Originally Posted by Alan Mendelson View Post
Regnis thanks. But why would the IRS question as "cheating" if you reported more than what's on the W2Gs? That makes no sense. It's what's required and not every gambling win gets a W2G.
There is nothing in their procedures or audit manuals that instructs them to do this. It is almost like they realize that most people are only going to declare the W-2G winnings, and therefore if you show more winnings, and presumably offset those winnings with additional losses, they assume cheating and then want to see your records or log for the entire year.

I was audited for horse racing 3 straight years. But I keep a complete log of every wager; all losing tickets (I have large barrels in the basement); and a completely separate bank account strictly for horse racing and no other gambling. After three years, and again I think this is an informal internal rule, they won't audit you again for several years. The problem for people like me is that in my state, gross winnings are taxed!!! There is no deduction or offset for losses.

This was the result of the change in the 1040 years ago where the losses went to Schedule A from page 1 where you simply offset the winnings before. The state tax form uses gross income before the Schedule a deductions so you pay state tax on the gross win. I considered and did start an action against the state challenging this, but was told by an insider at the state revenue department that they would take this to the highest court and that they had too much pull for me to win. He also warned me of punitive actions if I persisted. I knew I was beat and dropped it.