Federal legislation introduced today by leaders of the Congressional Gaming Caucus would greatly increase the amount of money needed to be won on a slot machine spin to trigger an IRS report.
Creatively named the SLOT Act — or “Shifting Limits on Thresholds Act” — the bipartisan legislation comes from US Representatives Dina Titus (D-Nevada) and Guy Reschenthaler (R-Pennsylvania). The two lawmakers cochair the Congressional Gaming Caucus.
The SLOT Act, if passed and signed into law by President Joe Biden, would increase the jackpot tax reporting threshold from $1,200 to $5,000. That’s a more than 300% surge.
Titus and Reschenthaler argue that the current IRS slot threshold, which hasn’t been touched since 1977, is long antiquated and due for a major adjustment. Ongoing inflation has only further necessitated a change, they say.
Due to inflation, the number of jackpots hitting that threshold, triggering a shutdown of the machine and necessitating excessive paperwork requirements for the patron, has increased dramatically,” said Titus. “This creates an unnecessary burden on the gaming industry, an economic driver for Southern Nevada and other communities nationwide where slot machines exist.”
US tax laws require that a casino suspend a slot machine’s operation any time a play wins $1,200 or more during a single spin. In the event of that happening, casino employees are tasked with completing a W-2G form. The IRS tax document is for taxpayers to report their annual gambling winnings as income.
The American Gaming Industry (AGA) naturally lent its support for the SLOT Act. The casino trade group says increasing the mandatory W-2G threshold would help ease “unnecessary administrative burdens on casino operators.” The AGA concluded that the bill would modernize the IRS’ regulations on slot machine jackpots.
Based on the US Labor Department’s Consumer Price Index, $1,200 in 1977 is the equivalent of $5,567 today.
Reschenthaler, whose state is now home to one of the largest gaming markets in the United States, says the $1,200 slot jackpot IRS activator is costly for casinos.
“Because the threshold has not kept up with inflation, it has resulted in a drastic increase in reportable jackpots, which trigger tax burdens for winners and compliance burdens for casinos. Increasing the threshold will eliminate this onerous red tape, ensuring the gaming industry can continue to support good-paying jobs and foster economic growth in Pennsylvania and across the country,” Reschenthaler said.
Fewer mandatory W-2G forms could result in less of the slot winnings being properly reported to the IRS.
Gamblers are required under law to report all of their gambling wins as “other income” on a 1040 tax form. But recreational gamblers often fail to do so. The IRS W-2G form is one way the federal government makes sure it receives its share of larger wins.
The US Treasury Department in late 2020 was ordered by Congress to commission a study into how raising the slot tax form threshold might impact overall gaming taxes. The report is nearly a year overdue.
“While I believe appropriate taxes should be collected on winnings, raising the threshold would reduce paperwork and ensure this is accomplished more efficiently,” Titus concluded.
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