Although gambling is widespread throughout the United States, regulations to govern gambling exist at the local, state and federal levels. In fact, legislation exists at each level that limits the type of gambling allowed or bans it from certain areas. For example, while Congress regulates international gambling, interstate gambling and the extent to which gambling may occur in Native American areas, states also have the power to determine who may gamble, what type of gambling may occur in the state and where gambling establishments may be located.
However, given the massive expansion of the internet, the U.S. has seen an explosion of legal and illegal gambling opportunities. Despite the controversy of legalized gambling, and the potential for massive personal loss and tragedy, Nevada is no longer the only state to allow casino gambling. In fact, there has been a substantial increase in the legalization of gambling in many states, and proponents argue that despite the risk, legalized gambling can potentially decrease taxes, increase job opportunities and allow for more infrastructure development.
Reasons Casinos Withhold Winnings
So, what do you need to know about gambling and receiving your winnings before you take your dream trip to Las Vegas and hit it big at the poker table? Anyone who gambles needs to understand that the money won from gambling may legally be withheld for specific reasons, including taxes and overdue child support.
1. Deducting my winnings to pay for taxes from earnings
The first step if you decide to take a trip and do some gambling is to understand the tax laws in that state. Failing to do so can lead to issues with the Internal Revenue Service (IRS).
Gambling winnings are almost always considered taxable income and are subject to a 25% flat tax. This is true whether you win playing poker or if you win playing the slots. Interestingly, however, in Las Vegas, if you hit the jackpot playing a slot machine, the casino will automatically withhold 25% of the prize money. They are not required to do this if you win at certain games such as roulette, blackjack or craps.
In Las Vegas, the amount you win will also determine whether you will receive a W-2G from the casino. For example, if you win $1,200 or more from a slot machine or bingo table, $1,500 from playing keno or $5,000 from a poker tournament, you should receive a W-2G form from the casino. However, regardless of whether they issue you tax documentation or withhold winnings immediately, you are required to report it yourself when you file your taxes if certain winning thresholds are met.
2. Withholding my winnings to pay for overdue child support
Another common reason why winnings may be withheld is to pay for overdue child support. In fact, in 2013, Illinois passed legislation to require casinos to withhold winnings for child support. They joined other states that have passed similar legislation. The good news is the process is working. In 2015, Ohio reported that in 11 months, they had seized more than $2 million from jackpot winners at casinos and race tracks who owed unpaid child support. Whether child support can be withheld and the amount withheld can vary by state. In Illinois, however, the amount that can be withheld may equal the sum of the winnings.
Steps to Get Your Casino Earnings
While it’s clear that there are legal reasons why a casino may be required to withhold casino earnings, there are also times when the casino simply refuses to pay the jackpot. The good news is that this doesn’t happen too often; the bad news is that it does happen.
The most common reason why a casino will refuse to pay out is if it believes that a machine, such as a slot machine, has had a malfunction. In fact, this happened to Katrina Bookman while visiting the Resorts World Casino in New York. Bookman reportedly won nearly $43 million before being told by the Resorts World spokesman that the slot machine was having an "obvious malfunction." As the time of writing this, Bookman is suing the casino. Another woman had a similar story in Oregon when visiting the Lucky Eagle Casino and won $8 million at the slot machine. She was also refused payment for an "obvious malfunction."
So, what do you do if this happens to you? Your rights will be determined by state laws, but here are the steps you can take in the State of Nevada:
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Other states may have different laws regarding your rights. For this reason, you may also want to contact a lawyer to determine your legal rights.