A Internal Revenue Service (IRS) proposal could change how slot machine players’ winnings are taxed, raising the tax form threshold.
Under the current system, casino winnings are considered taxable revenue. In fact, winning more than $1,200 playing slots will automatically trigger a W-2G tax form. This threshold has remained unchanged since 1977 but a new recommendation may change that.
Proponents of the change have argued that inflation has significantly changed the value of the currency over the past few decades. For context, a $1,200 payout in March 1977 would be equal to almost $6,300 in March 2024. Lawmakers have also pointed out that the devaluation of the currency has caused more bureaucracy for casinos in the US.
In February, a bipartisan letter asked Werfel to raise the threshold to $5,000, in line with an earlier lawmaking efforts. The IRS advisory council also supports such a measure since it would decrease the huge amount of tax forms casinos have to deal with as the gambling industry grows.
As it turns out, the forms aren’t always providing the IRS with a complete understanding of gamblers’ taxable income. Since most gamblers end the year in a net loss position, raising the threshold would allow the IRS to focus on more successful players.
During a House Appropriations subcommittee hearing on the IRS proposed budget, IRS Commissioner Danny Werfel confirmed that the service is giving a potential threshold change serious consideration.
While this measure has been promoted for years, Werfel noted that the decision would ultimately be up to the Treasury Department. The latter body is yet to comment on the matter.
Many Believe the Threshold Should Be Raised
Russell Fox, managing director of Clayton Financial and Tax, believes that the threshold increase would make things easier. However, he acknowledged that it may also prompt more players to not report their winnings.
Chris Cylke, AGA’s SVP for government relations, also supported the measure, saying that it would relieve unnecessary burdens for consumers, operators and the IRS alike. He said that his group approves the “building momentum around modernizing this long-outdated policy” and urged Werfel to follow the congressional leaders’ guidance.
For context, slot gaming is one of the biggest drivers of revenue in American gaming, bringing in billions of dollars in revenue every year.
