July 16, 2025 • 43 mins
Our guest this week is tax expert Russell Fox. We talk about the terrible new taxes on gamblers in the big beautiful bill. What's a gambler to do? Is Richard going to retire.... again?
[00:00] Introduction of gambling tax expert Russell Fox
[00:48] How does the tax bill affect gamblers?
[02:25] Session method logging
[03:56] Sports betting logs and session definition
[09:14] Advantage slot play and session definition
[13:08] Will this law be overturned?
[17:08] 1099 changes, W2G backup withholding
[20:16] CTRs
[20:51] 90% maximum deduction of losses and business expenses
[23:06] Long term impact on high limit rooms, DraftKings, FanDuel, and offshore books
[28:02] U.S. citizens, permanent residents, non-resident aliens, withholding
[30:46] Worldwide income, renouncing U.S. citizenship, and exit tax
[34:17] Favorable comfortable structures, tax advantages of C-corp
[34:55] IRS job cuts and audit probability
[38:29] Recreational gamblers and W2Gs
[40:33] Will this tax law increase tax fraud?
[41:18] Contacting Russell Fox
Links:
Claytontax.com
Taxabletalk.com
[00:00] Introduction of gambling tax expert Russell Fox
[00:48] How does the tax bill affect gamblers?
[02:25] Session method logging
[03:56] Sports betting logs and session definition
[09:14] Advantage slot play and session definition
[13:08] Will this law be overturned?
[17:08] 1099 changes, W2G backup withholding
[20:16] CTRs
[20:51] 90% maximum deduction of losses and business expenses
[23:06] Long term impact on high limit rooms, DraftKings, FanDuel, and offshore books
[28:02] U.S. citizens, permanent residents, non-resident aliens, withholding
[30:46] Worldwide income, renouncing U.S. citizenship, and exit tax
[34:17] Favorable comfortable structures, tax advantages of C-corp
[34:55] IRS job cuts and audit probability
[38:29] Recreational gamblers and W2Gs
[40:33] Will this tax law increase tax fraud?
[41:18] Contacting Russell Fox
Links:
Claytontax.com
Taxabletalk.com
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:08):
Good afternoon. You're listening to Gambling with an Edge. Now
here are your hosts, Bob Dancer and Richard Munchkin. Good afternoon,
Welcome to Gambling with an Edge. I'm Bob Dancer.
Speaker 2 (00:20):
And I'm Richard Munchkin.
Speaker 1 (00:22):
In one of our irregularly scheduled podcasts, today, we interview
gambling tax expert Russell Fox in an episode primarily dedicated
to how the new tax bill affects gamblers and what
we can do about it. Russell Fox, Welcome to Gambling
with an Edge. Glad to be here, Glad to have
(00:42):
you here. Let's get right into it. How does the
latest tax bill affect gamblers?
Speaker 3 (00:50):
Well, the bill is actually the Porcheawne. Gambling incredibly simple
and roughly ninety five percent of gamblers, but not ninety
five percent of your listeners won't be impact for amateurs.
Take your gambling losses multiplied by ninety percent, and those
are your tax gambling losses. Further, gambling losses remain only
(01:13):
deductible to the amount of winnings. Effectively, if your gambling
losses are one hundred and eleven percent of gambling winnings,
you will not be impacted by this law. Or know
more than one hundred and eleven percent two. Most amateur
gamblers lose at least one hundred and eleven percent of
gambling winnings. For professional gamblers, gambling related business expenses are
(01:36):
considered in the same category as losses, you only get
ninety percent of them. This law will especially hurt high volume,
low margin gambling. Sports betting, and certain advantage play unfortunately,
will be hit under this new measure, which goes into
effect for the twenty twenty six texture, does no impact
(01:59):
on twenty five. A contemporaneous gambling log is a musk,
either written on paper or using an app. Gamblers who
use the session method will be less impacted than gamblers
who don't. Additionally, neither the IRS nor the tax court
have any sympathy for gamblers who don't have a log.
Speaker 1 (02:20):
As a video poker player, I play perhaps one hundred,
excuse me, one thousand hands per hour. Some I score on,
some I don't, Some I break even on In some games.
Sometimes I collect less than my initial wager. At the
end of my session at a particular casino, I record
my score plus or minus along with any w twog's accumulated.
(02:44):
How is this recording system affected by the new law.
Speaker 3 (02:49):
It's not that is exactly what you're supposed to do,
other than you have to use the session method. It's
allowed for various court cases, such as Park v. Commissioner.
What you leave the casino with less what you begambling.
Let's say you have twenty thousand of w twogs for
the session, but your win is only three thousand dollars,
(03:10):
and you note both, along with all the other required
items for a gambling law date, casino name, start, end, times, result,
game you're playing, and if you ever play a table
game the table. When you prepare your tax return, you
will need to note that you have twenty thousand of
w twogs because you have to match what the IRIS
(03:30):
has on file for you, and you take as an
adjustment income the seventeen thousand dollars of gambling losses in
the same session. You probably are going to need to
attach IRIS Form eighty two seventy five to your return.
That's a disclosure statement, and then you're left with your
three thousand dollars of gambling winnings.
Speaker 2 (03:51):
Okay, so what about say you're a sports better and
you bet you know on eight or nine different football games,
in the course of a day. Maybe you also have
some some parlays in there. Maybe you add in some
in game betting during that and you make these bets
(04:16):
at six or eight different sports books. That is that
day your session. Is every sports book a session. How
does a sports better deal with this? Well, we don't
know for sure because there is no case law on
sports betting. Sports betting has expanded drastically in the last
(04:39):
few years. It takes a long time for cases to
make it into.
Speaker 3 (04:44):
The cort system. So with nothing in the definition of
tax code, we have to use both of the dictionary
and common sense to determine what we can combine into
the same session for sports betting. First, the idea that
a session is going to last the entire year a
month is laughable. That has no chance of being upheld
(05:08):
at an audit. Don't try it. Try If you try
to say, oh, it's the entire NFL season, baseball season, whatever,
it is not going to work. But clearly related wagers
should be part of the same session. Consider betting on
a baseball game at Wrigley Field with the wind blowing
out and the opposing picture being a notorious fly ball
(05:29):
pitcher while the Cubs pitcher is a ground ball pitcher.
Betting on both the Cubs and the over for runs
being part of the same session makes sense, and probably
it can be combined. But betting on the Cubs game
in the White Sox game must they're playing each other
like we won't be part of the same session. When
(05:50):
a statute is undefined, courts look at the dictionary definition
for guidance of the meaning of a word. One of
the definitions of session is a single continuous course or
a period of lessons, study, et cetera. In the work
of a day at school. Now there is a period
of time during which a group of persons meets to
(06:13):
pursue a particular activity. Both imply something with the discrete
beginning and end. The IRS Chief Council's Office came out
with a ruling about re entry poker tournaments a few
years ago. They concluded that each tournament entry has separate
conditions and you cannot aggregate one player's results. Albey are
(06:35):
fighting this for casinos, not players, but the problem is
for both dfs and sports betting. Wagering on today's slate
of baseball games has nothing to do with wagering on
football games. In November or even today or WNBA games.
I suspect that both the IRS and courts will rule
(06:58):
that nothing in sports betting and dfs except directly related
wagers can be aggregated. Having said that that's in the future,
likely some date beyond twenty thirty, that means I think
it may underscore the word. May be possible to lump
of days bets into one session, especially with online betting
(07:23):
for an act of better somebody who's betting every day.
It makes some sense, but well, the courts uphold it.
Nobody knows.
Speaker 1 (07:32):
Can we skip back your last question on my video poker?
You posed I had twenty thousand in w twogs with
a three thousand dollars win, and then you said that
means I had seventeen thousand in losses. Does that mean,
according to IRS, I had twenty thousand in wins because
(07:54):
that's what my wtwog's were.
Speaker 3 (07:57):
No, the session method is allowed. Courts allow it. The
IRIS Chief Council came out with a opinion that says
it should be allowed. So in this situation, what you
would note is twenty thousand of gambling winnings. If you're
a gambler on other income.
Speaker 1 (08:15):
And it's only twenty thousand because that's what the wtwogs.
Speaker 3 (08:18):
Are, right, We're just matching the W twogs here because
the IRIS matches. Then if you put down three thousand,
you're going to get an IRS notice. We don't like
IRIS notices. Then below there's a place for adjustments. It's
lining eight Z as in Zebra on schedule one. You know,
put minus seventeen thousand gambling losses in the same session.
(08:42):
And I would advise an amateur gambler to also attached
for eighty two seventy five, which is a disclosure statement
noting what's going on if that ever got the quarter,
and assuming good records, that gambler is going to win
because it the courts allow it, the IRS allows. Key
(09:04):
is you need good records. It's essential.
Speaker 1 (09:08):
Okay, Now let's go to a two slot players advantage
slot players. These players, let's say they stay in one
casino for the day. They may play on thirty to
one hundred different machines. They walk around until they find
(09:30):
a machine in a what they consider a positive state,
and they play it somewhere between one and ten thousand
hands has a result. Now they go to another machine
looking for a game in a positive state, et cetera.
Is each physical machine accession and does each physical one
(09:51):
need to be recorded separately? This is a huge burden
on somebody who played one hundred machines a day.
Speaker 3 (09:58):
No, it can be one together with some caveatsphere. But
the way the courts have looked at it is by
walking to the casino and I start the day with
say ten thousand dollars, and I play various machines, and
I leave the casino with twelve thousand dollars, I have
(10:19):
a two thousand dollars win. That's how it's described in
Park V Commissioner, and that would be applicable to an
advantage player playing multiple machines in the same casino and
in the same session. If you can't, like, go on
the casino at ten in the morning, leave it noon,
go back at four in the afternoon, and leave at six,
(10:41):
that would be two different sessions.
Speaker 2 (10:44):
And that would include table games as well. So if
that same slot player occasionally jumps over and jumps into
a hot blackjack shoe, he's working at that casino all
day long without leaving the casino.
Speaker 3 (10:59):
That is probably not able to be combined because it's
a different game the way it's written, the way the
description of a session is game you're playing. If you're
playing video blackjack, which of course is never going to
be advantage, but who knows.
Speaker 1 (11:19):
Don't count on that. Yeah, maybe there's.
Speaker 3 (11:21):
Some sort of weird promotion or something, but assuming you
know true odds, video blackjack wouldn't be most machines that
could be combined. But a table game, by definition is separate.
It's like a poker player playing a poker tournament, busting
the poker tournament and then playing some cash games. That
(11:43):
would be two different sessions.
Speaker 1 (11:45):
Okay. In the slot example, you just said you entered
the casino with ten thousand, you lead with twelve thousand.
That's a two thousand dollars win. What if you had
five thousand W twogs in that same session?
Speaker 3 (12:00):
You always have to note your W two gs always, okay,
if you have a session lag. The way we tend
to do it, and most tax professionals who specialize in
gambling is we need what is your toll of W
two g's for the year. Let's say it's one hundred thousand.
Then we need your session win total. Let's say it's
(12:22):
eighty thousand, well, we're going to have to. In this case,
we would put down you know, for an amateur gambler
W two gs one hundred thousand and then below gambling
losses in the same session minus twenty thousand, same sessions.
Excuse me, for a professional gambler, we generally, you know,
(12:45):
would do the same thing today because this law again
does not go in effect until twenty twenty six. On
a schedule seat, we put down W two g's one
hundred thousand gambling losses twenty thousand. We get to the
right result. Always want to match the irs numbers.
Speaker 2 (13:03):
So I for one, am very optimistic that this law
is going to get amended.
Speaker 3 (13:10):
There's it.
Speaker 2 (13:11):
There are already, you know, people putting up amendments Titus
from Nevada, and the fact that they're talking about it
on mainstream news as something that's bad I think. So
I'm optimistic, and I'm wondering what your take is on
whether you think this will be overturned.
Speaker 3 (13:35):
It will be overturned if the AGA and Indian gaming
interests want to expend the political capital, and I don't.
I don't think we know the answer to that yet.
Certain aspects of it. I think they're going to I mean,
first of all, there there's new tax law every year,
So is there going to be another tax law later
(13:58):
this year early next year.
Speaker 1 (14:00):
Absolutely?
Speaker 3 (14:01):
Do I have any idea what's going to be in that?
Of course not. Nobody knows today. There are rumors there's
going to be another reconciliation bill. There's something I wrote
about today that really says, please have a technical bill,
basically a bill to fix things. Those are generally bipartisan.
Whether that happens, nobody knows. These are all likely, but
(14:27):
who notes The problem is Titus's bill is unfortunately not
going to ever go anywhere because she has a D
behind her name. This is going to take Republicans. I
you know, I urge everyone who does not like this bill,
which I suspect is about as close to one hundred
percent of your audience as possible if they have a
(14:51):
Republican Congressman or Republican senator, to very respectively, be nice,
write them, email them, and let them know your displeasure
about this portion of the bill. It's a one point
one billion dollar revenue raiser over ten years. There's a
(15:11):
line I love from Lake Paul Volker, who is a
commissioner in the head of the Federal Reserve. Whatever you tax,
you get less of. I am convinced this will not
bring in a billion dollars Yeah over ten years, Harriet,
Yeah yeah. And it is horrible sports bet It's horrible
(15:34):
for sports betting. It's horrible for the states, it's horrible
for the Nevada casino industry. It's just ad. But there's
plenty of bad laws on our books.
Speaker 2 (15:46):
And something people really need to be aware of, and
that is, even if they do come up with an amendment,
say next year, that doesn't necessarily mean that it goes
into effect for twenty twenty six. So you're really gambling
if you decide to gamble in twenty twenty six on
(16:09):
the idea that, oh, they're going to fix this, because
it may not take effect until twenty twenty seven. Even
if they do get it through, well, we may have
an idea by the end of the year too. One
of the issues right now is my guess is AGA
is going to survey their members about this, and Indian
casinos also. This bill passed only a couple of weeks ago,
(16:33):
was signed into law on July fourth. We're recording this
on July fifteenth. That's not enough time. We The rumors
are there's going to be another reconciliation bill later this year,
probably in like the September October time frame. If we
(16:56):
that is probably where we will see something. If we're
going to see something this year.
Speaker 1 (17:02):
Okay, ten ninety ninths sometimes casinos issue ten ninety nine
for various wins. Are these affected by the new law?
Speaker 3 (17:13):
Yes, beginning in twenty twenty six, the ten ninety nine
threshold was increased to two thousand dollars for most ten
ninety nines, including gambling related ten ninety.
Speaker 2 (17:25):
Nine right, So people, So people need to realize that
ten ninety nine is not a W two G. Those
are two different things. And the ten ninety nine threshold
went up, not the W two G. But there's also
that threshold on ten ninety nine is only for the
(17:50):
withholding right, not for the.
Speaker 3 (17:54):
No. The ten ninety nine threshold if for example, you
win a casino contest, that's where you get a a
ten ninety nine. That threshold was increased to two thousand
dollars period and its index for inflation. So beginning in
twenty twenty seven, it will go up from two thousand
to something. Assuming we have some inflation, the W two
(18:18):
G backup with holding threshold was increased to two thousand dollars. However,
the W two G issuance threshold was not increased. Therefore,
if you have a slot win, you pull the handle
so to speak, on a slot machine video poker, and
(18:39):
you hit a thirteen hundred dollar jackpot, you will have
a W two GD issue. If you refuse to give
your social, which is not a great idea, you will
not have back up withholding because it didn't reach the
two thousand dollars threshold. That's how I read the plane
(19:00):
language of the law and the plane language governs. Again,
a technical corrections bill could be in the future to
increase both the two thousand dollars. That would be welcome,
because that twelve hundred dollars slot threshold was I want
to say, it dates to the nineteen seventies or even earlier,
(19:23):
way before my time.
Speaker 2 (19:26):
Yeah, and this idea that you can refuse to give
your social and they'll take withholding out. You know, most
casinos they don't know the law at all and they
will just refuse to pay you, you know. So, yeah,
that's not a good idea to try to tell them no,
I'm not giving you my social on a w twog
(19:48):
unless you're willing to just walk away from the jackpot entirely.
Speaker 1 (19:51):
You also walk away from any credit you have on
the machine before the jackpot hit right, right right.
Speaker 3 (19:58):
The idea that these two threshold are different make no sense,
And as I think, I mentioned a technical corrections bill
for things like this normally happens, but our Congress is
pretty polarized.
Speaker 1 (20:12):
Ctrs usually issued when you have more than ten thousand
in cash transaction in a day. Are they affected at
all by the.
Speaker 3 (20:20):
No ctrs are part of the Bank Secrecy Act? Nothing
in this law changed, Well, there's a couple things that
the word changed, but nothing regarding ctrs. Also, it's not
has nothing to do with wins and losses. They're just
movement of money in and out. So you could have
a losing session and have a CTR it issued if
(20:43):
you know, turning in more than ten thousand dollars okay.
Speaker 1 (20:48):
In nineteen eighty seven, there was a Commissioner versus Grutzinger,
a Supreme Court decision that established gambling income could be
considered a trade or business and thus losses are considered
an expense against revenue. This new law changes that.
Speaker 3 (21:07):
No with all expenses are always allowed for anyone in business,
all ordinary and necessary expenses are allowed up to the
are allowed now for gamblers. What has changed is that
expenses are limited to ninety percent of actual expenses. So
(21:29):
if your expenses total ten thousand dollars ordinary necessary, and
this is after any other limitations. For example, you only
get fifty cents on the dollar for meals, you would
get nine thousand dollars of tax expenses. But your combined
losses and expenses together still can't go higher than ninety
(21:51):
percent of your wins.
Speaker 1 (21:52):
Correct.
Speaker 3 (21:53):
It has nothing to do with wins. It has to
do with actual losses. So suppose we have a professional
gambler has one hundred thousand of gambling wins, one hundred
thousand of gambling losses, and business expenses. He will report
one hundred thousand of wins and ninety thousand of losses
(22:14):
and business expenses. Let's take another professional gambler who has
one hundred thousand of wins and twenty thousand of losses
and business expenses. They'll report one hundred thousand of wins
and eighteen thousand of losses and business expenses. Let's say
we have a another professional gambler who has one hundred
(22:35):
thousand of wins and one hundred and ten thousand of
losses and business expenses. He will lose eleven thousand dollars
of losses and business expenses because they're limited to ninety
percent of actual they're also limited by the way to
the amount of wins, but in this case they'll end
up at ninety nine thousand dollars and he will pay
(22:58):
tax on one thousand dollars. Is a phantom income.
Speaker 1 (23:02):
We've talked about relatively small amounts of W twogs. Big
players can easily get five or ten million dollars a
W two g's, or have in the past. I've done
that many times when they've played in high limit rooms.
This law seems to be the death of high limit rooms.
Players might do it one year and again and figure
(23:23):
out they have this horrendous tax bill. They had no
idea that it was happening, and then you just can't
play that way anymore. You can't play twenty five dollars
machines and get all of the W twogs or one
hundred dollars slot machines. You just get tons of W
two g's and people have to stop playing those Is
that fair? Mostly it is fair.
Speaker 3 (23:47):
The issue again is not w two g it's session results. Now,
first I'm going to point out the obvious. Most amateur
gamblers don't keep session monks, and so they're gonna be
Why I'm cited by this, it's you know, somebody who
goes in again, A losing gambler is not impact so
to a certain extent. Mean, if we think about it,
(24:10):
the high high limit rooms, I would guess, just like
any other form of gambling, at least ninety percent of
the people walking in there lose big and therefore those
people are not going to be impact. You still get,
you know, ninety percent of your gambling losses, and if
those gambling losses exceed one hundred and eleven percent of
your wins, nothing has changed. But as far as professional
(24:36):
gamblers playing high limit rooms, absolutely it's going to have
an impact. Anything that has large dollars low margin is
hit under this spill.
Speaker 2 (24:47):
Yeah, and sports betters are even more impacted than video
poker players. It's easy to have twenty fifty million dollars
worth of turnover in the course of a year, and
you know, if if your return on investment is you know,
two or three percent. You know, you can end up
(25:11):
owing millions of dollars in taxes on.
Speaker 3 (25:14):
You know, not that much income.
Speaker 1 (25:17):
I agree.
Speaker 3 (25:17):
I think sports betting especially is really going to be hit.
Another key question, which again we don't know the answer
to yet, is how will these sports betting companies here
I'm considering companies that really only do sports bank DraftKings,
FanDuel look at this bill. They do not want professional
(25:38):
sports banks. They have limited people right and left. If
they discover that Russ Fox is a professional sports better
and uses draft Gings or FanDuel, I will be limited
to basically two cent bets. But what are they going
to do because it still hurts their volume, it hurts
the amount they're going to collect, and we don't Again,
(26:02):
the law is too new for us to know the answer.
I suspect they're probably very neutral on this bill because
they do want to get rid of professionals professional sports betters,
but they don't like the idea of what's going to
potentially happen long term. That's a guess. I have no
(26:23):
you know, I've not spoken to anyone at either company.
I have no idea how they feel I've not seen
any public statements from them, but I assume sooner or
later they're going to be forced to make one.
Speaker 2 (26:35):
Well, I think they're a little short sighted in that
those are publicly traded companies, which means if suddenly their
handle goes down, they have to justify that to their
to their shareholders and to say, oh, well, we only
got rid of the bad money that was coming in.
(26:56):
I don't know that shareholders are going to buy that.
I also think they're very afraid that it's going to
drive more and more people off shore. And even the
recreational gamblers are going to start hearing even though the
tax thing doesn't affect them, but they're going to hear
(27:17):
that their taxes are going to be worse, and you know,
and and take their action off shore. But I mean,
as you say, we don't know what's going to happen there.
And the sports books are much more concerned with getting
Eye casino. They make so much more on the internet
(27:37):
casino gaming than they do on the sports betting, So
if they think there's something in their calculation that might
affect Eye Casino, then you know that that may have
something to do with which way they try to push
it's just frankly too orly enough.
Speaker 1 (27:56):
Yeah. Is there any distinction between US citizens and non
US citizens.
Speaker 3 (28:03):
With respect to this bill? Yes, there is. Non US
citizens who are permanent residents are taxed just like US citizens.
Those individuals are in the same exact boat as you
and I. However, non resident aliens are generally not taxed
(28:26):
as US citizens unless they meet what is called the
substantial presence test, and also so a non resident alien
is not impacted general. Finally, only non resident alien professional
gamblers conducting a business in the US, those individuals, of
(28:47):
which there might be two in the entire trait, are impacted.
But in general, a non resident like someone who came
to the World Series of Poker, playing at the World
Series Poker, then going home, he or she will not
be impacted.
Speaker 2 (29:04):
So he doesn't owe tax on the money he earns
at the World Series, assuming he's in a country with
a tax treaty.
Speaker 3 (29:13):
If he's in it, like he's from the United Kingdom,
comes here for two months, plays, goes home. The UK
US tax treaty says there's no withholding on gambling. He
gets all of his money, no impact gambling wins and losses,
don't affect him not impacted. Under the US Code, which
(29:35):
is law, and the US UK tax treaty and treaties
are considered law. An individual from a tax treaty country
faces no withholding. There's a list of them. They're mostly
in Western Europe, but it's not all countries. If you're
from the wrong country, for example Switzerland, you have thirty
(29:57):
percent withholding on anything that generates s a W two G.
Those individuals get a Form ten forty two S. Now, consider,
for example, somebody from a tax cheaty country who earns
a W two G poker, slots, video poker, whatever it is.
They still get a tax for them. They get a
(30:17):
Form ten forty two S, but it will show zero
percent withholding, assuming they have what is called an IT
in an individual tax pay identification number. Some casinos in
the US issue them, some don't. If you go to
the wrong casino and you don't have an IT in,
you will still have money with hell, but you can
(30:40):
get it back.
Speaker 2 (30:41):
So what about I know that if you are an
American and you move to another country, say Canada or
the UK, you still owe tax on the money you
earn in the United States. Or if you're not living
there a certain like I don't know, eleven months of
the year or something. There's some amount of time you're
(31:03):
allowed to visit. But how hard is it to actually
renounce your citizenship and become a citizen of Canada or
UK and not have the tax situation.
Speaker 3 (31:16):
Well, there are a couple. There are actually two things
in your question. First, and a US citizen owes tax
on the worldwide income. A US citizen living in Canada
or the UK has to report everything. Now, some things
can be excluded via something called the foreign earned income exclusion.
(31:36):
They are also foreign tax credits. Generally, a US citizen
living abroad earning an income from wages will not owe
US tax if they're in a high tax country, which
definitely Canada is, UK is as far as wages. If
they're in a low tax country, they may owe some tax.
(32:00):
There are some countries, for example, I always get this wrong,
the Baltic countries Lafya, Lithuania, Estonia. One of them has
I get ten or twelve percent income tax rate, while
an American working in one of those countries is going
to owe US tax because the US tax rate will
generally be higher. Renouncing citizenship is a legal process. It's involved.
(32:24):
It is something that somebody, if anyone wanted to do that,
they needed to consult an attorney. Not an attorney. There
is a form you file if you renounce citizenship because
the US has an exit tax. If your assets are
over a certain amount or your income is over a
certain amount, you generally have to continue filing tax returns
(32:47):
for ten years, and you may owe US tax for
additional ten years. If your income isn't that high or
your assets are not that high, you file the form.
By the way, this form has filed under penalty of perjury.
Somebody got in very deep trouble for claiming he was
worth about half a million dollars when he was worth
(33:09):
sixteen billion. That doesn't work, well, don't I do not?
It was around herror, Yeah. Uh. He ended up paying
the exit attacks along with penalties and interest in lieu
of jail tie he had made a flight from a
country which didn't have an extradition treaty with the US
(33:30):
to one that did.
Speaker 1 (33:32):
Oops.
Speaker 3 (33:33):
But I have filed this form twice for clients. As
long as you do it, and you're you know, doing it,
you know accurately, it's and in both cases, both clients
were what are called accidental Americans. They were born in
the US, they had citizenship in another country. They were
both average individuals, you know, middle class earning wages. You know,
(33:57):
they didn't have billions in assets, and they didn't make
you know, tremendous dollar amounts of income where they would
be subject to the exit tax. Anybody who is subject
to the exit tax, you know, I would immediately refer
to an immigration attorney.
Speaker 1 (34:13):
Are there any company structures such as sole proprietorships, partnerships, llc,
et cetera, that would receive more favorable treatment under the
new law prepared to another company structure.
Speaker 3 (34:28):
Not related to gambling, however, for certain other business activities. Potentially, yes,
I expect a slight increase in sea corporations in the future.
Has nothing to do with gambling. But my initial reading
was there are some tax advantages potentially for sea corporations
(34:49):
in the future.
Speaker 1 (34:51):
Early in this administration, maybe still, there was a Department
of Government Efficiency which went around and, among other things,
fired a lot of federal employees. Presumably this includes a
lot of IRS auditors. Does this imply the chances of
having your taxes audited for your twenty twenty six return
(35:12):
are lower than they would be for your twenty twenty
four return.
Speaker 3 (35:17):
Well, I would say one thing to first say is
audits don't happen when you file your return. Let's assume
you file today on extension your twenty twenty four return
that returns file today is in middle of July. An
audit would happen between the middle of twenty twenty six
(35:41):
to the middle of twenty twenty seven. Audits happen aways
out from the date you file your tax return, So
we don't know what's going to happen for twenty twenty
six returns because that's we're dealing with stuff that would
happen in twenty seven to twenty eight, and nobody knows
what the IRIS workforce is going to be then. But generally, yes,
(36:05):
I expect audits to go down because there are just
fewer people the IRS. The IRIS is lost in various
departments between ten and thirty percent of their staff. Now,
that is going to also be not good for tax administration,
and there needs to be some adds. It helps with
(36:25):
tax compliance. I hate to say that, but you know,
it'd be nice if everybody told the truth on their
tax returns. But I'm not naive. There was something that
came out this morning where an individual who's a former
person very high up in the IRIS expects another ten
to forty percent of IRIS employees to leave this year. Wow,
(36:48):
that's a lot. Now, the IRIS computer system is ancient.
It dates to nineteen fifty nine. You've heard me correctly,
before I was born, and you know I'm going to
be aligible for Social Security in a few years. So
it's old. Think punch carts. By the way, if anybody
(37:10):
listening is a COBOYL programmer and wants a job, the
IRIS will hire you right now. You have to go
to Martinsburg, West Virginia. Don't I have no idea where
that is, except it's in West Virginia. But that's where
the main IRIS computing center is. However, one of the
things that happens the IRS sends out a lot of
(37:31):
automated under reporting unit notices. These are where the IRIS
match things up. For example, you have one thousand dollars
of interest income from a bank and you don't put
it on your tax return. The IRIS is very good
about matching those things, and you get an automated under
reporting unit notice saying you don't think you included this.
Sometimes you have and the IRIS computer just doesn't see it.
(37:53):
You type Bank of America and you accidentally made a
type up and so the computer didn't match it. You
just pointed out out. I expect a lot more of
these notices in the future. The IRS is going to
see a lot of w twogs. People are going to
use a session method not attached disclosure statements, and the
(38:14):
IRS is going to be sending out a lot of
these notices, and there's going to be fewer staff to
deal with the responses. That's going to be an issue.
Speaker 2 (38:24):
I mean, isn't somebody take a recreational gambler that gambles
a lot, you know, aren't they reporting that wrong? If
let's say that they had fifty thousand in w twogs
and they lost a total of seventy thousand or whatever,
And what you're saying is you put fifty thousand in
(38:44):
the winds and seventy thousand and go offset it with
the losses ninety percent of seventy thousand.
Speaker 4 (38:53):
But aren't they actually because those people some days won,
so they actually had more than fIF fifty thousand in
wins than just the w twogs.
Speaker 3 (39:03):
So shouldn't they be putting.
Speaker 2 (39:05):
I had eighty thousand in win and one hundred and
twenty thousand.
Speaker 3 (39:09):
Lossy, it's possible they have more. It's also possible they
have less. Okay, your w twogs do not mean that's
your session total of wings. No, but on some days
people win.
Speaker 2 (39:21):
I mean, if they're a spot player, they you know.
Speaker 3 (39:24):
Oh absolutely. But here's the thing. If they have fifty
thousand of W two g's, what's the total of their
session wins. If it's more than fifty thousand, yes, they
need to add to their wins another twenty thousand. Okay,
if it's less, they can subtract that as an adjustment
to income. It'll be both ways. There are people who
(39:44):
have fifty thousand of w twog's one hundred and fifty
thousand of gambling wings, and there are also people with
fifty thousand of w twogs with five thousand of gambling wins.
Both are possible. Yeah, in many cases people will just okay,
I have fifty thousand of gambling of w twogs, I
lost money. I lost more than one hundred and eleven percent,
(40:06):
So I'm just going to put down fifty thousand of
tax gambling losses. I'm going to be fine. Is that
technically correct? No? Is it accurate or change the tax?
Probably not, but it could in some circumstance changes their
adjusted gross income? Right, yes, but it may or may
not change their tax. It all depends.
Speaker 1 (40:28):
I would guess this law is going to increase the
dishonest reporting among a large number of professional gamblers. Now,
obviously dishonest reporting is something you're very much against. But
would you suspect that I'm right in this? Yes?
Speaker 3 (40:49):
I'm not naive. People are I mean, a gambler who
loses is and they're going to a lot of people
are going to play auditor went. I can never advise
such actions. I'm licensed, and I always have to suggest
(41:09):
compliance with our tax laws. But I'm not naive.
Speaker 1 (41:13):
So Russell Fox, thank you very much. If any of
our listeners wish to get a hold of you for
tax or other consulting reasons, how would they do that?
Speaker 3 (41:22):
Eisi way is to send an email to rcfoxat Claytontax
dot com.
Speaker 1 (41:30):
Be advised that.
Speaker 3 (41:32):
If you're interested in us preparing your twenty twenty four
tax return, that would be on extension, probably not doable.
We're close to at capacity for this calendar year, but
for next year would probably be still doable. That's twenty
twenty five returns a year. We're in filed in twenty six.
Speaker 1 (41:52):
Thank you for much.
Speaker 2 (41:53):
We'll put a link for your link to your website
into your email in the show notes.
Speaker 1 (42:00):
Is it also true, Russell Fox, that if this tax
law changes in that you'll likely report that in your
website taxable talk dot com.
Speaker 3 (42:11):
Oh yes, if there is a if, for example, something
the law gets changed, I will absolutely report it. I'm
still digesting all the provisions of this bill. The bill
itself is I have it up. It is three hundred
and thirty pages of fine print. I thought it was
(42:33):
over nine hundred pages. It is showing at well, it's
frunk it in the format it's probably nine hundred pages
at about an eleven font as printed by the US
Government Publishing Office. It's in like a four or five font.
Speaker 1 (42:50):
Oh geez, I mean it's tiny, all righty, Thank you
very much, Russell Fox. Thank you, Richard. Go out and
hit lots of wild flushes, everybody, but do it this
year and not next. Thank you. Goodbye,
Good afternoon. You're listening to Gambling with an Edge. Now
here are your hosts, Bob Dancer and Richard Munchkin. Good afternoon,
Welcome to Gambling with an Edge. I'm Bob Dancer.
Speaker 2 (00:20):
And I'm Richard Munchkin.
Speaker 1 (00:22):
In one of our irregularly scheduled podcasts, today, we interview
gambling tax expert Russell Fox in an episode primarily dedicated
to how the new tax bill affects gamblers and what
we can do about it. Russell Fox, Welcome to Gambling
with an Edge. Glad to be here, Glad to have
(00:42):
you here. Let's get right into it. How does the
latest tax bill affect gamblers?
Speaker 3 (00:50):
Well, the bill is actually the Porcheawne. Gambling incredibly simple
and roughly ninety five percent of gamblers, but not ninety
five percent of your listeners won't be impact for amateurs.
Take your gambling losses multiplied by ninety percent, and those
are your tax gambling losses. Further, gambling losses remain only
(01:13):
deductible to the amount of winnings. Effectively, if your gambling
losses are one hundred and eleven percent of gambling winnings,
you will not be impacted by this law. Or know
more than one hundred and eleven percent two. Most amateur
gamblers lose at least one hundred and eleven percent of
gambling winnings. For professional gamblers, gambling related business expenses are
(01:36):
considered in the same category as losses, you only get
ninety percent of them. This law will especially hurt high volume,
low margin gambling. Sports betting, and certain advantage play unfortunately,
will be hit under this new measure, which goes into
effect for the twenty twenty six texture, does no impact
(01:59):
on twenty five. A contemporaneous gambling log is a musk,
either written on paper or using an app. Gamblers who
use the session method will be less impacted than gamblers
who don't. Additionally, neither the IRS nor the tax court
have any sympathy for gamblers who don't have a log.
Speaker 1 (02:20):
As a video poker player, I play perhaps one hundred,
excuse me, one thousand hands per hour. Some I score on,
some I don't, Some I break even on In some games.
Sometimes I collect less than my initial wager. At the
end of my session at a particular casino, I record
my score plus or minus along with any w twog's accumulated.
(02:44):
How is this recording system affected by the new law.
Speaker 3 (02:49):
It's not that is exactly what you're supposed to do,
other than you have to use the session method. It's
allowed for various court cases, such as Park v. Commissioner.
What you leave the casino with less what you begambling.
Let's say you have twenty thousand of w twogs for
the session, but your win is only three thousand dollars,
(03:10):
and you note both, along with all the other required
items for a gambling law date, casino name, start, end, times, result,
game you're playing, and if you ever play a table
game the table. When you prepare your tax return, you
will need to note that you have twenty thousand of
w twogs because you have to match what the IRIS
(03:30):
has on file for you, and you take as an
adjustment income the seventeen thousand dollars of gambling losses in
the same session. You probably are going to need to
attach IRIS Form eighty two seventy five to your return.
That's a disclosure statement, and then you're left with your
three thousand dollars of gambling winnings.
Speaker 2 (03:51):
Okay, so what about say you're a sports better and
you bet you know on eight or nine different football games,
in the course of a day. Maybe you also have
some some parlays in there. Maybe you add in some
in game betting during that and you make these bets
(04:16):
at six or eight different sports books. That is that
day your session. Is every sports book a session. How
does a sports better deal with this? Well, we don't
know for sure because there is no case law on
sports betting. Sports betting has expanded drastically in the last
(04:39):
few years. It takes a long time for cases to
make it into.
Speaker 3 (04:44):
The cort system. So with nothing in the definition of
tax code, we have to use both of the dictionary
and common sense to determine what we can combine into
the same session for sports betting. First, the idea that
a session is going to last the entire year a
month is laughable. That has no chance of being upheld
(05:08):
at an audit. Don't try it. Try If you try
to say, oh, it's the entire NFL season, baseball season, whatever,
it is not going to work. But clearly related wagers
should be part of the same session. Consider betting on
a baseball game at Wrigley Field with the wind blowing
out and the opposing picture being a notorious fly ball
(05:29):
pitcher while the Cubs pitcher is a ground ball pitcher.
Betting on both the Cubs and the over for runs
being part of the same session makes sense, and probably
it can be combined. But betting on the Cubs game
in the White Sox game must they're playing each other
like we won't be part of the same session. When
(05:50):
a statute is undefined, courts look at the dictionary definition
for guidance of the meaning of a word. One of
the definitions of session is a single continuous course or
a period of lessons, study, et cetera. In the work
of a day at school. Now there is a period
of time during which a group of persons meets to
(06:13):
pursue a particular activity. Both imply something with the discrete
beginning and end. The IRS Chief Council's Office came out
with a ruling about re entry poker tournaments a few
years ago. They concluded that each tournament entry has separate
conditions and you cannot aggregate one player's results. Albey are
(06:35):
fighting this for casinos, not players, but the problem is
for both dfs and sports betting. Wagering on today's slate
of baseball games has nothing to do with wagering on
football games. In November or even today or WNBA games.
I suspect that both the IRS and courts will rule
(06:58):
that nothing in sports betting and dfs except directly related
wagers can be aggregated. Having said that that's in the future,
likely some date beyond twenty thirty, that means I think
it may underscore the word. May be possible to lump
of days bets into one session, especially with online betting
(07:23):
for an act of better somebody who's betting every day.
It makes some sense, but well, the courts uphold it.
Nobody knows.
Speaker 1 (07:32):
Can we skip back your last question on my video poker?
You posed I had twenty thousand in w twogs with
a three thousand dollars win, and then you said that
means I had seventeen thousand in losses. Does that mean,
according to IRS, I had twenty thousand in wins because
(07:54):
that's what my wtwog's were.
Speaker 3 (07:57):
No, the session method is allowed. Courts allow it. The
IRIS Chief Council came out with a opinion that says
it should be allowed. So in this situation, what you
would note is twenty thousand of gambling winnings. If you're
a gambler on other income.
Speaker 1 (08:15):
And it's only twenty thousand because that's what the wtwogs.
Speaker 3 (08:18):
Are, right, We're just matching the W twogs here because
the IRIS matches. Then if you put down three thousand,
you're going to get an IRS notice. We don't like
IRIS notices. Then below there's a place for adjustments. It's
lining eight Z as in Zebra on schedule one. You know,
put minus seventeen thousand gambling losses in the same session.
(08:42):
And I would advise an amateur gambler to also attached
for eighty two seventy five, which is a disclosure statement
noting what's going on if that ever got the quarter,
and assuming good records, that gambler is going to win
because it the courts allow it, the IRS allows. Key
(09:04):
is you need good records. It's essential.
Speaker 1 (09:08):
Okay, Now let's go to a two slot players advantage
slot players. These players, let's say they stay in one
casino for the day. They may play on thirty to
one hundred different machines. They walk around until they find
(09:30):
a machine in a what they consider a positive state,
and they play it somewhere between one and ten thousand
hands has a result. Now they go to another machine
looking for a game in a positive state, et cetera.
Is each physical machine accession and does each physical one
(09:51):
need to be recorded separately? This is a huge burden
on somebody who played one hundred machines a day.
Speaker 3 (09:58):
No, it can be one together with some caveatsphere. But
the way the courts have looked at it is by
walking to the casino and I start the day with
say ten thousand dollars, and I play various machines, and
I leave the casino with twelve thousand dollars, I have
(10:19):
a two thousand dollars win. That's how it's described in
Park V Commissioner, and that would be applicable to an
advantage player playing multiple machines in the same casino and
in the same session. If you can't, like, go on
the casino at ten in the morning, leave it noon,
go back at four in the afternoon, and leave at six,
(10:41):
that would be two different sessions.
Speaker 2 (10:44):
And that would include table games as well. So if
that same slot player occasionally jumps over and jumps into
a hot blackjack shoe, he's working at that casino all
day long without leaving the casino.
Speaker 3 (10:59):
That is probably not able to be combined because it's
a different game the way it's written, the way the
description of a session is game you're playing. If you're
playing video blackjack, which of course is never going to
be advantage, but who knows.
Speaker 1 (11:19):
Don't count on that. Yeah, maybe there's.
Speaker 3 (11:21):
Some sort of weird promotion or something, but assuming you
know true odds, video blackjack wouldn't be most machines that
could be combined. But a table game, by definition is separate.
It's like a poker player playing a poker tournament, busting
the poker tournament and then playing some cash games. That
(11:43):
would be two different sessions.
Speaker 1 (11:45):
Okay. In the slot example, you just said you entered
the casino with ten thousand, you lead with twelve thousand.
That's a two thousand dollars win. What if you had
five thousand W twogs in that same session?
Speaker 3 (12:00):
You always have to note your W two gs always, okay,
if you have a session lag. The way we tend
to do it, and most tax professionals who specialize in
gambling is we need what is your toll of W
two g's for the year. Let's say it's one hundred thousand.
Then we need your session win total. Let's say it's
(12:22):
eighty thousand, well, we're going to have to. In this case,
we would put down you know, for an amateur gambler
W two gs one hundred thousand and then below gambling
losses in the same session minus twenty thousand, same sessions.
Excuse me, for a professional gambler, we generally, you know,
(12:45):
would do the same thing today because this law again
does not go in effect until twenty twenty six. On
a schedule seat, we put down W two g's one
hundred thousand gambling losses twenty thousand. We get to the
right result. Always want to match the irs numbers.
Speaker 2 (13:03):
So I for one, am very optimistic that this law
is going to get amended.
Speaker 3 (13:10):
There's it.
Speaker 2 (13:11):
There are already, you know, people putting up amendments Titus
from Nevada, and the fact that they're talking about it
on mainstream news as something that's bad I think. So
I'm optimistic, and I'm wondering what your take is on
whether you think this will be overturned.
Speaker 3 (13:35):
It will be overturned if the AGA and Indian gaming
interests want to expend the political capital, and I don't.
I don't think we know the answer to that yet.
Certain aspects of it. I think they're going to I mean,
first of all, there there's new tax law every year,
So is there going to be another tax law later
(13:58):
this year early next year.
Speaker 1 (14:00):
Absolutely?
Speaker 3 (14:01):
Do I have any idea what's going to be in that?
Of course not. Nobody knows today. There are rumors there's
going to be another reconciliation bill. There's something I wrote
about today that really says, please have a technical bill,
basically a bill to fix things. Those are generally bipartisan.
Whether that happens, nobody knows. These are all likely, but
(14:27):
who notes The problem is Titus's bill is unfortunately not
going to ever go anywhere because she has a D
behind her name. This is going to take Republicans. I
you know, I urge everyone who does not like this bill,
which I suspect is about as close to one hundred
percent of your audience as possible if they have a
(14:51):
Republican Congressman or Republican senator, to very respectively, be nice,
write them, email them, and let them know your displeasure
about this portion of the bill. It's a one point
one billion dollar revenue raiser over ten years. There's a
(15:11):
line I love from Lake Paul Volker, who is a
commissioner in the head of the Federal Reserve. Whatever you tax,
you get less of. I am convinced this will not
bring in a billion dollars Yeah over ten years, Harriet,
Yeah yeah. And it is horrible sports bet It's horrible
(15:34):
for sports betting. It's horrible for the states, it's horrible
for the Nevada casino industry. It's just ad. But there's
plenty of bad laws on our books.
Speaker 2 (15:46):
And something people really need to be aware of, and
that is, even if they do come up with an amendment,
say next year, that doesn't necessarily mean that it goes
into effect for twenty twenty six. So you're really gambling
if you decide to gamble in twenty twenty six on
(16:09):
the idea that, oh, they're going to fix this, because
it may not take effect until twenty twenty seven. Even
if they do get it through, well, we may have
an idea by the end of the year too. One
of the issues right now is my guess is AGA
is going to survey their members about this, and Indian
casinos also. This bill passed only a couple of weeks ago,
(16:33):
was signed into law on July fourth. We're recording this
on July fifteenth. That's not enough time. We The rumors
are there's going to be another reconciliation bill later this year,
probably in like the September October time frame. If we
(16:56):
that is probably where we will see something. If we're
going to see something this year.
Speaker 1 (17:02):
Okay, ten ninety ninths sometimes casinos issue ten ninety nine
for various wins. Are these affected by the new law?
Speaker 3 (17:13):
Yes, beginning in twenty twenty six, the ten ninety nine
threshold was increased to two thousand dollars for most ten
ninety nines, including gambling related ten ninety.
Speaker 2 (17:25):
Nine right, So people, So people need to realize that
ten ninety nine is not a W two G. Those
are two different things. And the ten ninety nine threshold
went up, not the W two G. But there's also
that threshold on ten ninety nine is only for the
(17:50):
withholding right, not for the.
Speaker 3 (17:54):
No. The ten ninety nine threshold if for example, you
win a casino contest, that's where you get a a
ten ninety nine. That threshold was increased to two thousand
dollars period and its index for inflation. So beginning in
twenty twenty seven, it will go up from two thousand
to something. Assuming we have some inflation, the W two
(18:18):
G backup with holding threshold was increased to two thousand dollars. However,
the W two G issuance threshold was not increased. Therefore,
if you have a slot win, you pull the handle
so to speak, on a slot machine video poker, and
(18:39):
you hit a thirteen hundred dollar jackpot, you will have
a W two GD issue. If you refuse to give
your social, which is not a great idea, you will
not have back up withholding because it didn't reach the
two thousand dollars threshold. That's how I read the plane
(19:00):
language of the law and the plane language governs. Again,
a technical corrections bill could be in the future to
increase both the two thousand dollars. That would be welcome,
because that twelve hundred dollars slot threshold was I want
to say, it dates to the nineteen seventies or even earlier,
(19:23):
way before my time.
Speaker 2 (19:26):
Yeah, and this idea that you can refuse to give
your social and they'll take withholding out. You know, most
casinos they don't know the law at all and they
will just refuse to pay you, you know. So, yeah,
that's not a good idea to try to tell them no,
I'm not giving you my social on a w twog
(19:48):
unless you're willing to just walk away from the jackpot entirely.
Speaker 1 (19:51):
You also walk away from any credit you have on
the machine before the jackpot hit right, right right.
Speaker 3 (19:58):
The idea that these two threshold are different make no sense,
And as I think, I mentioned a technical corrections bill
for things like this normally happens, but our Congress is
pretty polarized.
Speaker 1 (20:12):
Ctrs usually issued when you have more than ten thousand
in cash transaction in a day. Are they affected at
all by the.
Speaker 3 (20:20):
No ctrs are part of the Bank Secrecy Act? Nothing
in this law changed, Well, there's a couple things that
the word changed, but nothing regarding ctrs. Also, it's not
has nothing to do with wins and losses. They're just
movement of money in and out. So you could have
a losing session and have a CTR it issued if
(20:43):
you know, turning in more than ten thousand dollars okay.
Speaker 1 (20:48):
In nineteen eighty seven, there was a Commissioner versus Grutzinger,
a Supreme Court decision that established gambling income could be
considered a trade or business and thus losses are considered
an expense against revenue. This new law changes that.
Speaker 3 (21:07):
No with all expenses are always allowed for anyone in business,
all ordinary and necessary expenses are allowed up to the
are allowed now for gamblers. What has changed is that
expenses are limited to ninety percent of actual expenses. So
(21:29):
if your expenses total ten thousand dollars ordinary necessary, and
this is after any other limitations. For example, you only
get fifty cents on the dollar for meals, you would
get nine thousand dollars of tax expenses. But your combined
losses and expenses together still can't go higher than ninety
(21:51):
percent of your wins.
Speaker 1 (21:52):
Correct.
Speaker 3 (21:53):
It has nothing to do with wins. It has to
do with actual losses. So suppose we have a professional
gambler has one hundred thousand of gambling wins, one hundred
thousand of gambling losses, and business expenses. He will report
one hundred thousand of wins and ninety thousand of losses
(22:14):
and business expenses. Let's take another professional gambler who has
one hundred thousand of wins and twenty thousand of losses
and business expenses. They'll report one hundred thousand of wins
and eighteen thousand of losses and business expenses. Let's say
we have a another professional gambler who has one hundred
(22:35):
thousand of wins and one hundred and ten thousand of
losses and business expenses. He will lose eleven thousand dollars
of losses and business expenses because they're limited to ninety
percent of actual they're also limited by the way to
the amount of wins, but in this case they'll end
up at ninety nine thousand dollars and he will pay
(22:58):
tax on one thousand dollars. Is a phantom income.
Speaker 1 (23:02):
We've talked about relatively small amounts of W twogs. Big
players can easily get five or ten million dollars a
W two g's, or have in the past. I've done
that many times when they've played in high limit rooms.
This law seems to be the death of high limit rooms.
Players might do it one year and again and figure
(23:23):
out they have this horrendous tax bill. They had no
idea that it was happening, and then you just can't
play that way anymore. You can't play twenty five dollars
machines and get all of the W twogs or one
hundred dollars slot machines. You just get tons of W
two g's and people have to stop playing those Is
that fair? Mostly it is fair.
Speaker 3 (23:47):
The issue again is not w two g it's session results. Now,
first I'm going to point out the obvious. Most amateur
gamblers don't keep session monks, and so they're gonna be
Why I'm cited by this, it's you know, somebody who
goes in again, A losing gambler is not impact so
to a certain extent. Mean, if we think about it,
(24:10):
the high high limit rooms, I would guess, just like
any other form of gambling, at least ninety percent of
the people walking in there lose big and therefore those
people are not going to be impact. You still get,
you know, ninety percent of your gambling losses, and if
those gambling losses exceed one hundred and eleven percent of
your wins, nothing has changed. But as far as professional
(24:36):
gamblers playing high limit rooms, absolutely it's going to have
an impact. Anything that has large dollars low margin is
hit under this spill.
Speaker 2 (24:47):
Yeah, and sports betters are even more impacted than video
poker players. It's easy to have twenty fifty million dollars
worth of turnover in the course of a year, and
you know, if if your return on investment is you know,
two or three percent. You know, you can end up
(25:11):
owing millions of dollars in taxes on.
Speaker 3 (25:14):
You know, not that much income.
Speaker 1 (25:17):
I agree.
Speaker 3 (25:17):
I think sports betting especially is really going to be hit.
Another key question, which again we don't know the answer
to yet, is how will these sports betting companies here
I'm considering companies that really only do sports bank DraftKings,
FanDuel look at this bill. They do not want professional
(25:38):
sports banks. They have limited people right and left. If
they discover that Russ Fox is a professional sports better
and uses draft Gings or FanDuel, I will be limited
to basically two cent bets. But what are they going
to do because it still hurts their volume, it hurts
the amount they're going to collect, and we don't Again,
(26:02):
the law is too new for us to know the answer.
I suspect they're probably very neutral on this bill because
they do want to get rid of professionals professional sports betters,
but they don't like the idea of what's going to
potentially happen long term. That's a guess. I have no
(26:23):
you know, I've not spoken to anyone at either company.
I have no idea how they feel I've not seen
any public statements from them, but I assume sooner or
later they're going to be forced to make one.
Speaker 2 (26:35):
Well, I think they're a little short sighted in that
those are publicly traded companies, which means if suddenly their
handle goes down, they have to justify that to their
to their shareholders and to say, oh, well, we only
got rid of the bad money that was coming in.
(26:56):
I don't know that shareholders are going to buy that.
I also think they're very afraid that it's going to
drive more and more people off shore. And even the
recreational gamblers are going to start hearing even though the
tax thing doesn't affect them, but they're going to hear
(27:17):
that their taxes are going to be worse, and you know,
and and take their action off shore. But I mean,
as you say, we don't know what's going to happen there.
And the sports books are much more concerned with getting
Eye casino. They make so much more on the internet
(27:37):
casino gaming than they do on the sports betting, So
if they think there's something in their calculation that might
affect Eye Casino, then you know that that may have
something to do with which way they try to push
it's just frankly too orly enough.
Speaker 1 (27:56):
Yeah. Is there any distinction between US citizens and non
US citizens.
Speaker 3 (28:03):
With respect to this bill? Yes, there is. Non US
citizens who are permanent residents are taxed just like US citizens.
Those individuals are in the same exact boat as you
and I. However, non resident aliens are generally not taxed
(28:26):
as US citizens unless they meet what is called the
substantial presence test, and also so a non resident alien
is not impacted general. Finally, only non resident alien professional
gamblers conducting a business in the US, those individuals, of
(28:47):
which there might be two in the entire trait, are impacted.
But in general, a non resident like someone who came
to the World Series of Poker, playing at the World
Series Poker, then going home, he or she will not
be impacted.
Speaker 2 (29:04):
So he doesn't owe tax on the money he earns
at the World Series, assuming he's in a country with
a tax treaty.
Speaker 3 (29:13):
If he's in it, like he's from the United Kingdom,
comes here for two months, plays, goes home. The UK
US tax treaty says there's no withholding on gambling. He
gets all of his money, no impact gambling wins and losses,
don't affect him not impacted. Under the US Code, which
(29:35):
is law, and the US UK tax treaty and treaties
are considered law. An individual from a tax treaty country
faces no withholding. There's a list of them. They're mostly
in Western Europe, but it's not all countries. If you're
from the wrong country, for example Switzerland, you have thirty
(29:57):
percent withholding on anything that generates s a W two G.
Those individuals get a Form ten forty two S. Now, consider,
for example, somebody from a tax cheaty country who earns
a W two G poker, slots, video poker, whatever it is.
They still get a tax for them. They get a
(30:17):
Form ten forty two S, but it will show zero
percent withholding, assuming they have what is called an IT
in an individual tax pay identification number. Some casinos in
the US issue them, some don't. If you go to
the wrong casino and you don't have an IT in,
you will still have money with hell, but you can
(30:40):
get it back.
Speaker 2 (30:41):
So what about I know that if you are an
American and you move to another country, say Canada or
the UK, you still owe tax on the money you
earn in the United States. Or if you're not living
there a certain like I don't know, eleven months of
the year or something. There's some amount of time you're
(31:03):
allowed to visit. But how hard is it to actually
renounce your citizenship and become a citizen of Canada or
UK and not have the tax situation.
Speaker 3 (31:16):
Well, there are a couple. There are actually two things
in your question. First, and a US citizen owes tax
on the worldwide income. A US citizen living in Canada
or the UK has to report everything. Now, some things
can be excluded via something called the foreign earned income exclusion.
(31:36):
They are also foreign tax credits. Generally, a US citizen
living abroad earning an income from wages will not owe
US tax if they're in a high tax country, which
definitely Canada is, UK is as far as wages. If
they're in a low tax country, they may owe some tax.
(32:00):
There are some countries, for example, I always get this wrong,
the Baltic countries Lafya, Lithuania, Estonia. One of them has
I get ten or twelve percent income tax rate, while
an American working in one of those countries is going
to owe US tax because the US tax rate will
generally be higher. Renouncing citizenship is a legal process. It's involved.
(32:24):
It is something that somebody, if anyone wanted to do that,
they needed to consult an attorney. Not an attorney. There
is a form you file if you renounce citizenship because
the US has an exit tax. If your assets are
over a certain amount or your income is over a
certain amount, you generally have to continue filing tax returns
(32:47):
for ten years, and you may owe US tax for
additional ten years. If your income isn't that high or
your assets are not that high, you file the form.
By the way, this form has filed under penalty of perjury.
Somebody got in very deep trouble for claiming he was
worth about half a million dollars when he was worth
(33:09):
sixteen billion. That doesn't work, well, don't I do not?
It was around herror, Yeah. Uh. He ended up paying
the exit attacks along with penalties and interest in lieu
of jail tie he had made a flight from a
country which didn't have an extradition treaty with the US
(33:30):
to one that did.
Speaker 1 (33:32):
Oops.
Speaker 3 (33:33):
But I have filed this form twice for clients. As
long as you do it, and you're you know, doing it,
you know accurately, it's and in both cases, both clients
were what are called accidental Americans. They were born in
the US, they had citizenship in another country. They were
both average individuals, you know, middle class earning wages. You know,
(33:57):
they didn't have billions in assets, and they didn't make
you know, tremendous dollar amounts of income where they would
be subject to the exit tax. Anybody who is subject
to the exit tax, you know, I would immediately refer
to an immigration attorney.
Speaker 1 (34:13):
Are there any company structures such as sole proprietorships, partnerships, llc,
et cetera, that would receive more favorable treatment under the
new law prepared to another company structure.
Speaker 3 (34:28):
Not related to gambling, however, for certain other business activities. Potentially, yes,
I expect a slight increase in sea corporations in the future.
Has nothing to do with gambling. But my initial reading
was there are some tax advantages potentially for sea corporations
(34:49):
in the future.
Speaker 1 (34:51):
Early in this administration, maybe still, there was a Department
of Government Efficiency which went around and, among other things,
fired a lot of federal employees. Presumably this includes a
lot of IRS auditors. Does this imply the chances of
having your taxes audited for your twenty twenty six return
(35:12):
are lower than they would be for your twenty twenty
four return.
Speaker 3 (35:17):
Well, I would say one thing to first say is
audits don't happen when you file your return. Let's assume
you file today on extension your twenty twenty four return
that returns file today is in middle of July. An
audit would happen between the middle of twenty twenty six
(35:41):
to the middle of twenty twenty seven. Audits happen aways
out from the date you file your tax return, So
we don't know what's going to happen for twenty twenty
six returns because that's we're dealing with stuff that would
happen in twenty seven to twenty eight, and nobody knows
what the IRIS workforce is going to be then. But generally, yes,
(36:05):
I expect audits to go down because there are just
fewer people the IRS. The IRIS is lost in various
departments between ten and thirty percent of their staff. Now,
that is going to also be not good for tax administration,
and there needs to be some adds. It helps with
(36:25):
tax compliance. I hate to say that, but you know,
it'd be nice if everybody told the truth on their
tax returns. But I'm not naive. There was something that
came out this morning where an individual who's a former
person very high up in the IRIS expects another ten
to forty percent of IRIS employees to leave this year. Wow,
(36:48):
that's a lot. Now, the IRIS computer system is ancient.
It dates to nineteen fifty nine. You've heard me correctly,
before I was born, and you know I'm going to
be aligible for Social Security in a few years. So
it's old. Think punch carts. By the way, if anybody
(37:10):
listening is a COBOYL programmer and wants a job, the
IRIS will hire you right now. You have to go
to Martinsburg, West Virginia. Don't I have no idea where
that is, except it's in West Virginia. But that's where
the main IRIS computing center is. However, one of the
things that happens the IRS sends out a lot of
(37:31):
automated under reporting unit notices. These are where the IRIS
match things up. For example, you have one thousand dollars
of interest income from a bank and you don't put
it on your tax return. The IRIS is very good
about matching those things, and you get an automated under
reporting unit notice saying you don't think you included this.
Sometimes you have and the IRIS computer just doesn't see it.
(37:53):
You type Bank of America and you accidentally made a
type up and so the computer didn't match it. You
just pointed out out. I expect a lot more of
these notices in the future. The IRS is going to
see a lot of w twogs. People are going to
use a session method not attached disclosure statements, and the
(38:14):
IRS is going to be sending out a lot of
these notices, and there's going to be fewer staff to
deal with the responses. That's going to be an issue.
Speaker 2 (38:24):
I mean, isn't somebody take a recreational gambler that gambles
a lot, you know, aren't they reporting that wrong? If
let's say that they had fifty thousand in w twogs
and they lost a total of seventy thousand or whatever,
And what you're saying is you put fifty thousand in
(38:44):
the winds and seventy thousand and go offset it with
the losses ninety percent of seventy thousand.
Speaker 4 (38:53):
But aren't they actually because those people some days won,
so they actually had more than fIF fifty thousand in
wins than just the w twogs.
Speaker 3 (39:03):
So shouldn't they be putting.
Speaker 2 (39:05):
I had eighty thousand in win and one hundred and
twenty thousand.
Speaker 3 (39:09):
Lossy, it's possible they have more. It's also possible they
have less. Okay, your w twogs do not mean that's
your session total of wings. No, but on some days
people win.
Speaker 2 (39:21):
I mean, if they're a spot player, they you know.
Speaker 3 (39:24):
Oh absolutely. But here's the thing. If they have fifty
thousand of W two g's, what's the total of their
session wins. If it's more than fifty thousand, yes, they
need to add to their wins another twenty thousand. Okay,
if it's less, they can subtract that as an adjustment
to income. It'll be both ways. There are people who
(39:44):
have fifty thousand of w twog's one hundred and fifty
thousand of gambling wings, and there are also people with
fifty thousand of w twogs with five thousand of gambling wins.
Both are possible. Yeah, in many cases people will just okay,
I have fifty thousand of gambling of w twogs, I
lost money. I lost more than one hundred and eleven percent,
(40:06):
So I'm just going to put down fifty thousand of
tax gambling losses. I'm going to be fine. Is that
technically correct? No? Is it accurate or change the tax?
Probably not, but it could in some circumstance changes their
adjusted gross income? Right, yes, but it may or may
not change their tax. It all depends.
Speaker 1 (40:28):
I would guess this law is going to increase the
dishonest reporting among a large number of professional gamblers. Now,
obviously dishonest reporting is something you're very much against. But
would you suspect that I'm right in this? Yes?
Speaker 3 (40:49):
I'm not naive. People are I mean, a gambler who
loses is and they're going to a lot of people
are going to play auditor went. I can never advise
such actions. I'm licensed, and I always have to suggest
(41:09):
compliance with our tax laws. But I'm not naive.
Speaker 1 (41:13):
So Russell Fox, thank you very much. If any of
our listeners wish to get a hold of you for
tax or other consulting reasons, how would they do that?
Speaker 3 (41:22):
Eisi way is to send an email to rcfoxat Claytontax
dot com.
Speaker 1 (41:30):
Be advised that.
Speaker 3 (41:32):
If you're interested in us preparing your twenty twenty four
tax return, that would be on extension, probably not doable.
We're close to at capacity for this calendar year, but
for next year would probably be still doable. That's twenty
twenty five returns a year. We're in filed in twenty six.
Speaker 1 (41:52):
Thank you for much.
Speaker 2 (41:53):
We'll put a link for your link to your website
into your email in the show notes.
Speaker 1 (42:00):
Is it also true, Russell Fox, that if this tax
law changes in that you'll likely report that in your
website taxable talk dot com.
Speaker 3 (42:11):
Oh yes, if there is a if, for example, something
the law gets changed, I will absolutely report it. I'm
still digesting all the provisions of this bill. The bill
itself is I have it up. It is three hundred
and thirty pages of fine print. I thought it was
(42:33):
over nine hundred pages. It is showing at well, it's
frunk it in the format it's probably nine hundred pages
at about an eleven font as printed by the US
Government Publishing Office. It's in like a four or five font.
Speaker 1 (42:50):
Oh geez, I mean it's tiny, all righty, Thank you
very much, Russell Fox. Thank you, Richard. Go out and
hit lots of wild flushes, everybody, but do it this
year and not next. Thank you. Goodbye,
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