Congressional Gaming Caucus Asks for Higher Slot Tax Threshold

The ultimate thrill for many slot machine gamblers is a “hand pay.”

That’s a jackpot of $1,200 or more, where the machine locks up, the machine often generates some visual and musical hoopla and casino slot attendants scurry to bring the lucky player a heaping stack of cash.

Behind this beloved ritual is an awkward fact: It’s a pain in the ass for just about everyone involved.

Just another day in Vegas.

This whole process is in place because the Internal Revenue Service (IRS) wants a piece of the action.

The main reason slot attendants get involved is there’s a slew of paperwork required for jackpots of $1,200 or more, the “slot tax threshold.”

Players provide identification and their social security number so at tax time, the IRS can take its bite of the player’s income thanks to the issuance of a W-2G tax reporting form.

One of the key problems is $1,200 jackpots aren’t uncommon, and this causes a number of headaches for casinos.

The hand pay ritual stops the player from playing, for starters. An idle slot machine generates zero revenue.

There are also additional hard costs associated with the relatively small tax threshold, including additional labor costs. Also known as “administrative burdens.”

Granted, not all hand pays are created equal, but the current threshold needs to go.

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The $1,200 threshold hasn’t been adjusted for inflation since 1977, which is utterly outrageous.

Members of the Congressional Gaming Caucus have asked for legislation to raise the threshold to $5,000.

This request follows on the heels of Congress directing the U.S. Department of the Treasury to investigate the possibility of updating the slot tax threshold through regulation. Shockingly, nothing has happened. That was sarcasm, in case that wasn’t readily apparent. It’s the government. Hello.

Raising the slot machine tax threshold is long overdue.

Hand pay Circa
Hand pays are a blast. The paperwork, not so much.

For many players, hand pays are elusive, but if you’re bored sometime, visit the high limit slot room at any Las Vegas casino. You’ll see machines where virtually any win qualifies as a hand pay. You’ll also see players twiddling their thumbs or playing on other machines while their paperwork is being processed.

Some casinos offer services, like the Cosmo’s Fastpay System, where a player can provide their social security number prior to gambling, and their taxable jackpots are added up throughout the session and processed at the end. These services are clunky workarounds, though.

The taxable threshold should be higher. Most players at this level are offsetting their wins against their losses at tax time, anyway, so it’s all just a big administrative cluster for no real reason.

You can read the proposed bill here (.pdf format). It’s just two pages.

If approved, the proposed change to the rules would apply to wins after December 31, 2022.

A higher threshold will save players aggravation and casinos money. Let’s go, already.

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