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Honolulu Lite
Charles Memminger
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Don’t gamble with IRS over casino wins
Two friends were trying to convince me that if you win money gambling in Las Vegas and leave your winnings in a casino account, you don't have to pay federal taxes on it.
"As long as it doesn't leave the casino, you don't have to pay the taxes," one buddy told me. His proof was that a friend of his employs this interesting strategy, so it has to be true. My other friend was equally insistent that this was a little known example of Internal Revenue Service largess.
Now, I only covered the federal courts and IRS criminal cases for several years so what do I know? But in those years I came away with the feeling that the IRS wasn't exactly the federal agency with a biggest heart. (That would be the U.S. Department of Free Air, Gravity and Good Wishes.)
In fact, I covered a case where a gullible gentleman had been told by some scam artists that paying federal taxes is voluntary and so he didn't have to do it. Before finding him guilty, a real sweetheart of a visiting federal judge known to occasionally bite off the heads of criminal defendants and spit them out into the hallway, leaned over the bench, glared at the poor guy and yelled, "Yeah, paying taxes is voluntary! You volunteer to do it OR SOMETHING BAD HAPPENS TO YOU!" He then sent the man to the slammer for two years.
So the idea that the IRS would let gamblers squirrel away their winnings in a casino seemed a tad too philanthropic to be true. And since so many Hawaii residents go to Vegas, I thought I might do a public service by probing into what I perceived to be an urban legend, likely perpetrated by the casinos themselves.
I contacted one of the most respected gambling reporters in the country, Liz Benston of the Las Vegas Sun newspaper. Liz knows one or two things about taxes and gambling and neither of them will give any solace to Hawaii gamblers hiding their winnings in casinos. After she composed herself upon hearing my question (the noise in the background might have been her falling out of her chair) she said, "It doesn't matter if your winnings are under your mattress, in the bank or on hold for you at the casino -- the IRS wants its cut."
Bettors who don't report their winnings are taking a bigger gamble then when they play craps or Texas Hold'em. The good news is that you can offset any gambling winnings with gambling loses, but you have to keep detailed records, Liz said.
I asked the same question of gambling tax expert Russell Fox, who can be found online at www.taxabletalk.com. "It's a myth," he said. "Basically, when you can spend the money, it's income. So winnings left on account with a casino are absolutely taxable."
So much for a new warm and fuzzy IRS. That sounds like your grandmother's IRS ... the one with a heart like pea-sized hardened lump of coal.
But I understand the casinos' position. If owned a casino, I'd sure love to keep your winnings in my vault until you find the time to return to Las Vegas and lose it. Those big casino vaults weren't built with good wishes.
Buy Charles Memminger's hilarious new book, "Hey, Waiter, There's An Umbrella In My Drink!" at island book stores or
online at any book retailer. E-mail him at
cmemminger@starbulletin.com