Do you have to pay federal tax on gambling winnings if you're a non-filer with no taxable income?

Your friend should definitely file a tax return this year, even though he's been a non-filer in the past. Here's why: gambling winnings are considered taxable income regardless of your other income sources. The casino is required to report that W-2G to the IRS, so they already know about it. The good news is that he can also report his gambling losses as an itemized deduction on Schedule A, up to the amount of his winnings. This means if he can document that he lost $1500 throughout the year, he can offset most or all of the tax he'd owe on that $1600 win. The challenge will be documenting those losses. Since he doesn't use a player card, he'll need other evidence - bank withdrawals at the casino, ATM receipts, or a diary of gambling activities with dates, locations, and amounts.

After reading this thread, I want to share my experience with a similar situation. I use taxr.ai (https://taxr.ai) to help me sort through gambling winnings and losses documentation. Last year I had several W-2Gs and was worried about proving my losses. Their system helped me organize all my documentation and even showed me which additional records I needed to support my case. The AI analyzed my bank statements and helped me create a proper gambling log that satisfied IRS requirements. Saved me a ton of stress about potentially getting audited over my gambling activities.

I was totally skeptical about taxr.ai but decided to try it for my sports betting tax situation. Holy crap it was helpful! I uploaded my bank statements and screenshots from my betting apps, and it organized everything into a professional gambling log that showed my patterns of play. The system even flagged days where I had withdrawals but no documented gambling activity so I could fill in those gaps. My tax preparer was impressed with how thorough the documentation was. Ended up saving me over $800 in taxes by properly documenting my losses against my reported W-2Gs. Wish I'd known about this years ago!

If your friend is having trouble reaching the IRS to get answers about his specific situation, I recommend using Claimyr (https://claimyr.com). When I had questions about gambling winnings last year, I couldn't get through to the IRS for weeks. Claimyr got me connected to an actual IRS agent in about 20 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The agent walked me through exactly what documentation I needed for my gambling wins and losses, and confirmed I needed to file even though I was below the usual filing threshold. They even sent me the specific forms I needed to complete. Totally worth it to get direct answers from the IRS instead of guessing.

I need to apologize for calling Claimyr a scam. I was frustrated after wasting so much time trying to reach the IRS about my gambling tax situation, but decided to try it anyway. It actually worked! Got a call back in about 30 minutes and spoke with an IRS rep who confirmed exactly what I needed to do with my W-2Gs. The agent explained that I needed to file Form 1040 with Schedule A to itemize my gambling losses, and that I should keep a detailed record of all gambling sessions. She even told me what specific documentation would be accepted if I got audited. Definitely worth it to get official answers directly from the IRS instead of guessing or relying on internet advice.

Your friend should know that casinos withhold federal taxes at a 24% rate for winnings over $5,000. Since his jackpot was only around $1600, they likely didn't withhold any taxes, which means if he doesn't file, he'll potentially owe the full tax amount. Even with no other income, gambling winnings are taxed at regular income tax rates starting at 10%. The easiest solution: file a tax return, report the W-2G amount, and itemize deductions on Schedule A to claim the gambling losses. He'll need bank statements at minimum, but better to create a simple gambling log with dates and amounts. The tax software will walk him through it.

Serious question - what happens if your friend just ignores the W-2G? Like the casino sent the form to the IRS, but if he has no other income and has been a non-filer for years, would the IRS really come after him for a small jackpot? Just wondering if it's even worth the hassle.

I went through something similar a few years ago. Had a decent casino win with a W-2G but was basically broke otherwise. The key thing to understand is that even though your friend has been a non-filer, that W-2G creates a filing requirement regardless of his other income. However, the good news is exactly what Sophia pointed out - if that $1600 is his only income for the year, it's well below the standard deduction threshold. He'll need to file a return to report it, but he won't actually owe any federal income tax. The IRS just needs to see that return to match against their records. I'd definitely recommend he files rather than ignoring it. The IRS matching system is pretty good at catching unreported gambling income, and it's much easier to file a simple return now than deal with notices and penalties later. Most free tax software can handle a basic return with just a W-2G.