I’m not sure if I understand you question, however I’ll give it a shot….
- You win $10,000, they withhold $3,000
- You also have $5000 of losses
What should happen is that you report the $10,000 of winning less the $5,000 of losses for net income of $5,000. You’re taxed at 30% = $1,500. Since they withheld $5000 you should receive a refund of $3,500.
It’s possible that they are disallowing you losses because you failed to provide proof of you losses. I wasn’t aware that they required proof of losses unless they specifically asked for proof. Did they send you a letter requesting proof of losses after the return was filed?
I’m not sure if this is what happened. Did they provide any explanation on the letter they sent?
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Phil Hogan, CA
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