Winning is exciting but no one wants to pay unnecessary taxes. Changes to the Canadian-US Income Tax Treaty have provided a means for Canadians to recover some of the taxes imposed on US gambling winnings.
Did you know that Canadians can recover taxes on U.S. gambling winnings?
The IRS can tax all gambling winnings such as Keno, slot machines, bingo, lotteries, etc. As a Canadian who is not residing in the U.S., the tax rate is 30%. However, some games such as blackjack, baccarat, craps, roulette and big-6 wheel escape the withholding tax as the IRS does not feel it is feasible to collect the tax.
As Canadians, we have a special concession from the IRS which allows us to deduct our gambling losses against gambling winnings. Because the tax is then calculated on the net winnings, any difference between the calculated tax and the tax withheld will be refundable to you.
Ensure that you are not leaving money on the table and in the hands of the IRS. Baker Tilly can assist you in reclaiming any tax refunds due to you.
Expertise to Bet On
The professionals at Baker Tilly have developed solutions to assist you in reclaiming some of the taxes imposed on US gambling winnings.
Get Your Refund
There is a two step process to claiming your refund. First, you must have a U.S. ITIN (more information below), which is a Taxpayer Identification Number. Secondly, you must file a U.S. non-resident tax return after the end of the year.
Get an ITIN
To request an ITIN from the IRS, you must complete form W-7. Check with the gambling establishment about submitting your application at the time of withholding. Baker Tilly has the professionals and resources to assist in this process and who will submit the applications as part of your U.S. tax return.
File a U.S. Non-Resident Return
Our professional staff is experienced in preparing U.S. Non-Resident Returns. You need to provide us with your U.S. withholding tax slip (usually Form 1042-S) showing the amount you won, the amount of tax withheld and, more importantly, a complete record of the amount you spent on gambling.
Track Your Losses
The IRS recommends you keep a diary of your winnings and losses. Often, casinos will track your winnings and losses for you and present you with a statement. It is wise to set this up prior to commencing gambling.
Other ways to track your losses include cash withdrawal slips, ticket stubs, cancelled cheques, credit card receipts, etc. These should supplement your diary, which is your best proof. The more detailed your diary, the more likely it will be accepted by the IRS. For example, if you play the slot machines, the IRS recommends you record the machine number, the date and time the machine was played and the amount you spent.
The IRS can assess penalties for not maintaining accurate records to substantiate losses.
