Gambling: A Social and Tax Problem

The gambling industry or its culture sells the sizzle to the public. What is imprinted on the memory are the examples of happy people receiving millions of dollars of winning tickets. No one is talking about the bankruptcy of this enterprise morally and economically. No one is talking about the ensuing tax problems crying for a tax resolution. 

For the most part the people buying the tickets are the poor. They are the ones that possibly exhausted what they know of means to get out from under financial burdens and live a happier life like those they see on TV. They scrape a dollar at a time to buy the one ticket that will erase all the burdens and transport them to a land they have never seen. It is the land of a nice car, of a house whose mortgage they don’t have to worry about, nice restaurants where they can freely order from the menu and anything their children want. 

Rich people have all that anyway. They don't invest a dollar or ten dollars a day to get what they already have. It is those who don't have. It is those who aspire and their economic lot does not qualify them for the glamorous life of the lucky ones. That is why some argue that lotteries are a hidden tax on the poor. 

Needless to say that gambling violates the basic principles of work ethics. People delay making the right decision in life under the delusion that they are waiting for the knock out. The big pay day, the day that renders everything a green pasture. 

But beyond the ethics and social norms, there are two major economic problems. The first is that the odds are always against the gamblers. They will end up losing instead of the big bang. Many families have been ruined because of a gambler in their midst. 

The second problem is income tax. If you win you pay tax. If you lose you can't deduct your losses unless offset by winnings. Many people end up with a major tax problem because your winnings are documented but your loss is not. 

When you play in a casino, every time you win the casino sends the information to you and a copy to the IRS. At the end of the year, I have seen people with tens of thousands, sometimes hundreds of thousands of winnings in the IRS records and no losses. You have to prove your losses. Most people don't keep the loss evidence. So, even though they end up losing everything, they are now contending with a tax debt. 

In addition to the financial ruin, they have to face the IRS back taxes and the IRS collection actions. Now a CPA or an IRS tax attorney comes into the picture. Now you have to contend with professional fees in addition to the collection actions against you such as IRS levy, tax lien and wage garnishment before you reach an IRS settlement or tax resolution. 

If you are lucky enough and now destitute, you may qualify for the currently not collectible or an offer in compromise. Otherwise, the only tax help or tax relief available to you is installment agreement as a final tax resolution to your tax problem in addition to the financial ruin. 

Should you gamble then? Think twice before you embark on a foolish project. In the final analysis, gambling creates financial and tax problems that will require costly tax resolutions to avoid IRS levy, tax lien and wage garnishment.