New York State Tax Gambling Winnings

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New York State Tax Gambling Winnings Average ratng: 9,7/10 6042 votes

The New York Department of Finance and Taxation, for instance, allows you to itemize expenses on Form IT-201, as long as they don’t exceed the amount of winnings you reported under other income. Before you claim any gambling expenses, make sure you have approved documentation to back it up. Gambling Wins and Losses on a Tax Return. Gambling wins are reported on the front page of Form 1040 for tax years 2017 and prior. Gambling wins are reported on Schedule 1, Line 21 for tax year 2018. All gambling wins are required to be reported even if the casino doesn’t report the win to the IRS. Gambling wins are reported on a W-2G for.

State lotteries provide revenue for government coffers in more than one way. Apart from ticket sales, lotteries also produce new income for winners, income that's subject to federal and state taxes. The Internal Revenue Service requires states to withhold federal taxes from some prizes. Depending on where you live or where you win, the state may also withhold state taxes. The amount of tax you'll pay overall on Lotto winnings depends on the prize, the state and your other income.

Gambling Winnings Tax. Is provided by ITC Financial Licenses, Inc. ITC Financial Licenses, Inc. Is licensed as a Money Transmitter by the New York State. You will have to pay state income tax on your winnings in 39 states. If you live in one of the 11 states that don’t tax sweepstakes prizes, you may be spared state income taxes.

Federal Income Taxes

State lotteries must issue a federal W-2G form for winnings of $600 or more as of early 2011. If you're a U.S. resident, but don't have a Social Security number, the state withholds 28 percent from winnings of $600 or more to pay federal income taxes. Each state must withhold 25 percent from prizes greater than $5,000 won by U.S. citizens and resident aliens with Social Security numbers. They withhold 30 percent from all prizes won by citizens of other countries who aren't U.S. residents.

State and Local Income Taxes

State income tax rates and rules vary from state to state, so the amount you'll pay in state taxes depends on where you live and the state that issues the prize. Florida and Texas, for example, have no state personal income taxes as of 2011, so residents of those states who win a Florida or Texas Lotto prize don't pay state income tax on their winnings. New York does have a state income tax. If you win the New York State Lotto, New York will withhold New York taxes on prizes of more than $5,000, regardless of where you live. The state income tax rate is 8.82%. New York City withholding 3.876%. Yonkers withholding 1.323%.

FAQs: New York State Lottery Winners Tax Responsibilities

This publication provides guidance on the New York State, New York City, and Yonkers personal income tax treatment of lottery prizes. This guidance applies specifically to prizes from lottery games conducted by the New York State Division of Lottery (New York State Lottery). New York State lottery prizes include prizes from all games conducted by the New York State Lottery, including the multi-state Mega Millions game (if the winning ticket was purchased in New York State) and video lottery games at a video-gaming facility that has been licensed by the New York State Lottery. (See the New York State Lottery Web site (www.nylottery.org) for more information on lottery games.)

In many instances, the New York State, New York City, and Yonkers tax treatment of prize payments depends upon the amount of the proceeds from the prize. For this purpose, proceeds means the total amount of the prize won (not each installment amount, if the prize is payable in installments), less the cost to purchase the winning ticket. If the prize is won by a group, proceeds means the total prize won by the group (not each group member.s share of the prize) less the cost of the winning ticket.

1)Q: I am a resident of New York State and I won a prize in the New York State Lottery. Is the prize payment I received subject to New York State income tax?

A:Yes. If you are a resident of New York State, your prize payment is subject to New York State income tax if the prize payment is includable in your federal adjusted gross income for the tax year. If you are a resident of New York City or Yonkers, the prize payment will also be subject to the applicable city resident income taxes.

2)Q: I am a nonresident of New York State. I won a prize in the New York State Lottery. Is the prize payment I received and any future installment payments (if the prize is payable in installments) subject to New York State income tax?

A:If you won the prize on or after October 1, 2000, and the proceeds exceed $5,000, your lottery prize payment is New York source income and is subject to New York State income tax.

If the proceeds are $5,000 or less, or the prize was won before October 1, 2000, the prize payment(s) is not considered New York source income and is not subject to New York income tax.

3)Q: Is my New York State lottery prize payment subject to New York State, New York City, or Yonkers withholding taxes?

A:All prizes won on or after October 1, 2000, are subject to New York State withholding tax if the proceeds exceed $5,000. Prizes won prior to October 1, 2000, are subject to New York State withholding if the proceeds exceed $5,000 and you were a New York State resident at the time you won the prize. These prize payments are also subject to New York City and Yonkers withholding if you were a resident of New York City or Yonkers at the time you won the prize.

If withholding is required, the New York State Lottery is required by law to withhold tax using the highest effective rate of state tax for the year in which a payment is made, without any allowance for deductions or exemptions. If you are a resident of New York City or Yonkers, the prize payment(s) is also subject to city withholding at the city.s highest effective rate of tax.To ensure that you will not be subject to a penalty for failure to pay estimated tax, you should estimate your total income tax liability for the year to determine if you should be paying estimated tax, even though your lottery prize is subject to New York State, New York City, or Yonkers withholding tax. For more information on estimated tax, see the instructions for Form IT-2105, Estimated Income Tax Payment Voucher for Individuals; Form IT-2106, Estimated Income Tax Payment Voucher for Fiduciaries; or Publication 94, Should You Be Paying Estimated Tax?

4)Q: If I move into New York State during the year, how does my change from a nonresident to a resident affect my state income tax obligation with respect to a New York State lottery prize payment(s) that I am entitled to receive after the move?

A:When you change your status from a nonresident of New York State to a resident of New York State and are entitled to receive a New York State lottery prize payment(s) from a lottery prize won while you were a nonresident, the tax treatment depends on the amount of the proceeds and when you won your prize.

If the proceeds are $5,000 or less, the prize payment is not considered New York source income and it is not subject to New York State income tax.

If the proceeds exceed $5,000, and the prize was won on or after October 1, 2000, the prize payment(s) is considered New York source income and is subject to New York State income tax.

If you won the prize before October 1, 2000, and you are receiving installment payments, special accrual rules apply. Under these accrual rules, in the year of the change you must include, in your New York adjusted gross income in the Federal amount column of Form IT-203, Nonresident and Part-Year Resident Income Tax Return, the total amount of the installment payments you are entitled to receive in the future. However, do not include that amount in your New York source income (the New York State amount column of Form IT-203). In addition, the installment payment(s) received in the following tax year(s) must be subtracted from federal adjusted gross income in computing New York adjusted gross income, and therefore is not subject to New York State income tax. (The subtraction is limited to the amount of the installment payment included in federal adjusted gross income.)

5)Q: I won a prize in a New York State Lottery drawing that was held while I was a resident of New York State. I moved out of New York State before I claimed my prize. Later that same year, I came back to New York State just to claim my prize payment. How does my change from a resident to a nonresident affect my New York State income tax obligation with respect to the lottery prize payment that I received as a nonresident? Do I still have to pay New York State taxes?

A:When you change your status from a resident of New York State to a nonresident of New York State and are entitled to receive a prize payment from a lottery prize won while you were a resident, you must pay New York State income tax on the payment(s) you are entitled to receive, even if the prize payment is received during the nonresident period of your tax year. As a part-year New York State resident, you must file Form IT-203, Nonresident and Part-Year Resident Income Tax Return, and include in New York source income the amount of the prize payment received.

6)Q: I won a prize in the New York State Lottery while I was a resident of New York State. I then moved out of New York State and will not return to claim my prize until the following year when I am a nonresident. How will the change from a resident to a nonresident affect my New York State income tax obligation with respect to the lottery prize payment (or installment payments) that I will claim and receive in a future tax year(s) as a nonresident? Do I still have to pay New York State taxes?

A:When you change your status from a resident of New York State to a nonresident of New York State and are entitled to receive a payment or installment payments from a lottery prize won while you were a resident, you must pay New York State income tax on the prize payment(s) you are entitled to receive in a future tax year(s). However, when the tax must be paid depends upon whether or not the prize payment is subject to New York State withholding tax.

If the proceeds from the prize are less than $5,000, the prize payment is not subject to New York State withholding tax. Instead, the prize is subject to special accrual rules. Under these special accrual rules:

The total amount of the unpaid prize that is not included in your federal adjusted gross income for the year of change on your federal income tax return must be included in New York adjusted gross income (Federal amount column of Form IT-203) and New York source income (New York State amount column of Form IT-203) for the year of change of residence on your New York State income tax return, unless you file a bond or other acceptable security with the Tax Department.

If you file a bond or other acceptable security with the Tax Department, the payment (or installment payments) is taxed in the year that the payment is actually received. As a result, you must file a New York State nonresident return (Form IT-203), and include in New York source income the amount of the payment received in that year. In the case of a prize that is payable in installments, you must file Form IT-203 for each future tax year that you receive an installment payment.

For more information on special accruals and change of resident status, see the instructions for Form IT-203, Form IT-260, New York State and City of New York Surety Bond Form . Change of Resident Status . Special Accruals, and Form IT-260.1, Change of Resident Status . Special Accruals.

A lottery prize that is subject to New York State withholding tax (whether it is one payment or multiple installment payments) is included in New York source income and is subject to New York State income tax in the year the payment is received. As a result, you must file a New York State nonresident return (Form IT-203), and include in New York source income the amount of the payment received in that year. In the case of a prize that is payable in installments, you must file Form IT-203 for each future year that you receive an installment payment.

7)Q: If I move into New York City during the year, how does my change from a New York City nonresident to a New York City resident affect my city resident income tax obligation with respect to a New York State lottery prize payment(s) that I am entitled to receive after the move?

A:When you change your status from a nonresident of New York City to a resident of New York City and are entitled to receive a New York State lottery payment(s) from a lottery prize won while you were a nonresident of the city, the tax treatment depends on the amount of the proceeds and when you won your prize.

If the proceeds are $5,000 or less or you won the lottery prize before October 1, 2000 (regardless of the amount), special accrual rules apply. Under these accrual rules, any future payment(s) is not included in determining New York City taxable income for the year of change and any future year.

If the proceeds exceed $5,000 and you won the lottery prize on or after October 1, 2000, any payment(s) you receive during the city resident period in the year you changed residence must be included in New York City taxable income for the year of change. In addition, the payments (if the prize is payable in installments) received in future years will also be subject to New York City resident income tax.

Note: The New York City change of resident status income tax rules apply whether or not you changed your New York State resident status.

8)Q: I won a prize in a New York State Lottery drawing that was held while I was a resident of New York City. I moved out of the city and did not claim my prize until later that same year when I was a nonresident of New York City. How does my change from a New York City resident to a New York City nonresident affect my city resident income tax obligation with respect to a New York State lottery prize payment(s) that I received as a nonresident of the city? Do I still have to pay New York City income tax?

A:When you change your status from a resident of New York City to a nonresident of New York City and are entitled to receive a prize payment from a lottery prize you won while you were a New York City resident, you must pay New York City income taxes on the prize payment(s) you are entitled to receive, even if the prize payment is received after you became a nonresident of New York City. As a part-year New York City resident, you must include the amount of the prize payment(s) received in New York City taxable income.

Note: The New York City change of resident status income tax rules apply whether or not you changed your New York State resident status.

9)Q: I won a prize in the New York State Lottery while I was a resident of New York City. I then moved out of New York City and will not actually claim my prize until the following year when I am a nonresident of New York City. How will the change from a resident to a nonresident affect my New York City income tax obligation with respect to the lottery prize payment (or installment payments) that I will claim and receive in a future tax year(s) as a nonresident of the city? Do I still have to pay New York City taxes?

A:When you change your status from a resident of New York City to a nonresident of New York City and are entitled to receive a payment or installment payments from a lottery prize won while you were a resident, you must pay New York City income tax on the prize payment(s) you are entitled to receive in a future tax year(s). However, when the tax must be paid depends upon whether or not the prize payment is subject to New York City withholding tax.

If the proceeds from the prize are less than $5,000, the prize payment is not subject to New York City withholding tax. Instead, the prize is subject to special accrual rules. Under these special accrual rules:

The total amount of the unpaid prize that is not included in your federal adjusted gross income for the year of change on your federal income tax return must be included in New York City taxable income for the year of change of residence, unless you file a bond or other acceptable security with the Tax Department.

If you file a bond or other acceptable security with the Tax Department, the payment (or installment payments) is taxed in the year that the payment is actually received. As a result, you must compute the New York City tax using the New York City resident tax rates and include in New York City taxable income the amount of the payment received in that year. In the case of a prize that is payable in installments, you must compute the New York City tax for each future tax year that you receive an installment payment(s).

For more information on special accruals and change of resident status, see the instructions for Form IT-203, Form IT-260, New York State and City of New York Surety Bond Form 'Change of Resident Status' Special Accruals, and Form IT-260.1, Change of Resident Status . Special Accruals.

A lottery prize that is subject to New York City withholding tax (whether it is one payment or multiple installment payments) is included in New York City taxable income and is subject to New York City income tax in the year the payment is received. As a result, you must compute the New York City tax using the New York City resident tax rates and include in New York City taxable income the amount of the payment received in that year. In the case of a prize that is payable in installments, you must compute the New York City tax for each future year that you receive an installment payment(s).

Note: The New York City change of resident status income tax rules apply whether or not you changed your New York State resident status.

10)Q: If I move into Yonkers during the year, how does my change from a Yonkers nonresident to a Yonkers resident affect my city income tax obligation with respect to a New York State lottery prize payment(s) that I am entitled to receive after the move?

A:When you change your status from a nonresident of Yonkers to a resident of Yonkers and are entitled to receive a New York State lottery payment(s) from a lottery prize won while you were a Yonkers nonresident, special accrual rules apply. Under these accrual rules, the total amount of the payment(s) you are entitled to receive in the future is includable in the portion of the year prior to the time you changed your residence. Any payment(s) accrued for this purpose must be excluded in determining your Yonkers resident income tax surcharge for the year of change and any future year.

Note: The Yonkers change of resident status income tax rules apply whether or not you changed your New York State resident status.

11)Q: I won a prize in a New York State Lottery drawing that was held while I was a resident of Yonkers. I moved out of Yonkers and did not claim my prize until later that same year when I was a nonresident of Yonkers. How does my change from a Yonkers resident to a Yonkers nonresident affect my Yonkers income tax obligation with respect to a New York State lottery prize payment(s) that I received as a nonresident of Yonkers? Do I still have to pay Yonkers income tax?

A:When you change your status from a Yonkers resident to a Yonkers nonresident and are entitled to receive a prize payment from a lottery prize won while you were a Yonkers resident, you must pay Yonkers income tax on the prize payment(s) you are entitled to receive, even if the prize payment is received after you became a nonresident. As a part-year Yonkers resident, you must include the amount of the prize payment(s) received when computing your Yonkers income tax surcharge.

Note: The Yonkers change of resident status income tax rules apply whether or not you changed your New York State resident status.

12)Q: I won a prize in the New York State Lottery while I was a resident of Yonkers. I then moved out of Yonkers and will not actually claim my prize until the following year when I am a Yonkers nonresident. How will the change from a Yonkers resident to a Yonkers nonresident affect my Yonkers income tax obligation with respect to the lottery prize payment (or installment payments) that I will claim and receive in a future tax year(s) as a Yonkers nonresident? Do I still have to pay Yonkers income taxes?

State

A:When you change your status from a Yonkers resident to a Yonkers nonresident and are entitled to receive a payment or installment payments from a lottery prize won while you were a Yonkers resident, you must pay Yonkers income tax on the prize payment(s) you are entitled to receive in a future tax year(s). However, when the tax must be paid depends upon whether or not the prize payment is subject to Yonkers withholding tax.

If the proceeds from the prize are less than $5,000, the prize payment is not subject to Yonkers withholding tax. Instead, the prize is subject to special accrual rules. Under these special accrual rules:

The total amount of the unpaid prize that is not included in your federal adjusted gross income for the year of change on your federal income tax return must be included when computing your Yonkers income tax surcharge for the year of change of residence, unless you file a bond or other acceptable security with the Tax Department.

If you file a bond or other acceptable security with the Tax Department, the payment (or installment payments) is taxed in the year that the payment is actually received. As a result, you must report the payment(s) and compute the Yonkers income tax surcharge using the resident income tax rate. In the case of a prize that is payable in installments, you must compute the Yonkers income tax surcharge for each future tax year that you receive an installment payment(s).

A lottery prize that is subject to Yonkers withholding tax (whether it is one payment or multiple installment payments) is subject to the Yonkers income tax surcharge in the year the payment is actually received. As a result, you must report the payment(s) and compute the Yonkers income tax surcharge using the Yonkers resident tax rate. In the case of a prize that is payable in installments, you must compute the Yonkers income tax surcharge for each future year that you receive an installment payment(s).

New york state tax gambling winnings rules

Note: The Yonkers change of resident status income tax rules apply whether or not you changed your New York State resident status.

13)Q: I am a nonresident of New York State and my New York State lottery prize is subject to New York State income tax. The state that I live in will also tax the prize. Will I have to pay taxes in both states?

A:Tax laws vary by state, but most states provide a credit to their residents for taxes paid to other states. For information on your state.s tax credit rules, check with the taxing authority in your state.

14)Q: I am one member of a group of winners of a single New York State lottery prize. We formed an entity (for example, a partnership, trust, or New York S corporation) to collect the lottery prize. What are my income tax obligations?

A:As a partner of a partnership, beneficiary of a trust, or shareholder of a New York S corporation, you may be required to include your share of the prize passed on to you from the entity in determining your New York State income tax and any applicable city taxes. The taxability of the prize depends on the amount of the proceeds from the wager and your resident status.

If you are a resident of New York State, your prize payment is subject to New York State income tax if the prize payment is includable in your federal adjusted gross income for the tax year. If you are a resident of New York City or Yonkers, the prize payment will also be subject to the applicable city resident income taxes.

If you are a nonresident and if the proceeds are $5,000 or less, the prize payment is not considered New York source income and it is not subject to New York State income tax. If you won the prize on or after October 1, 2000, and the proceeds exceed $5,000, your lottery prize payment is New York source income and is subject to New York State income tax.

15)Q: How will New York State tax my lottery prize payment(s) if I sell the right to future payments to a third party for a lump-sum payment?

A:If the prize payment(s) was subject to New York State income tax prior to the sale, the lump-sum payment received is also subject to tax. The lump-sum payment received from a third party represents the present value of the New York State lottery prize payment(s) sold. The lottery prize payment(s) is gambling winnings taxed as ordinary income. Therefore, the payment from the third-party purchaser is considered a payment of gambling winnings and is taxed as ordinary income. Accordingly, the amount of the payment that is includable in federal adjusted gross income should be reported on the Other Income line of Form IT-201, Resident Income Tax Return; Form IT-203, Nonresident and Part-Year Resident Income Tax Return; or Form IT-205, Fiduciary Income Tax Return, as applicable. (Nonresidents and part-year residents must include the lump-sum payment in both the Federal amount and New York State amount columns of Form IT-203).

16)Q: Does New York State report the amount of lottery prize to the Internal Revenue Service?

A:Yes. The New York State Lottery is required to report all prizes where the proceeds from the wager are greater than $600 and at least 300 times the amount of the wager. A federal

Form W-2G, Certain Gambling Winnings, will be issued to you reporting the total prize payment. In addition, Form W-2G will also show the amount, if any, of federal, New York State, New York City, and Yonkers income tax withheld.

17)Q: If I die before I collect all of my New York State lottery prize payments, is the unpaid lottery payment(s) that is distributed to my estate or to a beneficiary of my estate subject to New York State income tax?

A:Lottery payments made to your estate or to your heirs are taxable if they were taxable to you. They must be reported on the Other Income line of Form IT-205, Fiduciary Income Tax Return;

Form IT-201, Resident Income Tax Return; or Form IT-203, Nonresident and Part-Year Resident Income Tax Return, as applicable. (Nonresident and part-year residents must include the amount of the payment in both the Federal and New York State columns of Form IT-203.)

New York State Tax Gambling Winnings Rules

18)Q: If I die before I collect all of my New York State lottery prize payments, will my estate be subject to New York State estate tax?

A:If the value of your unpaid payments and other property is substantial, your estate may be required to file Form ET-706, New York State Estate Tax Return, and pay a New York State estate tax on the value of your overall estate, which will include the value of any future lottery payments. For more information on estate tax, see the instructions for Form ET-706.



§ 31.3402(q)-1 Extension of withholding to certain gambling winnings.

(a)Withholding obligation -

(1)General rule. Every person, including the Government of the United States, a State, or a political subdivision thereof, or any instrumentality of any of the foregoing making any payment of “winnings subject to withholding” (defined in paragraph (b) of the section) must deduct and withhold a tax in an amount equal to the product of the third lowest rate of tax applicable under section 1(c) and the payment. The tax must be deducted and withheld upon payment of the winnings by the person making the payment (“payer”). See paragraph (c)(5)(ii) of this section for a special rule relating to the time for making deposits of withheld amounts and filing the return with respect to those amounts. Any person receiving a payment of winnings subject to withholding must furnish the payer a statement as required in paragraph (d) of this section. Payers of winnings subject to withholding must file a return with the Internal Revenue Service and furnish a statement to the payee as required in paragraph (e) of this section. With respect to reporting requirements for certain payments of gambling winnings not subject to withholding, see section 6041 and the regulations thereunder.

(2)Exceptions. The tax imposed under section 3402(q)(1) and this section shall not apply (i) with respect to a payment of winnings which is made to a nonresident alien individual or foreign corporation under the circumstances described in paragraph (c)(4) of this section or (ii) with respect to a payment of winnings from a slot machine play, or a keno or bingo game.

(b)Winnings subject to withholding -

(1)In general. Winnings subject to withholding means any payment from -

(i) A wager placed in a State-conducted lottery (defined in paragraph (c)(2) of this section) but only if the proceeds from the wager exceed $5,000;

(ii) A wager placed in a sweepstakes, wagering pool, or lottery other than a State-conducted lottery but only if the proceeds from the wager exceed $5,000; or

(iii) Any other wagering transaction (as defined in paragraph (c)(3) of this section) but only if the proceeds from the wager:

New

(A) Exceed $5,000; and

(B) Are at least 300 times as large as the amount of the wager.

(2)Total proceeds subject to withholding. If proceeds from the wager qualify as winnings subject to withholding, then the total proceeds from the wager, and not merely amounts in excess of $5,000, are subject to withholding.

(c)Definitions; special rules -

(1)Rules for determining amount of proceeds from a wager -

(i)In general. The amount of proceeds from a wager is the amount paid with respect to the wager, less the amount of the wager.

(ii)Amount of the wager in the case of horse races, dog races, and jai alai. In the case of a wagering transaction with respect to horse races, dog races, or jai alai, all wagers placed in a single parimutuel pool and represented on a single ticket are aggregated and treated as a single wager for purposes of determining the amount of the wager. A ticket in the case of horse races, dog races, or jai alai is a written or electronic record that the payee must present to collect proceeds from a wager or wagers.

(iii)Amount paid with respect to a wager -

(A)Identical wagers. Amounts paid with respect to identical wagers are treated as paid with respect to a single wager for purposes of calculating the amount of proceeds from a wager. Two or more wagers are identical wagers if winning depends on the occurrence (or non-occurrence) of the same event or events; the wagers are placed with the same payer; and, in the case of horse races, dog races, or jai alai, the wagers are placed in the same parimutuel pool. Wagers may be identical wagers even if the amounts wagered differ as long as the wagers are otherwise treated as identical wagers under this paragraph (c)(1)(iii)(A). Tickets purchased in a lottery generally are not identical wagers, because the designation of each ticket as a winner generally would not be based on the occurrence of the same event, for example, the drawing of a particular number.

(B)Non-monetary proceeds. In determining the amount paid with respect to a wager, proceeds which are not money are taken into account at the fair market value.

(C)Periodic payments. Periodic payments, including installment payments or payments which are to be made periodically for the life of a person, are aggregated for purposes of determining the amount paid with respect to the wager. The aggregate amount of periodic payments to be made for a person's life is based on that person's life expectancy. See §§ 1.72-5 and 1.72-9 of this chapter for rules used in computing the expected return on annuities. For purposes of determining the amount subject to withholding, the first periodic payment must be reduced by the amount of the wager.

(2)Wager placed in a State-conducted lottery. The term “wager placed in a State-conducted lottery” means a wager placed in a lottery conducted by an agency of a State acting under authority of State law provided that the wager is placed with the State agency conducting such lottery or with its authorized employees or agents. This term includes wagers placed in State-conducted lotteries in which the amount of winnings is determined by a parimutuel system.

(3)Other wagering transaction. The term “other wagering transaction” means any wagering transaction other than one in a lottery, sweepstakes, or wagering pool. This term includes a wagering transaction in a parimutuel pool with respect to horse races, dog races, or jai alai.

(4)Certain payments to nonresident aliens or foreign corporations. A payment of winnings that is subject to withholding tax under section 1441(a) (relating to withholding on nonresident aliens) or 1442(a) (relating to withholding on foreign corporations) is not subject to the tax imposed by section 3402(q) and this section when the payee is a foreign person, as determined under the rules of section 1441(a) and the regulations thereunder. A payment is treated as being subject to withholding tax under section 1441(a) or 1442(a) notwithstanding that the rate of such tax is reduced (even to zero) as may be provided by an applicable treaty with another country. However, a reduced or zero rate of withholding of tax must not be applied by the payer in lieu of the rate imposed by sections 1441 and 1442 unless the person receiving the winnings has provided to the payer the documentation required by § 1.1441-6 of this chapter to establish entitlement to treaty benefits.

(5)Gambling winnings treated as payments by employer to employee.

(i) Except as provided in subdivision (ii), for purposes of sections 3403 and 3404 and the regulations thereunder and for purposes of so much of subtitle F (except section 7205) and the regulations thereunder as relate to chapter 24, payments to any person of winnings subject to withholding under this section shall be treated as if they are wages paid by an employer to an employee.

(ii) Solely for purposes of applying the deposit rules under 6302(c) and the return requirement of section 6011, the withholding from winnings shall be deemed to have been made no earlier than at the time the winner's identity is known to the payer. Thus, for example, winnings from a State-conducted lottery are subject to withholding when actually or constructively paid, whichever is earlier; however, the time for depositing the withheld taxes and filing a return with respect thereto shall be determined by reference to the date on which the winner's identity is known to the State, if such date is later than the date on which the winnings are actively or constructively paid. If a payer's obligation to pay winnings terminates other than by payment, all liabilities and requirements resulting from the requirement that the payer deduct and withhold with respect to such winnings shall also terminate.

(d)Statement furnished by payee -

(1)In general. Each person who is making a payment subject to withholding under this section must obtain from the payee a statement described in paragraph (d)(2) of this section.

(2)Contents of statement. Each person who is to receive a payment of winnings subject to withholding under this section must furnish the payer a statement on Form W-2G or 5754 (whichever is applicable) made under the penalties of perjury containing -

(i) The name, address, and taxpayer identification number of the winner accompanied by a declaration that no other person is entitled to any portion of such payment, or

(ii) The name, address, and taxpayer identification number of the payee and of every person entitled to any portion of the payment.

New York State Tax Gambling Winnings Winning

(3)Multiple payments. If more than one payment of winnings subject to withholding is to be made with respect to a single wager, for example in the case of an annuity, the payee is required to furnish the payer a statement with respect to the first payment only, provided that the other payments are taken into account in a return required by paragraph (e) of this section.

Gambling

(4)Reliance on statement for identical wagers. If the payee furnishes the statement which may be required pursuant to § 1.6011-3 of this chapter (regarding the requirement of a statement from payees of certain gambling winnings), indicating that the payee (and any other persons entitled to a portion of the winnings) is entitled to winnings from identical wagers, as defined in paragraph (c)(1)(iii)(A) of this section, and indicating the amount of the winnings, if any, then the payer may rely upon the statement in determining the total amount of proceeds from the wager under paragraph (c)(1) of this section.

(e)Return of payer -

(1)In general. Every person making payment of winnings for which a statement is required under paragraph (d) of this section must file a return on Form W-2G at the Internal Revenue Service location designated in the instructions to the form on or before February 28 (March 31 if filed electronically) of the calendar year following the calendar year in which the payment of winnings is made. The return required by this paragraph (e) need not include the statement by the payee required by paragraph (d) of this section and, therefore, need not be signed by the payee, provided the statement is retained by the payer as long as its contents may become material in the administration of any internal revenue law. In addition, the return required by this paragraph (e) need not contain the information required by paragraph (e)(1)(v) of this section provided the information is obtained with respect to the payee and retained by the payer as long as its contents may become material in the administration of any internal revenue law. For payments to more than one winner, a separate Form W-2G, which in no event need be signed by the winner, must be filed with respect to each such winner. Each Form W-2G must contain the following:

(i) The name, address, and taxpayer identification number of the payer;

(ii) The name, address, and taxpayer identification number of the winner;

(iii) The date, amount of the payment, and amount withheld;

(iv) The type of wagering transaction;

(v) Except with respect to winnings from a wager placed in a State-conducted lottery, a general description of the two types of identification (as described in paragraph (e)(2) of this section), one of which must have the payee's photograph on it (except in the case of tribal member identification cards in certain circumstances as described in paragraph (e)(3) of this section), that the payer relied on to verify the payee's name, address, and taxpayer identification number;

(vi) The amount of winnings from identical wagers; and

(vii) Any other information required by the form, instructions, or other applicable guidance published in the Internal Revenue Bulletin.

(2)Identification. The following items are treated as identification for purposes of paragraph (e)(1)(v) of this section -

New York State Tax Gambling Winnings

(i) Government-issued identification (for example, a driver's license, passport, social security card, military identification card, tribal member identification card issued by a federally-recognized Indian tribe, or voter registration card) in the name of the payee; and

(ii) A Form W-9, “Request for Taxpayer Identification Number and Certification,” signed by the payee that includes the payee's name, address, taxpayer identification number, and other information required by the form. A Form W-9 is not acceptable for this purpose if the payee has modified the form (other than pursuant to instructions to the form) or if the payee has deleted the jurat or other similar provisions by which the payee certifies or affirms the correctness of the statements contained on the form.

(3)Special rule for tribal member identification cards. A tribal member identification card need not contain the payee's photograph to meet the identification requirement described in paragraph (e)(1)(v) of this section if -

(i) The payee is a member of a federally-recognized Indian tribe;

(ii) The payee presents the payer with a tribal member identification card issued by a federally-recognized Indian tribe stating that the payee is a member of such tribe; and

(iii) The payer is a gaming establishment (as described in § 1.6041-10(b)(2)(iv) of this chapter) owned or licensed (in accordance with 25 U.S.C. 2710) by the tribal government that issued the tribal member identification card referred to in paragraph (e)(3)(ii) of this section.

(4)Transmittal form.Persons making payments of winnings subject to withholding must use Form 1096 to transmit Forms W-2G to the Internal Revenue Service.

(5)Furnishing a statement to the payee. Every payer required to make a return under paragraph (e)(1) of this section must also make and furnish to each payee, with respect to each payment of winnings subject to withholding, a written statement that contains the information that is required to be included on the return under paragraph (e)(1) of this section. The payer must furnish the statement to the payee on or before January 31st of the year following the calendar year in which payment of the winnings subject to withholding is made. The statement will be considered furnished to the payee if it is provided to the payee at the time of payment or if it is mailed to the payee on or before January 31st of the year following the calendar year in which payment was made.

(f)Examples. The provisions of this section may be illustrated by the following examples:

A purchases a lottery ticket for $1 in the State W lottery from an authorized agent of State W. On February 1, 1977, the drawing is held and A wins $5,001. Since the proceeds of the wager ($5,001 - $1) are not greater than $5,000, State W is not required to withhold or deduct any amount from A's winnings.
Assume the same facts as in example 1 except that A purchases two $1 tickets and that A wins $5,002 when one of the tickets is drawn. State W must deduct and withhold tax at a rate of 20% from $5,001 ($5,002 less the $1 wager), or $1,000.20.
C purchases a lottery ticket for $1. On June 1, 1979, the lottery drawing is held and C wins the grand prize of $50,000, payable $500 monthly. The payer must deduct and withhold tax at a rate of 20% from each payment of winnings. Therefore, $99.80 must be withheld from the first monthly payment to B ($500−$1) × 20% = $99.80) and $100 ($500 × 20%) must be withheld from each monthly payment thereafter.
Assume the same facts as in example 3, except that C wins an automobile rather than the grand prize. The fair market value of the automobile on the date on which it is made available to C is $10,000. The payer must deduct and withhold a tax of $2,000 (($10,001−$1) × 20%). This may be accomplished, for example, if C pays $2,000 to the payer. Alternatively, if the payer, as part of the prize, pays all taxes required to be duducted and withheld, the payer must deduct and withhold tax not only on the fair market value of the automobile less the wager, but also on the taxes it pays that are required to be deducted and withheld. This results in a pyramiding of taxes requiring the use of an algebraic formula. Under this formula, the payer must deduct and withhold a tax of 25 percent of the fair market value of the automobile less the wager ($2,500) and, in addition, the payer must indicate on Form W-2G the amount of such winnings as $12,501 ($10,001 + 25%($10,001−$1)).
D purchases a ticket for $1 in the State Y lottery from an authorized agent of State Y On January 1, 1976, a drawing is held and D wins $100 a month for the rest of D's life. It is actuarially determined that, on January 3, 1977, D's life expectancy is 5 years. Based on that determination, the proceeds from the wager paid to D on or after January 3, 1977, will exceed $5,000. Therefore, State Y must deduct and withhold $20 from each monthly payment made on or after January 3, 1977. (None of such payments is reduced by the amount of the wager because the amount of the wager was offset by the first payment of winnings which was made before January 3, 1977)).
Assume the same facts as in example 5 except that State Y purchases in its own name, as owner, an annuity of $100 a month for D's life from E Corporation, in order to fund its own obligation to make the payments. Although State Y remains liable for the withholding of tax, E Corporation as paying agent for State Y, making payments directly to D, should deduct and withhold from each monthly payment in the manner described in example 5.
E purchases a sweepstakes ticket for $1 in a sweepstakes conducted by W. E purchases the ticket on behalf of himself and on behalf of F and G, who have contributed equal amounts toward the purchase of the ticket and who have agreed to share equally in any prizes won. The ticket which E purchases wins $1,002. Since the proceeds of the wager ($1,002 - $1) are greater than $1,000 W is required to withhold and deduct 20 percent of such proceeds.
On February 1, 1977, a drawing is held in the State X lottery in which a winning ticket is selected. The person holding the winning ticket is entitled to proceeds of $100,000 payable either as a lump sum upon demand or $10,000 a year for 10 years. Under State law, the winning ticket must be presented to an authorized agent of State X before February 1, 1978. Until the ticket is presented, State X does not know the identity of the winner. On December 1, 1977, H, the winner, presents the winning ticket to an authorized agent of the State X lottery. The winnings are constructively paid to H on February 1, 1977. Since H, has the option of receiving the entire proceeds upon demand, State X is required to deduct and withhold $20,000 ($100,000 × 20%) from the proceeds of H's winnings on February 1, 1977; but for purposes of determining the time at which the deposit and inclusion on Form 941 of these taxes is to be made, the withholding shall be deemed to have beem made on December 1, 1977.
J purchases a subscription to N magazine, at the regular subscription price. All new subscribers are automatically eligible for a special drawing. The drawing is held and J wins $50,000. Since J has not paid any more than the regular subscription price, J has not placed a wager or entered a wagering transaction. Therefore, N is not required to deduct and withhold J's winnings.

New York State Tax On Gambling Winnings

(i) B places a $15 bet at the cashier window at the racetrack for horse A to win the fifth race at the racetrack that day. After placing the first bet, B gains confidence in horse A's prospects to win and places an additional $40 bet at the cashier window at the racetrack for horse A to win the fifth race, receiving a second ticket for this second bet. Horse A wins the fifth race, and B wins a total of $5,500 (100 to 1 odds) on those bets. The $15 bet and the $40 bet are identical wagers under paragraph (c)(1)(iii)(A) of this section because winning on both bets depended on the occurrence of the same event and the bets are placed in the same parimutuel pool with the same payer. This is true regardless of the fact that the amount of the wager differs in each case.

(ii) B cashes the tickets at different cashier windows. Pursuant to paragraph (d) of this section and § 1.6011-3, B completes a Form W-2G indicating that the amount of winnings is from identical wagers and provides the form to each cashier. The payments by each cashier of $1,500 and $4,000 are less than the $5,000 threshold for withholding, but under paragraph (c)(1)(iii)(A) of this section, identical wagers are treated as paid with respect to a single wager for purposes of determining the proceeds from a wager. The payment is not subject to withholding or reporting because although the proceeds from the wager are $5,445 ($1,500 + $4,000 − $55), the proceeds from the wager are not at least 300 times as great as the amount wagered ($55 × 300 = $16,500).

B makes two $1,000 bets in a single “show” pool for the same jai alai game, one bet on Player X to show and one bet on Player Y to show. A show bet is a winning bet if the player comes in first, second, or third in a single game. The bets are placed at the same time at the same cashier window, and B receives a single ticket showing both bets. Player X places second in the game, and Player Y does not place first, second, or third in the game. B wins $8,000 from his bet on Player X. Because winning on both bets does not depend on the occurrence of the same event, the bets are not identical bets under paragraph (c)(1)(iii)(A) of this section. However, pursuant to the rule in paragraph (c)(1)(ii) of this section, the amount of the wager is the aggregate amount of both wagers ($2,000) because the bets were placed in a single parimutuel pool and reflected on a single ticket. The payment is not subject to withholding or reporting because although the proceeds from the wager are $6,000 ($8,000 − $2,000), the proceeds from the wager are not at least 300 times as great as the amount wagered ($2,000 × 300 = $600,000).
B bets a total of $120 on a three-dog exacta box bet ($20 for each one of the six combinations played) at the dog racetrack and receives a single ticket reflecting the bet from the cashier. B wins $5,040 from one of the selected combinations. Pursuant to the rule in paragraph (c)(1)(ii) of this section, the amount of the wager is $120, not $20 for the single winning combination of the six combinations played. The payment is not subject to withholding under section 3402(q) because the proceeds from the wager are $4,920 ($5,040 − $120), which is below the section 3402(q) withholding threshold.
B makes two $12 Pick 6 bets at the horse racetrack at two different cashier windows and receives two different tickets each representing a single $12 Pick 6 bet. In his two Pick 6 bets, B selects the same horses to win races 1-5 but selects different horses to win race 6. All Pick 6 bets on those races at that racetrack are part of a single parimutuel pool from which Pick 6 winning bets are paid. B wins $5,020 from one of his Pick 6 bets. Pursuant to the rule in paragraph (c)(1)(ii) of this section, the bets are not aggregated for purposes of determining the amount of the wager because the bets are reflected on separate tickets. Assuming that the applicable rate is 25%, the racetrack must deduct and withhold $1,252 (($5,020 − $12) × 25%) because the amount of the proceeds of $5,008 ($5,020 − $12) is greater than $5,000 and is at least 300 times as great as the amount wagered ($12 × 300 = $3,600). The racetrack also must report B's winnings on Form W-2G pursuant to paragraph (e) of this section and furnish a copy of the Form W-2G to B.
C makes two $50 bets in two different parimutuel pools for the same jai alai game. One bet is an “exacta” in which C bets on player M to win and player N to “place.” The other bet is a “trifecta” in which C bets on player M to win, player N to “place,” and player O to “show.” C wins both bets and is paid $2,000 with respect to the bet in the “exacta” pool and $3,100 with respect to the bet in the “trifecta” pool. Under paragraph (c)(1)(iii)(A) of this section, the bets are not identical bets. Under paragraph (c)(1)(ii) of this section, the bets are not aggregated for purposes of determining the amount of the wager for either payment because they are not wagers in the same parimutuel pool. No section 3402(q) withholding is required on either payment because neither payment separately exceeds the $5,000 withholding threshold.
C makes two $100 bets for the same dog to win a particular race. C places one bet at the racetrack and one bet at an off-track betting establishment, but the two pools constitute a single pool. C receives separate tickets for each bet. C wins both bets and is paid $4,000 from the racetrack and $4,000 from the off-track betting establishment. Under paragraph (c)(1)(ii) of this section, the bets are not aggregated for purposes of determining the amount of the wager because the wager placed at the racetrack and the wager placed at the off-track betting establishment are reflected on separate tickets, despite being placed in the same parimutuel pool. No section 3402(q) withholding is required because neither payment separately exceeds the $5,000 withholding threshold.
C places a $200 Pick 6 bet for a series of races at the racetrack on a particular day and receives a single ticket for the bet. No wager correctly picks all six races that day, so that portion of the pool carries over to the following day. On the following day, C places an additional $200 Pick 6 bet for that day's series of races and receives a new ticket for that bet. C wins $100,000 on the second day. Pursuant to the rule in paragraph (c)(1)(ii) of this section, the bets are on two separate tickets, so C's two Pick 6 bets are not aggregated for purposes of determining the amount of the wager. Assuming that the applicable rate is 25%, the racetrack must deduct and withhold $24,950 (($100,000 − $200) × 25%) because the amount of the proceeds of $99,800 ($100,000 − $200) is greater than $5,000, and is at least 300 times as great as the amount wagered ($200 × 300 = $60,000). The racetrack also must report C's winnings on Form W-2G pursuant to paragraph (e) of this section and furnish a copy of the Form W-2G to C.

(g)Applicability date. The rules in this section apply to payments made with respect to a winning event that occurs after November 13, 2017. For rules that apply to payments made with respect to a winning event on or before that date, see § 31.3402(q)-1 as contained in 26 CFR part 31, revised April 1, 2017.

(Secs. 6011 and 7805 of the Internal Revenue Code of 1954 (68A Stat. 732, 917; 26 U.S.C. 6011, 7805)
[T.D. 7787, 46 FR 46908, Sept. 23, 1981, as amended by T.D. 7919, 48 FR 46298, Oct. 12, 1983; 48 FR 55728, Dec. 15, 1983; T.D. 7943, 49 FR 5345, Feb. 13, 1984; 49 FR 8437, Mar. 7, 1984; T.D. 8895, 65 FR 50408, Aug. 18, 2000; T.D. 9824, 82 FR 44926, Sept. 27, 2017]