Nerd Knowledge: Tax Season Advice from an Accountant

NO ONE LIKES TAX SEASON: WHY OUR CASINOS CAN MAKE IT WORSE FOR OUR GUESTS

By Kevin Huddleston, CPA, CGMA, CFF, Strategic Raving Partner, Accounting and Auditing, and Partner, Finley & Cook

Everyone’s favorite season has just kicked-off! Wait, football season is over!? That’s right; it’s tax season (collective groan). Even us accountants have a bit of dread for tax season. No doubt players club team members, hosts and slot attendants have a similar dread. Every year there are guests that are unhappy about the tax-related information they received or didn’t receive from the casino. Dealing with these guests is often a no-win situation. Even when you’re right, you’re wrong. I don’t have any magic formula to help you make the angry guest happy, but I can equip you with some nerd knowledge that might help explain things and diffuse the situation.

Why am I getting a 1099?

One of the biggest complaints I’ve heard is from guests who don’t understand why they received a 1099 and who are certain they didn’t win that much. 1099 forms must be mailed no later than January 31st each year. Income reported on form 1099 is a cumulative total for the calendar year. $600 is the tipping point where reporting is required. The amount reported has nothing to do with jackpot wins, but prizes won in contests and drawings. Casinos usually set a threshold between $50 and $100 where they begin to log these transactions so they can determine at the end of the year who they are required to send a 1099. Handling these issues confidently and swiftly is key in getting the guest to a happier place. To that end, it’s important that access to the detail of dates, amounts, and promotions that put them at $600 or more be readily available to team members in key guest contact positions. A preventative step that casinos can take to avoid these issues is to have a statement on your prize forms stating that “cumulative prize winnings of $600 or more in a calendar year will be reported to you and the IRS on form 1099.” If the guests see this throughout the year, then it shouldn’t be a shock to them when they receive the form in the mail. It also gives them an opportunity throughout the year to ask questions and gain a better understanding.

Win/loss statements

Win/Loss statements are another thing that gives guests heartburn at this time of year. Most casinos don’t automatically provide win/loss statements to guests. A few may not at all (my favorite). There are several reasons why guests often have issues with win/loss statements. First, they are not consistent from casino to casino. Seeing information about their play in different formats can lead to confusion. Second, some win/loss statements may show cash-in and out. Others may show coin-in. If coin-in is shown, that amount is usually 8 to 10 times more than the actual cash the guest put into your machines. That can be shocking when they see it. Third, the amounts on the win/loss statements can only report what happened while the guest had their players club card in the machine. If carded play runs between 40% and 60%, then on average the statements are half right. Lastly, a win/loss statement is not acceptable documentation of gambling losses in the eyes of the IRS. I would avoid supplying win/loss statements to guests, but if you do, make sure your key guest contacts understand the statements, what the numbers represent and have knowledge of the items mentioned above.

And finally, the W-2g

The last thing I want to address is form W-2g. Since guests receive these at the time of a jackpot win, there is less confusion surrounding them. Issues that guests usually have with these are one of two things. First, they can’t find their W-2g. They simply want someone to reprint it quickly. Second, they received a letter from the IRS stating that the wins they reported on their tax return for last year don’t match what the casino reported to them. These letters usually arrive in August of each year. Casinos are required to submit detailed files to the IRS each year listing every single W-2g they issued and the information in every field, including taxes withheld. The information in these files is what the IRS is matching against. The files are the only way the IRS knows that a specific guest had taxes withheld. Both of these issues are usually handled by having readily available access to the guest’s jackpot history. Because reporting to the IRS is usually handled by Finance, guest contacts should be informed of who specifically to contact if they can’t quickly resolve the issue.

None of us like tax season, but we can make it a little easier for everyone if we’re prepared. We can’t do anything about the reporting requirements for these transactions, but we can do something about how quickly the guest is taken care of. After all, service is what truly sets one casino apart from another. So educate your team and impress your guests.

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About the author

Kevin Huddleston

Kevin, a member of the Choctaw Nation of Oklahoma, provides outsourced accounting and consulting services for Native American tribes and casino clients. Through his nearly three decades of working within the gaming industry, he is an expert in integrating the many financial systems unique to the gaming industry. Contact Kevin

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