Cross Border Tax Q&A

Gambling Refund Disallowed by the IRS

January 10, 2011

3399

I have helped hundreds of people successfully navigate from the US to Canada. If you're thinking of moving or retiring to Canada contact me today to chat about your plans.

I can be reached via email at phil@philhogan.com, by phone at 250-661-9417 or through my contact page here.

I look forward to speaking to you soon.

Phil Hogan, CPA, CA, CPA (CO)
Cross-Border Tax and Investment Specialist

Question

Phil,

I know you don’t know me from a hole in the ground and I know you are out to make money but I thought I’d ask anyhow. I’m a XXXXXX in XXXXX but US Tax law isn’t my forte. I have had an ITN for more than 10 years and have filed a 1040NR to recover gambling money each year. Last year I was told I wasn’t getting it back because I didin’t claim my losses. I had never done it in the past and didn’t know what they were talking about. Of course you have to wait 12 weeks to find that out.

They essentially told me I should never have been paid previously without including that info. I finally resolved it but am getting ready to file again and I want to make sure I have things right. The 40 pages of instructions for the 1040NR have always been a bit of a joke. Just wondering if you can tell me if there is anything else that might hold up my return other than now filling out lines 10a and 10b? Is it as simple as you withheld $1200 from me on a $4000 win so I better claim losses of at least $5200?

Thanks in advance should you decide to humour me!

XXXXXXXXX

Answer

Hi XXXXX

I’m not sure if I understand you question, however I’ll give it a shot….

An example:

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?

Feel free to give me a call at 250-661-9417.

Cheers

Phil

Phil Hogan, CA
250-661-9417

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