Casino Compliance: Managing W-2G and 1042-S Reporting for Gambling Winnings

Casinos in the U.S. have specific IRS reporting obligations when it comes to gambling winnings. The two primary forms involved are Form W-2G (for U.S. persons) and Form 1042-S (for nonresident aliens). Properly managing both is critical for regulatory compliance, audit readiness, and avoiding IRS penalties.

1. Form W-2G – For U.S. Citizens and Resident Aliens

When to Issue:

Casinos must issue Form W-2G when a U.S. person wins at or above certain thresholds:

• $1,200 or more from slot machines or bingo

• $1,500 or more (net of buy-in) from keno

• $5,000 or more (net of wager) from poker tournaments

• Other gambling winnings (e.g., lotteries, raffles) if the payout is $600 or more and at least 300 times the wager

Withholding Requirements:

• 24% backup withholding if the winner doesn’t provide a valid SSN

• Otherwise, no withholding for U.S. citizens and resident aliens (unless backup withholding is triggered)

What’s on the Form:

• Winner’s name, address, SSN

• Type of wager and amount won

• Date of the win

• Federal income tax withheld (if any)

2. Form 1042-S – For Nonresident Aliens

When to Issue:

Casinos must use Form 1042-S for gambling winnings paid to nonresident aliens, including international tourists and players. All U.S.-source gambling winnings are taxable unless covered by a tax treaty.

Withholding Requirements:

• 30% flat withholding on gross winnings, unless:

  • A tax treaty applies (some reduce or eliminate withholding)

  • The winnings are from certain exempt games like blackjack or baccarat (which are classified as games of skill)

TIN Requirements:

• A valid ITIN (Individual Taxpayer Identification Number) is required for any treaty benefits to apply

• Without an ITIN, the full 30% is withheld

What’s on the Form:

• Winner’s name, country of residence, and ITIN (if available)

• Type of income (code 28 = gambling winnings)

• Gross winnings and federal tax withheld

• Withholding agent’s information (the casino)