Man, every time I go to Vegas I hope to win the car. You know what I’m talking about, it’s the shiny car sitting on top of the slot machines. I walk into the casino and think, “I feel lucky today, I should sit down and play a couple rounds on this slot machine.” Alas, the only thing I walk away with from the car giveaway slot machines is an empty purse.
If I did win the car I would be thrilled! I would be able to drive it home – hair blowing in the wind, radio up loud listening to my favorite music. Along with my shiny convertible the casino would also give me a W2-G!
Form W2-G, Certain Gambling Winnings, will describe the Fair Market Value of the my winnings for the IRS and the amount of taxes I paid, if any, towards my winnings.
Now, here’s something I learned about gambling winnings by reading the W2-G Instructions; you have to pay taxes on your noncash payment. My shiny red convertible would be a noncash payment. According to the instructions, “If the FMV exceeds $5,000, after deducting the price of the wager, the winnings are subject to 25% regular gambling withholding. The tax you must withold is computed and paid under either of the following two methods: 1) The winner pays the withholding tax to the payer. In this case, the withholding is 25% of the FMV (Fair Market Value) of the noncash payment minus the amount of the wager. Or 2) The payer pays the withholding tax, In this case, the withholding is 33.33% of the FMV of the noncash payment minus the amount of the wager.
Now, I don’t know about you, but I doubt the casino (payer) will pay the taxes on the gambling winnings of my car so option 1 will probably be the more common scenario. I guess I better start saving up for the next time I go to Las Vegas. That way I’ll have extra money to pay for the taxes on my new car!