Sources for my articles on gambling taxes
Last update: February 22, 2026
I cite my sources very well because I always do no matter the topic, but in the case of gambling taxes it’s extra important because there’s lots of misinformation floating around. You want to know whom to trust, so I’m putting my sources where my mouth is. For my gambling tax articles I cite court cases, IRS documents, and expert CPAs who specialize in gambling taxes. And if you think I got something wrong, I’m always ready to correct it (let me know), but your source has to trump mine.
Lots of the sources are cited within the articles, right after the point I’m making. Much of what’s below is additional sources.
CPAs
I had conversations with two different CPAs with specific experience with gambling taxes, in Feb. 2026.
General
- IRS Tax Topic 419: Gambling Income and Losses
- IRS Publication 529: Miscellaneous deductions
Reporting the W2-G amounts as winnings
Report wins/losses per session, and don’t report the W-2G amount as the winnings
(Note: The form/line number for where to report gambling wins changes from year to year, so the “Line 21” mentioned in the sources below is not the line you’d report on today.)
- Shollenberger v. [IRS] Commissioner. This court case firmly established that wins/losses should be tracked by session, and that entering the W-2G amounts as the win is wrong. “The Form W-2G that reported their gross winnings from the $2,000 jackpot should not be reported on line 21 as $2,000 [as their gambling income].” (Shollenberger v. Commissioner, T.C. Memo. 2009-306, 2009 WL 5103973 • U.S. Tax Ct. 2009)
- Journal for Enrolled IRS Agents: “Another common myth suggests that only amounts reported to the IRS on Form W-2Gs should be included. This obviously incorrect…The IRS and judges get suspicious if the amount of gambling income reported by a taxpayer exactly matches the total amount of gambling income reported on Form W-2Gs....For example, if a gambler starts the day with $10,000 in cash, and ends the day with $15,000 in cash but generates $100,000 of W-2Gs in the process, the taxpayer's gambling winnings for the gambling session are $5,000—not the $100,000 of W-2Gs.” (“Taxation of Recreational Gamblers”, p. 22, EA Journal, March/April 2013, Reece B. Morrel, Jr., CPA)
- IRS Notice 2025-21: “Gross income from a slot machine wagering transaction is determined on a session basis.” (IRS Notice 2015-21)
- IRS Memo No. AM2008-011. Confirms the use of session-based wins and losses. (IRS.gov)
- Randall Brody, IRS Enrolled Agent: “You add up all your winning sessions during the year to determine your winnings that are to be reported on Line 21 of the Form 1040 and then do the same by adding up your losing sessions to determine your annual losses.” (source)
- Forbes: “In 2008, the IRS ruled that U.S. citizens could measure their gains on a per-session basis. In effect, you don't have to compute each wager separately to determine if you won or lost and by how much. Just tally your total at the end of your gambling session. The Tax Court reached the same conclusion in Shollenberger v. Commissioner.” (Forbes)
- Publication 525. Confusingly, Pub. 525 says to “include” the W-2G amount(s) as gambling wins. Pub. 525 is simply wrong, and case law trumps instructions. We know that when taxpayers enter only the W-2G amount, when they get audited they’re in trouble. (Pub. 525, Taxable and Non-Taxable Income, rev. 2024, current as of 2/18/26)
- Russ Fox, CPA. His blog post refers to the session method being “allowed”. That wording suggested to me that he thinks the IRS position is something like, “We’ll allow this, but it’s not the preferred and proper way.” So I asked him, if session reporting is merely allowed, then what are we supposed to be doing? He replied and said that “allowed” and “what you’re supposed to do” are the same thing to him, that we are supposed to do session reporting.
For more on reporting using the session method vs. using the W-2G amounts, see my article on How to Report Gambling Winnings and Losses.
CPAs and tax prep software get it wrong, saying that W2-G amounts are winnings
- I saw it in TurboTax with my own eyes.
- “[I]t is likely that the vast majority of tax returns
that report gambling income—whether prepared by the taxpayer, a
tax professional, or tax software—are prepared incorrectly.”
“[S]everal popular tax-preparation programs reviewed by the author ignore the gambling-session methodology as well they merely total the W-2Gs. Such a limitation requires tax return preparers to alter, modify, override, or otherwise finesse their software so as to [report the correct amount]” (“Taxation of Recreational Gamblers”, p. 22, 24, EA Journal, March/April 2013, Reece B. Morrel, Jr., CPA)
Reporting only the W-2G amounts doesn’t fly if you get audited
- “The IRS and judges get suspicious if the amount of gambling income reported by a taxpayer exactly matches the total amount of gambling income reported on Form W-2Gs. On audit, the IRS is more likely to demand that a taxpayer substantiate his or her gamblig losses. In like manner, the courts require something more than the (possibly) self-serving oral testimony of the taxpayer as evidence of gambling losses. In several reported cases, the courts suspected that the taxpayers had more gamblig income than what was reported to the IRS by the casinos on the form W-2Gs.” (“Taxation of Recreational Gamblers”, p. 22, EA Journal, March/April 2013, Reece B. Morrel, Jr., CPA)
- The Norgaards reported their winnings as the W-2G amounts. They wound up in court and the court determined that their actual winnings were higher than W-2Gs. (Norgaard v. Commissioner, 939 F.2d 874 • 9th Cir. 1991)
More likely to get scrutiny if reported winnings don’t match the W2-G amounts
If you report the W-2G totals as your winnings, you’re screwed come audit time. But if you report your wins/losses by sessions like you’re supposed to, your return is more likely to be flagged for review. See my article on how to report wins/losses for the workaround.
- “[We]we were contacted by taxpayers in Oklahoma and Wisconsin. They received similar letters from the IRS notifying them that their 2018 income tax returns were selected for audit because of ‘unreported gambling winnings’…[B]oth of the taxpayers calculated their income using the ‘gambling session’ methodology…. Our guess is tat the IRS computers are totaling each taxpayer’s total gambling winnings (reported on Form W2-G to the IRS. Next, their computers compare this total with the amount of wagering gains reported by the taxpayer on teir income tax return. Finally, if there is a difference between these amounts, then the income tax return is selected for audit, additional tax, penalties, and interest are applied…” (Reece B. Morrel. Jr., CPA)
- “[T]he IRS computer matching program, which makes sure that a taxpayer includes all of his gambling winnings reported on Form W2Gs, completely ignores the IRS-preferred and Tax Court-approved methodology of gambling sessions.” (“Taxation of Recreational Gamblers”, p. 22, EA Journal, March/April 2013, Reece B. Morrel, Jr., CPA)
Logs and sessions
Requirement to keep a log of wins/losses
- Publication 529 says “You must keep an accurate diary or similar record of your losses and winnings.” They call it a diary but what they describe is a journal or a log. Anyway, I have a whole article about keeping the log. (Pub. 529, Miscellaneous Deductions, rev. 2020, current as of 2/18/26)
- IRS Revenue Procedure 77-29 also spells out that gamblers should keep a log.
Can’t use the whole year as one big session
“To permit a casual gambler to net all wagering gains or losses throughout the year would intrude upon, if not defeat or render superfluous, the careful statutory arrangement that allows deduction of casual gambling losses…” (Shollenberger v. Commissioner, T.C. Memo. 2009-306, 2009 WL 5103973 • U.S. Tax Ct. 2009)
Can’t simply subtract losses from wins and report the difference as net winnings
- “[T]axpayers are not allowed to simply net together their total gains and losses for the year and report the difference….If such a ‘netting’ methodology is discovered, the IRS and courts consistently force the taxpayer to ‘un-net’ the wins and losses and recalculate accordingly. Please be aware that a sampling of such cases shows that the IRS is willing to litigate this issue over relatively small amounts.” (“Taxation of Recreational Gamblers”, p. 23, EA Journal, March/April 2013, Reece B. Morrel, Jr., CPA)
- “Insofar as petitioners mean to suggest that section 165(d) permits their gross income from slot machine play to be calculated by netting all their 2005 slot machine gains and losses, we disagree….To permit a casual gambler to net all wagering gains or losses throughout the year would intrude upon, if not defeat or render superfluous, the careful statutory arrangement that allows deduction of casual gambling losses, if at all, only as itemized deductions, subject to the limitations of section 165(d). (Shollenberger v. Commissioner, T.C. Memo. 2009-306 • U.S. Tax Ct. 2009)
- “Scholl testified to his belief that he could "net out" his gambling wins and losses in any particular year and, if losses exceeded wins, nothing needed to be reported on the return….[However] Form 1040 Instructions Manual specifically states: ‘You cannot offset [gambling] losses against winnings and report the difference‘.” (United States v. Scholl, 166 F.3d 964, 9th Cir. 1999)
- “[T]here is a duty to report gambling winnings even if there is a net loss.” (Szkircsak v. Commissioner, T.C. Memo. 1980-129 • U.S. Tax Ct. 1980)
Consequences of not keeping a log
- Bill Remos claimed $50k in losses, allowed to claim only $0. (Nolo)
- Donald Mock claimed $32k in losses, allowed to claim only $0. (Mock v. Commissioner, T.C. Memo. 2011-94 • U.S. Tax Ct. 2011)
- The Szkircsaks claimed $15,645 in losses. They had some
records but not a proper session log. Allowed to deduct only
$5,840. (Szkircsak
v. Commissioner, T.C. Memo. 1980-129 • U.S. Tax Ct. 1980)
(more details about these cases)