The Wager

The withholding rate under Section 3402(q) applicable to winnings of $5,000 or more from sweepstakes, wagering pools, certain parimutuel pools, jai alai, and lotteries (formerly 25%) is 24%. This rate appears in the Withholding, Regular Gambling Withholding for Certain Games, Noncash payments, and Backup Withholding sections under Specific Instructions for Form W-2G; the Withholding section under 1. Horse Racing, Dog Racing, Jai Alai, and Other Wagering Transactions Not Discussed Later; the Withholding section under 2. Sweepstakes, Wagering Pools, and Lotteries; and the Withholding and Forms W-2G for Multiple Winners section under Specific Instructions for Form 5754.

A payee of gambling winnings meeting the reporting thresholds for bingo, keno, and slot machines, and a payee of gambling winnings meeting the withholding thresholds from horse racing, dog racing, jai alai, sweepstakes, wagering pools, lotteries, and certain other wagering transactions, but not from a state-conducted lottery, must present two forms of identification, one of which must include the payee's photo. A completed and signed Form W-9 is acceptable as the nonphoto form of identification. Gaming establishments owned or licensed by a tribal government of a federally recognized Indian tribe may waive the photo ID requirement for payees who are members of that tribe and present a tribal member identification card issued by the same tribe. These rules affect boxes 11 and 12 under the instructions for 1. Horse Racing, Dog Racing, Jai Alai, and Other Wagering Transactions Not Discussed Later; 2. Sweepstakes, Wagering Pools, and Lotteries; and 3. Bingo, Keno, and Slot Machines.

The Wager

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All wagers placed in a single parimutuel pool and represented on a single ticket are aggregated and treated as a single wager for purposes of determining the amount of the wager with respect to winnings from parimutuel betting on horse racing, dog racing, or jai alai. These rules affect boxes 1 and 4 under the instructions for Horse Racing, Dog Racing, Jai Alai, and Other Wagering Transactions Not Discussed Later.

File Form W-2G, Certain Gambling Winnings, to report gambling winnings and any federal income tax withheld on those winnings. The requirements for reporting and withholding depend on the type of gambling, the amount of the gambling winnings, and generally the ratio of the winnings to the wager. File Form W-2G with the IRS. You must provide a statement to the winner (Copies B and C of Form W-2G).

You may be required to withhold 24% of gambling winnings for federal income tax. This is referred to as regular gambling withholding. Withhold at the 24% rate if the winnings minus the wager are more than $5,000 and are from:

You must take the fair market value (FMV) of a noncash payment, such as a car in a sweepstakes, wagering pool, or lottery, into account for purposes of reporting and withholding. If the FMV exceeds $5,000, after deducting the price of the wager, the winnings are subject to 24% regular gambling withholding. The tax you must withhold is computed and paid under either of the following two methods.

Payments of gambling winnings to a nonresident alien individual or a foreign entity aren't subject to reporting or withholding on Form W-2G. Generally, gambling winnings paid to a foreign person are subject to 30% withholding under sections 1441(a) and 1442(a) and are reportable on Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons, and Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding. Winnings of a nonresident alien from blackjack, baccarat, craps, roulette, big-6 wheel, or a live dog or horse race in the United States from legal wagers initiated outside the United States in a parimutuel pool aren't subject to withholding or reporting. See Pub. 515, Withholding of Tax on Nonresident Aliens and Foreign Entities.

File Form W-2G for every person to whom you pay $600 or more in gambling winnings if the winnings are at least 300 times the amount of the wager. If the person presenting the ticket for payment is the sole owner of the ticket, complete Form W-2G showing the name, address, and TIN of the winner. If regular gambling withholding is required, the winner must sign Form W-2G, under penalties of perjury, stating that he or she is the sole owner and that the information listed on the form is correct. If more than one person shares in the winnings from a single wager, see Withholding and Forms W-2G for Multiple Winners, later.

You must withhold federal income tax from the winnings if the winnings minus the wager exceed $5,000 and the winnings are at least 300 times the wager. Withhold 24% of the proceeds (the winnings minus the wager). This is regular gambling withholding.

Winnings from "identical wagers" are added together for purposes of reporting and withholding requirements. Two or more wagers are identical wagers if they are placed with the same payer and winning depends on the occurrence (or non-occurrence) of the same event or events. In the case of horse races, dog races, or jai alai, wagers must also be placed in the same parimutuel pool to be identical wagers. For example, multiple bets placed in a parimutuel pool with a single payer on the same horse to win a specific race are identical wagers.

All wagers in horse racing, dog racing, or jai alai placed in a single parimutuel pool and represented on a single ticket are aggregated and treated as a single wager for purposes of determining the amount of the wager for withholding and reporting requirements. These types of wagers are not necessarily identical wagers. For example, two bets in a single show pool, one for Player X to show and the other for Player Y to show, are not identical wagers because winning on the two bets isn't contingent on the occurrence of the same event. However, if both bets are represented on a single ticket, then they must be aggregated to determine the amount of the wager.

File Form W-2G for each person to whom you pay $600 or more in gambling winnings from a sweepstakes, wagering pool, or lottery (including a state-conducted lottery) if the winnings are at least 300 times the amount of the wager. The wager must be subtracted from the total winnings to determine whether withholding is required and, at the option of the payer, to determine whether reporting is required. The wager must be subtracted at the time of the first payment.

The requirements in this section apply to church raffles, charity drawings, etc. In the case of one wager for multiple raffle tickets, such as five for $1, the wager is considered as $.20 for each ticket.

You must withhold federal income tax from the winnings if the winnings minus the wager exceed $5,000. Withhold 24% of the proceeds (the winnings minus the wager). This is regular gambling withholding. If the winner of reportable gambling winnings doesn't provide a TIN, you must backup withhold on any such winnings that aren't subject to regular gambling withholding at the same withholding rate of 24%. That is, backup withholding of 24% applies if the winnings are at least $600 but not more than $5,000 and are at least 300 times the wager. Figure backup withholding on the amount of the winnings reduced, at the option of the payer, by the amount wagered.

Winnings from "identical wagers" are added together for purposes of the reporting and withholding requirements. Two or more wagers are identical wagers if they are placed with the same payer and winning depends on the occurrence (or non-occurrence) of the same event or events.

File Form W-2G for every person to whom you pay $1,200 or more in gambling winnings from bingo or slot machines, or $1,500 or more from keno after the price of the wager for the winning keno game is deducted. If the winnings aren't paid in cash, the FMV of the item won is considered the amount of the winnings. Total all winnings from all wagers made during a single bingo or keno game to determine whether the winnings are reportable. Winnings and losses from other wagering transactions aren't to be taken into account in arriving at the $1,200 or $1,500 figure.

Regular gambling withholding doesn't apply to winnings from bingo, keno, or slot machines. However, if the recipient of reportable gambling winnings from bingo, keno, or slot machines doesn't provide a TIN, you must backup withhold. That is, if the winnings are at least $1,200 from bingo or slot machines or $1,500 from keno, backup withholding of 24% applies to the amount of the winnings reduced, at the option of the payer, by the amount wagered.

File Form W-2G for each person to whom you pay more than $5,000 in winnings, reduced by the amount of the wager or buy-in, from each poker tournament you have sponsored. Winnings and losses of the participant from other poker tournaments you have sponsored during the year aren't taken into account in arriving at the $5,000 amount.

If more than one person shares in the winnings from a single wager, the total amount of the winnings (minus the amount wagered) will determine the amount of the proceeds for purposes of reporting and withholding. Do not allocate winnings to each winner before determining whether the withholding or reporting thresholds were reached.

So sure was the lord of Ostergaard about the honest nature of his new servant that he immediately said he would place as large a wager as his neighbor pleased that he could not get John to tell a lie. Whichever lord won the wager would also win the entire estate of the lord who had lost.

And so the lord of Nebbegaard wrote the letter to his daughter. He told her about the wager and stressed how important it was for him to win. He wrote that the young man who delivered the letter was John and that she should seem as friendly toward him as possible.

"Here comes your truthful boy," exclaimed the lord of Nebbegaard. "Look how slowly he comes and without the horse. You know the instructions I gave my daughter in the letter. Who do you think will win the wager now?"

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