What happens when non-Americans win big in Las Vegas casinos?
Published on February 12, 2024
by Clark Stott
Clark Stott has been with Expat Tax Online since 2015. Being a dual national based in the UK, Clark has unique experience helping US citizens (and Accidental Americans) become tax compliant via the Streamlined Tax Amnesty program. Clark likes to help Americans in the UK keep their tax situations as simple as possible to avoid harsh IRS treatment.
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Your winnings will be taxed. However, you can get it back with a tax refund.
When non-Americans win big at Las Vegas casinos, they often face a 30% tax on their winnings, as the IRS mandates this for all winners, American or not.
This tax applies to various forms of gambling winnings, including money won from slot machines, table games, and even game shows. While this can come as a surprise for non-US citizens, it’s a standard procedure under US tax laws.
In general, the process goes like this:
Winners receive a Form 1042-S, which details the amount won and the taxes withheld. To claim a tax refund, winners must have a U.S. Individual Taxpayer Identification Number (ITIN), which necessitates filing Form W-7 with the IRS.
This ITIN is crucial for filing a U.S. tax return as a non-resident, allowing the winner to potentially recover some or all of the withheld taxes.
Why does the IRS tax casino winnings of non-American players?
The IRS taxes the casino winnings of non-American players due to regulations aimed at ensuring that all income generated within the US is subject to taxation.
The 30% tax rate for international gamblers is a part of the US tax code’s broader approach to non-resident taxation. This rule is applied uniformly, regardless of the winner’s nationality, to maintain fairness and compliance with US tax laws.
Can non-US citizens claim back taxes on casino winnings?
Yes. Non-US citizens can claim back taxes on their casino winnings by filing a Non-Resident Alien (NRA) tax return. To do this, they must obtain an Individual Taxpayer Identification Number (ITIN) by submitting Form W-7 to the IRS.
Once they have their ITIN, they can file a US tax return, specifically Form 1040-NR, to reclaim some or all of the withheld taxes, depending on the tax treaty between the US and their home country.
Non-American casino winners should seek assistance from tax professionals who specialize in US tax laws for non-residents. These experts can guide them through the process of obtaining an ITIN, filing the necessary tax forms, and understanding their rights under various tax treaties.
What is an ITIN and why is it necessary for tax reclamation?
An Individual Taxpayer Identification Number (ITIN) is a tax processing number issued by the Internal Revenue Service (IRS) to individuals who are required to have a US taxpayer identification number but do not have, and are not eligible to obtain, a Social Security Number (SSN).
ITINs are essential for non-US citizens who need to file US tax returns or claim tax refunds, including reclaiming withheld taxes on US income such as casino winnings or other taxable activities within the United States.
Why use the IRS Streamlined Tax Amnesty Program?
It’s for American citizens that didn’t know they had to file U.S. tax returns each year, and have therefore fallen behind. Some more than 30 years! With the IRS Streamlined Procedure, say goodbye to overdue tax returns, late fees, and penalties.
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How do I obtain an ITIN?
- Complete Form W-7: The first step in obtaining an ITIN is to complete IRS Form W-7, Application for IRS Individual Taxpayer Identification Number. This form requires detailed personal information and a valid reason for needing an ITIN.
- You’ll need a CAA (Certified Acceptance Agent) to verify your non-US passport. The IRS will only accept original or certified copies of your identification – which can be arranged by Expat Tax Online.
- Attach Tax Return: Typically, Form W-7 should be submitted along with your federal tax return to the IRS, as it’s often required for processing the tax return. Always send them to the IRS together.
- Provide Proof of Identity: You must include original or certified copies of documents proving your identity and foreign status with your W-7 form. Acceptable documents include a passport, national identification card, US driver’s license, or birth certificate.
- Submit the Application: The completed W-7 form and US individual tax return must be posted to the IRS in the mail.
- Wait for Processing: After submission, it usually takes about six to ten weeks for the IRS to process the application and issue an ITIN.
How can professionals help me with tax recovery?
Professionals specializing in US tax laws are vital in aiding non-US citizens with tax recovery, particularly in cases involving casino winnings. These experts are well-versed in US tax regulations and can guide you through the process of reclaiming withheld taxes.
They can assist in accurately preparing and filing necessary forms, such as the Non-Resident Alien (NRA) tax return and Form W-7 for ITIN applications. You must use a Certified Acceptance Agent to validate your passport or ID. Their expertise ensures compliance with IRS procedures and maximizes the chances of a successful tax recovery.
Who can reclaim casino tax?
The eligibility to reclaim casino tax extends to various non-US nationals under specific conditions:
- Non-US Residents: Individuals who are not US citizens or resident aliens can claim back withheld casino taxes.
- Valid Identification: Claimants must have a valid government-issued ID from their home country and obtain an ITIN from the IRS.
- Proof of Winnings and Withholding: Documentation such as Form 1042-S issued by the casino is required to show the amount won and the tax withheld.
- Tax Treaty Benefits: Residents of countries that have a tax treaty with the US may be eligible for a reduced rate of withholding or exemption, depending on the treaty’s provisions.
What do I need to know to get started with my tax reclamation?
- Understand Your Eligibility: Determine if you are eligible for a tax refund. This typically applies if you are a non-US citizen who has had taxes withheld from gambling winnings in the US
- Gather Necessary Documentation: Collect all relevant documents, including identification papers and Form 1042-S issued by the casino, which indicates the amount of winnings and tax withheld.
- Obtain an ITIN: If you don’t already have one, apply for an Individual Taxpayer Identification Number (ITIN) using Form W-7. This is a crucial step in the tax reclamation process.
- File a US Tax Return: Complete and submit a Non-Resident Alien (NRA) tax return to the IRS, specifically Form 1040-NR, to claim your refund.
- Consult with a Tax Professional: Engaging with a tax professional who specializes in US tax laws for non-residents can provide invaluable assistance in ensuring that your tax reclamation process is handled correctly and efficiently.
The information provided herein is for general informational purposes only and should not be considered professional advice. While we aim to provide helpful and accurate information, we make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained here or linked to from this material.
Always get professional advice from a US international tax specialist.
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