Las Vegas, Casinos, Gamblers May Get a Surprise IRS Jackpot
Congress may change an outdated rule that would set a higher threshold for what slot winnings need to be reported to the IRS (which Caesars, MGM, and others should love.)
Every casino player lucky enough to hit a slot machine jackpot knows the downside of any win $1,200 or over. When that happens -- after the initial excitement has faded -- you quickly realize that your machine freezes and won't pay out. Instead, a warning pops up to wait for an attendant.
The waiting for an attendant can be a problem as even at major casinos owned by Caesars Entertainment (CZR) - Get Free Report and MGM Resorts International (MGM) - Get Free Report there seems to be no connection between the machine telling you that you need an attendant and one actually coming. Some machines have buttons you can press that turn a light on that's supposed to signal an attendant to come see you, but that's hardly a perfect system.
The machine locks and won't print out your winnings because any win $1,200 or over has to be recorded by the casino and reported to the Internal Revenue Service (IRS). So, in a perfect world, you hit your jackpot and someone comes over promptly to collect your identification in order to fill out IRS form W2-G to report your winning to the government.
Once you have been handed that form, your machine is unlocked and you either get paid out right there (which is why these are generally known as "handpays" or you can print out a voucher. It's a clumsy system that has been in place since 1977 -- a time when $1,200 was a lot more money than it is now -- which has not changed once since it was introduced.
Last year, Nevada Democrat Dina Titus introduced the Shifting Limits on Thresholds (SLOT) Act, in the U.S. House of Representatives And, despite its clever name and bipartisan support, the act did not move forward.
A New Attempt to Raise Slot Winnings Tax Threshold
While Titus failed during the last session of Congress, she plans to try again, according to a report from the Las Vegas Review-Journal.
“There was a time when we were trying to get the Treasury Department to do this through regulation, but they never moved, so we’re just going to push the legislation instead,” Titus told the paper.
Her new proposal is pretty similar to the SLOT Act. She wants the IRS reporting threshold to be raised to $5,000 and indexed to inflation. When she first proposed the SLOT Act, which was not voted on in the last session of Congress, she released a statement explaining her actions.
“Due to inflation, the number of jackpots hitting that threshold, triggering a shut down of the machine and necessitating excessive paperwork requirements for the patron, has increased dramatically,” Titus said in a press release. “This creates an unnecessary burden on the gaming industry, an economic driver for southern Nevada and other communities nationwide where slot machines exist. While I believe appropriate taxes should be collected on winnings, raising the threshold would reduce paperwork and ensure this is accomplished more efficiently.”
Good For Gamblers and Casinos
The last thing Caesars, MGM, or any other casino wants is a player to hit a jackpot and then have to sit around slowly getting angry. Ideally, at least for the casino, when someone wins a large amount, they can immediately get back to playing (and perhaps lose some of their winnings back).
Titus' act, which she believes will have bipartisan support from states with legalized slot machine gambling, simply removes a pain point. Casinos won't have to devote labor to a tedious process and gamblers won't have to figure out how to get an attendant to pay attention to them when they can't walk away from their machine.
And, while this seems like a logical change for Congress to make, gaming industry expert Brendan Bussmann told the paper he does not expect it to pass.
“The challenge that we are going to face is that you have a dysfunctional legislative body that won’t see this as a bipartisan issue. It’s time to update the system and up the threshold on taxable winnings. This should be a no-brainer, but in an age where we live by continuing resolutions, this gets lost in the shuffle," he said.