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Jackpot! Now How Do I Get My Withholding Back?

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For foreign persons gambling in casinos in the United States and Indian Reservations, when it comes to taxes – “What happens in Vegas, doesn’t have to stay in Vegas”.

Unlike other foreign countries, the United States considers winnings from gambling and lotteries to be taxable. Under the tax law jackpots of $600 or more will incur a non-resident withholding tax of 30%. So if you are non-U.S. resident and you win $10,000 you only go back home with $7,000.

But as a foreign person, can you get that money back? The short answer is “maybe” depending on the country you are from. For example, the US-Canada Tax Treaty allows Canadians to deduct their U.S. gambling losses (with a few exceptions) in a given year from winnings.

How do you substantiate the losses? Well you don’t have to submit your receipts to the IRS with your tax return.  But if you are ever audited you will be asked for proof of losses so its wise to claim only those losses that you can substantiate. The requirement of substantiation extends to any tax filer (resident or non-resident) looking to claim gambling losses.  To start, if you belong to a casino’s Players Club, check with the casino or casinos that you visited to see if they can provide you with a record of your gambling. Some keep those records. If not, then you should keep a diary of your activity with the following:

•           The date and type of wagering activity

•           The name and location of the casino

•           The amounts you won or lost

You can aggregate all your U.S. gambling  losses for the whole year, not just the trip you won on. Remember travel expenses, entertainment, food and accommodations are not deductible.

So if you are a foreign person looking to claim the gambling losses, what forms need to be filed? If you have never obtained an Individual Taxpayer Identification Number (ITIN) you will need to file for one using Form W-7 along with a certified copy of your passport (sending the original passport is not advisable). Contact passport services of your State Department for one. This only needs to be done the first time you file a return. Next you will fill out tax form 1040NR using the information from the Form 1042S issued to you by the casino. Next send in the completed Form 1040NR, 1042S and your W-7 if you don’t have an ITIN to the IRS who will process your refund.

By using an experienced Cross-Border Tax Expert who is familiar with U.S. tax filings there should be no problem in quickly getting your refund. Contact the Law Offices Of Jeffrey B. Kahn, P.C. with locations in Los Angeles and elsewhere in California.

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