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IRS eyes lowering jackpot tax threshold

AP
File - In this Oct. 4

LAS VEGAS » The IRS says a $600 slot machine or bingo jackpot might get its attention in the future, and the prospect has riled gamblers and the casino industry.

The agency requires reporting on a single jackpot or win that’s $1,200 or more for federal income-tax purposes. But it’s floating the possibility of cutting that threshold in half.

A reportable keno win also could be lowered. The threshold for that game is now $1,500.

The IRS hasn’t proposed lowering the tax threshold yet, but it suggested it might in the future and asked for public comment. As of Tuesday, the agency received more than 3,000 comments, with many opposed to the change.

The limits were first established in 1977. The American Gaming Association, which represents casinos and device manufacturers, is against the changes. It has said if the threshold is modified at all, it should be raised to about $5,000 to adjust for inflation.

The IRS has declined to comment. Sen. Dean Heller, R-Nevada, briefly criticized the change Tuesday during a Capitol Hill hearing with the agency’s director.

Meanwhile, a more pressing change being proposed by the IRS involves how casinos keep track of how much players have won or lost on slot machines.

Technology has changed, and casinos now issue loyalty cards to players, the IRS notes in its proposal.

As it is now, a gambler who bets and loses once or many times but eventually hits a $1,200 jackpot has to fill out the agency’s W-2G form for that win without accounting for what else the player won or lost.

Under the proposal, a player would have to win at least one jackpot worth $1,200 or more and still have won at least $1,200 after accounting for any losses and wins during a session. It defines a session as the time from a player’s first bet to their last within a calendar day.

The industry says the change would create more work and cost more to implement.

In its comments to the IRS, the American Gaming Association also noted no customers will want to sign up for loyalty cards — among a casino’s most valuable marketing tools — if they fear the IRS is watching their transactions.

Plus, the loyalty cards offer only an estimate of how much a player has won or lost, the group said. And there’s the opportunity for cards to be used by other people or left in devices for unsuspecting players to rack up wins and losses. Jackpots hit by those players could create a quagmire in terms of who owes what to the IRS.

A public hearing in Washington, D.C., is scheduled for June 17.

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