So Esmeralda came barging into the office the other day stating that she had wanted her money back and that she was expecting to get it all back. “Why did they keep my money, I’m not an American and I want my money back – you know how much $30 000 USD is to a Canadian right now?” “Yes, Esmeralda, I know – I also know that if you had it all for the next big Lotto 649 you would stand a better chance of winning. Anyhow, it sounds like you want to file the 1040NR.”
In order to get your money back – there is a process that you must follow. First you need to apply for an Individual Taxpayer Identification Number (ITIN). You can actually apply for it and do the tax return at the same time. It has actually been my experience that most people actually apply for the ITIN first as they often want their money back before the next filing season begins. For you to get your ITIN you must fill out a form called the W-7 and provide “certified true copies” of the requested documentation. It is crucial that the copies provided with your W-7 are “certified true copies” as documents that have been certified by someone other than the issuing agency will not be accepted – this will most likely cause your application to be delayed or rejected altogether. For those of you who like to do it yourself – the form and instructions can be found on the official IRS website. Once the number has been provided by the IRS you can go ahead and file your tax return – there is even a special place for Canadians (Section 10 on page 4 of the 1040NR) as they pay taxes on their “net winnings” – it is like you expense the money that was lost in order to achieve the winnings. In the end, you will only pay a little bit of tax unless you didn’t lose anything. However, the IRS may want to see documented proof of your losings. “Document your losses, how the heck do you do that?”Esmeralda was furious when she was told that. There will be a list below of what could be considered documentation for poker games as well as other types of gambling. Many people are surprised that the IRS would ask for documentation of losses, but according to the IRS as a source once stated “If it isn’t documented, it didn’t happen”.
Some potential documentation that is kept by gamblers is the following:
Poker and other table games: You must record the name of the Casino, the number of the table that you played at – the casino credit card data, and if it applies, you must indicate if the credit was issued at the cashier’s cage or in the pit.
Slot machines: Record along with the location of the casino, the slot machine number and the times and dates that you won.
Lotteries: You must record the name, date, all tickets – including the losing ones, how much was paid and what was the result of each ticket (win or lose).
Dog or Horse Racing: It is important to record the times and dates of the actual races and the numbers of the animals bid on along with the details and the results of each bet, and payment records provided by the racetrack.
Please keep in mind that the IRS will not always ask for the proof but it should be kept in case they would like to see it. As a result of this compliance, it is highly recommended that if you plan on gambling often, to join the casino’s frequent gambler club using the card to track your winnings and losses. At the end of your stay, you can request a printout of your gambling activities. Yes, you can actually track your gambling winnings.
Esmeralda was amazed and upset at the same time – “who knew that gambling would be so much … work?” This is what you have to do to keep your gambling compliant, along with having fun of course. “Well, maybe if gambling is this tedious, I’ll just buy revenue property instead”.
Next time, we will explain to Esmeralda, what will occur if she decides to buy a property in Nevada to rent out when she is not there to gamble.