My mother received a letter from IRS saying she owed taxes (plus penalties, interest, and tax) for her winnings at Delaware’s casino the previous year. The IRS included a copy of the W2G form she, according to them, had not claimed on her Federal tax return. Because there are more casinos in Delaware than ever, Mom had yet to go to the Delaware casino that year.
My mother didn’t know where to start to resolve this issue, so she called me. My first instinct as an accountant was to get a copy of the receipt the winner signed when she won the jackpot. Mom called the accounting department and requested a fax of the ticket.
It was not my mother’s signature that was on the receipt. We learned many things about the accounting process at casinos after we made another call to the casino.
It turns out that there is another person who has the same name and address as my mother but with a different Social Security number. My mother and this person had signed up for the casino’s “club” card. I believe they both had to provide their Social Security numbers. This card is what you use to play at the casino. It is supposed to track your winnings, provide points for free meals, https://spt.education.gov.uk, and so on.
The casino needed to verify the correct SSN before filing the paperwork for the winner. Therefore, the incorrect W2G was submitted to the Internal Revenue Service to claim the jackpot. My mother was charged for the tax and penalties on winnings and interest. The clock tilted on interest until the matter was resolved.
The accounting department needed help to resolve the problem, and making another call to the casino was frustrating. As an accountant, I knew they would need to submit a W2G with no income under my mother’s SSN and a W2G with the winner’s earnings under the correct SSN. After the IRS confirmed that the casino needed to file the two forms, we called the casino to clarify how they would rectify this.
Mom received a corrected W2G from the casino a few weeks later. I then wrote an explanation letter to IRS describing the situation and asking for interest and penalties to be reversed. The IRS finally resolved the matter, but it took a lot of frustration and time. The casino was okay with the error. They did apologize, but they will not return to that place again. Mom called them to cancel her “club” card so that this would not happen again.
This is the lesson: If you enjoy playing at casino tables or slots, keep track of your winnings. Ask the casino to provide a list of all your winnings for the year to December. This will allow you to verify that it matches your actual figures and to question any errors. Many jackpot winners end up paying taxes on the money they don’t win.