What Happens If a Canadian Wins Money in Vegas?
If you’re a Canadian considering playing in Vegas, you must know what to expect if you win. The Internal Revenue Service (IRS) imposes a 30% tax on all winnings of more than €1,200 by Canadians playing in Vegas. All US-based casinos must pay this tax.
Luckily, you can get this back by filing a tax refund claim.
Recovering Withholding Tax On Your Earnings In Vegas
The IRS taxes all winnings on slot machines, Keno, lotteries, and bingo. The rate is 30% for Canadians not residing in the US. Fortunately, the IRS doesn’t impose a withholding tax on games like craps, baccarat, and blackjack.
A nonresident alien who earns a determinable, annual or periodic income in the US is liable to pay a 30% withholding tax. The tax is on the gross amount with no effect from credits or deductions. However, it can be reduced by a tax treaty, as in the case of Canada.
The US and Canada signed a tax treaty in the 1980s. These two countries signed Protocol Three in 1995, which amended the earlier tax convention. It permitted Canadians to file a withholding tax refund on earnings from gambling in the US.
How To Submit A Tax Refund Claim
Getting a refund involves two steps, as highlighted below.
Get an ITIN
An Individual Taxpayer Identification Number (ITIN) is a number for processing your taxes. Getting this from the IRS requires completing Form W-7. You must check with the relevant gambling body (the Nevada Gaming Commission for Las Vegas) regarding submitting your application at the time of withholding.
Professionals can guide you throughout the application process to get your tax return.
Filing A Return For Non-Residents In The US
The next step is to file a return for nonresidents in the US. Doing this requires having a withholding slip. The Form 1042-S must show how much you won, tax withheld, and records of your expenditure on gambling.
Tracking Your Losses
You need appropriate documentation to file a claim on your return tax. The kind of documentation you need includes:
You must update this wherever you gamble. The journal must include the name of the casino or gambling establishment, the date, and the gambling activity. You must record your earnings separately from losses and show these daily.
Apart from the journal, you must also provide receipts after winning, including a 1042-S Slip showing the tax held. You must also record all cash withdrawals to prove the source of funds for your winnings.
Alternatively, you may receive receipts after buying US dollars for use before your Vegas trip. When you come back, you must record cash bank deposits of your winnings.
You may also request a win/loss statement from your casino. The statement shows all Vegas winnings and any losses made. A player’s card is a handy tool for tracking all your wins and losses to support the claim for return on your casino winnings tax.
For the IRS to audit your tax winnings, you must ask the casino to verify that your slips are accurate. This is where the journal, win/loss statement, or corroborating documents come in handy. You have limited time to complete the process, so having the documents handy is essential.
Canadians can play and win big in Vegas. However, the IRS imposes a 30% withholding tax on most casino game winnings. Fortunately, filing a tax refund claim will help you recover your money in tax deductions. You must have appropriate evidence, such as a win/loss statement and a gambling journal.
Kevin Flynn is a lean start-up business consultant, PowerMBA, and Senior Financial Markets Editor at Investors Prism. He lives in Leominster, Massachusetts, with his wife…More info on Kevin Flynn