Whether you take part in charitable games regularly as a hobby, are celebrating a special occasion, or are looking to host an event, there's a lot to know when it comes to the tax regulations and license rules surrounding them. Before you decide, it's essential to understand how both wins and losses can impact your tax bill.
Illinois Charitable Games License
To be able to hold charitable games, your organization must follow and meet specific application requirements. You also must submit your application a minimum of 30 days in advance and pay an application fee. Suppliers, providers, and qualifying organizations must file forms specific to their role, which can be filed online or by mail.
If you're applying for an equipment ownership permit, you must file Form RCG-9 and obtain and complete a report yearly. For each event hosted, you must file Form RCG-18, Charitable Games Tax Return, within 30 days of the event. You also have to fill out Form RCG-32 for your records and to provide it when requested by the state of Illinois.
For each annual application filed, you can host up to four events. If not all four are requested at the time of filing, you may request an amendment as long as you do so at least 30 days before the event. Each license fee is $400, and the license is valid for two years. Gaming equipment suppliers must pay an annual license fee of $500 per year, and if you rent space for a game, you must pay a $50 per year provider's fee.
What is the Illinois Charitable Games Tax?
There are fourteen games permitted under the Illinois Charitable Games License. These include beat the dealer, big six, bang, chuck-a-luck, blackjack, gin rummy, five-card stud poker, poker, keno, pull tabs, merchandise wheel, and roulette. Profits from these games must be dedicated to supporting the organization's goals, such as education, healthcare, or charitable work. Each licensed organization can hold a maximum of four events per year.
The Illinois Charitable Games Tax is imposed on the net proceeds of hosted charitable games and is imposed on providers and suppliers of the games. Operators must also pay a license fee, valid for two years. To be eligible to conduct a charitable game, the organization must:
- Operate with profit to your members.
- Be exempt from federal income taxation.
- Be present in the state of Illinois for a minimum of five years. In certain circumstances, this can be lowered to two years.
- Be an educational, religious, charitable, veterans, labor, or fraternal organization.
Taxes And Gambling
Before you gamble, it's important to understand the consequences that it will have on your taxes. You're probably aware that 100% of your winnings from gambling must be reported as taxable income. The winnings are taxed at your federal income tax rate, though you may pay lower rates because of Tax Cuts and Job Acts (TCJA) rate reductions. Earnings can be reported on the IRS Form W-2G (Certain Gambling Winnings).
When it comes to deducting gambling losses, there are some essential things to note. Gambling losses may be written off as a miscellaneous itemized deduction. In recent years, the standard deduction means that itemizing may not be beneficial. Itemizing your deductions only saves taxes when the itemized deductions exceed the standard deduction. Keep in mind that excess losses must be used towards this year's deduction, and your deduction is limited to the winnings you've earned during the same year.
You must provide adequate documentation to claim a tax deduction for gambling losses. This documentation includes:
- Address and name of the establishment where you gambled.
- Names of any other people who were present with you, only if you're not gambling at a race track, casino, or a bingo parlor.
- Date the gambling took place.
- Type of gambling activity.
- The money you have won or lost.
You can record your winnings or losses by documenting the table you were playing and by keeping casino credit receipts and statements issued to you. If you've won the lottery, you can provide the tickets as documentation.
Taxes and Winning
If you've hit it big, whether it's the lottery or gambling, you should prepare for how your win will impact your taxes. If you win at gambling, you're required to report 100% of your winnings as taxable income. You can report this as other income on your 1041 tax return on Schedule I. Be sure and measure your net gain. For example, if you place $40 on a $100 win, you've won $60, not $100. You should also keep good records of your losses throughout the year and document the date, amount of loss, type of loss, and the place.
While the chances of winning the lottery are slim, it happens. If you've won, it's important to remember that your winnings are 100% taxable. You may also be held accountable for state income taxes as well. If your winnings are $5,000 or more, you must withhold 24% for your federal taxes. You can expect Form W-2G to show the amount you were paid and how much in taxes you had withheld. It's essential to keep up with it, so you don't assess a penalty or get stuck making tax payments.
Call Pasquesi Sheppard Today
When it comes to charitable games, gambling, and the tax regulations surrounding them, it's always better to make sure that you're educated and guided properly after you celebrate. There are also situations where you may be able to claim your losses. Since 1975, Pasquesi Sheppard LLC has been serving the Lake Forest and Chicago areas with quality accounting services as well as individual and business consulting.
By building a relationship and staying closely involved with our clients, we can make faster, better decisions to provide you with the outcome that you want. Please contact us today if you have further questions about Illinois Charitable Games License and tax laws. We can be reached by phone at 847-234-5000 or found at 585 Bank Lane in Lake Forest.