If you are an Illinois resident, and you favor the Indianariverboats, you will probably end up with some new tax filingheadaches. In early 2003, Indiana announced that gambling winnings ofnon-residents at Indiana based establishments are subject to Indianataxes. If you are an Illinois resident this means you will have anIndiana tax filing and a more complicated Illinois tax return. For yourIndiana winnings you will have to report the income on an Indianaincome tax return, and on your Illinois return you can claim a creditfor the Indiana taxes limited to the effective Illinois tax rates.While there are a number of forms and computations involved, the endresult is usually paying a 3.4% Indiana income tax and claiming acredit up to 3% on your Illinois return.Not filing an Indiana income tax return on your Indiana gamblingwinnings is not a good alternative. Gambling winnings of $1,200 or moreare reported to the IRS, and this information is shared with thestates. The reporting threshold for racetrack winnings is only $600. Ifyou are caught by Indiana you will be subject to interest andpenalties. Also, by the time Indiana assesses you it may be too late tofile a refund claim in Illinois. For both Illinois and Indiana, thereis a three-year statute of limitations for refund claims. However,there is no statute of limitations on assessments if an Indiana taxreturn was never filed, and you may want to file Indiana returns forprior years now as the Indiana Department of Revenue is aggressivelygoing after non-filers from Illinois for prior years.
Indiana's new withholding rules complicate matters. Starting with July2002, Indiana requires withholding income taxes on Indiana gamblingwinnings exceeding $2,500. Unfortunately, you cannot claim the Indianaincome tax withholding on your Illinois tax return as there is noreciprocal agreement between Indiana and Illinois. You will have tofile an Indiana income tax return and then claim a credit for theIndiana taxes on your Illinois income tax return.
Does Indiana Tax Gambling Winnings Due
Unfortunately, the Internal Revenue Service (IRS) says that your winnings are potentially subject to federal taxes. Gambling winnings are considered taxable income. Thankfully, you can deduct. For instance, if you claim it as an itemized deduction on your federal tax return, then no, you can't claim it on your Indiana tax return. However, if you are a professional gambler and are allowed to claim gambling losses on your federal business schedule (probably federal Schedule C), then the losses are included in federal AGI, and you'll.
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