Whether winning - or losing - tax obligations apply to gambling, even in Oklahoma

BY WAYNE GREENE World Senior Writer
Monday, April 16, 2012
4/16/12 at 7:53 AM

If you like to play the slots, that's gambling; but if you play the slots and don't pay attention to possible tax problems, that's gambling twice, says a local tax attorney who deals with an increasing number of clients whose problems with the IRS started in a casino.

"Oklahoma is the casino capital of the United States. We have 25 percent of all the casinos," said attorney Reece Morrel Jr.

As the number of casinos has exploded in recent years, so have the number of Oklahoma taxpayers with related problems, Morrel said.

"Several years ago, we thought we had a big case with a $40,000 case. Then three years or four years ago, we got a preacher with a $175,000 tax problem. Then a couple of years ago, we got into a case where the IRS claimed a client owed $7 million," Morrel said. "That will really cause you to stop and pause."

As Americans face the Tuesday deadline for filing their federal income tax returns, Morrel said the increasing number of Oklahoma gamblers need to take some common-sense precautions to protect themselves against big IRS and state tax bills.

Consider this hypothetical: A gambler takes $100,000 into a casino, plays the slots with all the money and walks out with $95,000. It sounds like the gambler has lost $5,000, but if the process isn't properly documented, the IRS could claim the gambler won $95,000 - the amount documented by the casino when the gambler cashes out.

Morrel's solution: a gambler's diary.

If a gambler keeps a timely record of winnings and losses with a lot of details - beginning and ending times, W2s from the casinos, ATM receipts, notes on who came along on the trip - it's evidence of the gambler's real tax obligations, he said.

"It's really a proof problem," Morrel said.

Morrel has published a "Lady Luck Gambling Diary," available online and at Steve's Sundry, 2612 S. Harvard Ave., that he says is the only gambling diary that fully complies with IRS rules. The diary has enough space for 14 gambling sessions, numbered 1-12, 14 and 15, because no gambler would want to record a 13th gambling session.

Another hint he offers to persistent gamblers is to segregate their gambling money in a separate banking account. Keeping casino winnings and losses separate from money for groceries and rent can be valuable evidence in an audit, he said.

He offers more tips - and addresses many of the tax myths that gamblers believe - on a website that can be accessed at tulsaworld.com/ladyluckdiary

A self-described "numbers guy," Morrel said he always says he's "retired" as a gambler, whenever people ask.

Basically a dull guy - Morrel says he's never been able to finish a glass of beer in his life - he invested $60 into a local casino when he was researching his book.

He fairly quickly hit a $250 jackpot.

"I got the bug," he said. "Oh baby, I was hot. I just won $250."

He played the slot machine a few more times, and his real personality took over.

"My bean-counter side kicked in, and I went ahead and cashed out, got my $249.25 and went home," he said. "I'm one of the most successful gamblers you'll ever meet."

Original Print Headline: Gambling with tax problems

Wayne Greene 918-581-8308
wayne.greene@tulsaworld.com

Associated Images:

Gambling tax attorney Reece Morrel stands in his office in Tulsa awaiting the week of the IRS tax filing deadline. MICHAEL WYKE / Tulsa World