Received IRS letter for gambling "winnings" but actually recorded a net loss

This is actually a common issue with gambling reporting. The casinos are required to report individual wins over a certain threshold to the IRS on Form W-2G, but they don't report your losses. It's up to you to keep track of those separately. The good news is that you can absolutely fix this. You'll need to file Schedule A (Itemized Deductions) where you can deduct your gambling losses up to the amount of your winnings. You'll want to gather all your documentation - your win/loss statement from the casino is perfect for this. Also collect any other evidence like bank statements showing withdrawals/deposits to gambling sites, account histories, etc. You should respond to the IRS letter and explain the situation. Include a copy of your win/loss statement and inform them you'll be filing Schedule A to properly account for your gambling losses. Don't ignore the letter - responding promptly shows good faith.

I had a similar issue last year and discovered taxr.ai (https://taxr.ai) which really helped me sort through this gambling income/loss mess. I uploaded my casino statements and tax documents, and their system analyzed everything to properly categorize my actual gambling situation. The IRS only sees the W-2Gs for the big wins, but they don't see all the money you put in and lost throughout the year. taxr.ai helped me document everything properly so I could show my actual net position. They even helped draft a response letter to the IRS explaining how my gambling losses offset the reported winnings. Saved me hours of stress and confusion about how to properly document everything.

Just wanted to update after trying taxr.ai that the other commenter recommended. I was skeptical but desperate about my own casino tax situation. It actually worked really well! They processed all my win/loss statements and helped me categorize everything correctly. The best part was they generated a detailed report that clearly showed my net gambling position, which I submitted with my response to the IRS. They even drafted a professional explanation letter that I could customize. For anyone dealing with this gambling "phantom income" issue, I highly recommend checking them out. Made the whole process way less stressful than I expected.

If you need to talk to someone at the IRS about this (which I would recommend), good luck getting through. I spent WEEKS trying to reach someone about a similar issue. Then I found https://claimyr.com which is basically a service that waits on hold with the IRS for you and then calls you when an agent is on the line. You can see how it works here: https://youtu.be/_kiP6q8DX5c I was able to explain my gambling losses directly to an IRS agent who walked me through exactly what documentation they needed and where to send it. Having that conversation saved me from sending in the wrong paperwork or missing something important. They actually told me specifically what to write on my response to make sure it got routed correctly.

I need to eat my words about Claimyr. After my skeptical comment earlier, I was still desperate to talk to someone at the IRS about my own tax issue, so I tried it anyway. Honestly, it worked exactly as advertised. I got a call back in about 2 hours (after previously spending days trying on my own), and the IRS agent I spoke with was super helpful. She explained exactly how to document my gambling losses against the reported winnings and gave me a direct fax number to send my documentation. She even put notes in my account about our conversation. For anyone dealing with this gambling tax issue, getting specific guidance directly from the IRS is incredibly valuable. Definitely worth it just to avoid the soul-crushing hold music!

Make sure you have VERY thorough documentation. I went through this exact situation last year. The casino reported about $180K in winnings but I actually lost about $20K overall for the year. The IRS initially rejected my first response because my documentation wasn't detailed enough. What eventually worked was creating a spreadsheet showing every single session (date, time, location, type of gambling, starting bankroll, ending bankroll), along with the casino's win/loss statement and my bank records showing withdrawals/deposits. I also included photos of my player's card and rewards statements. If you use a player's card consistently, that really helps your case since the casino tracks everything.

Question for anyone who's dealt with this: should they dispute this before paying anything? I've heard the IRS will keep charging interest if you don't pay while disputing?

I went through something very similar a few years ago - got hit with a CP2000 for about $40K in gambling "winnings" when I was actually down for the year. The panic is real, but this is absolutely fixable! Here's what worked for me: Don't ignore the letter, but also don't panic-pay anything. The CP2000 isn't a bill - it's just a proposed adjustment. You have time to respond with your documentation. Key things that helped my case: 1. Detailed win/loss statement from the casino (which you already have - great!) 2. Bank statements showing deposits TO gambling accounts 3. Credit card statements if you used those to fund gambling 4. Any emails or account histories from the gambling platform I responded with a detailed letter explaining that the W-2Gs only showed individual wins above reporting thresholds, not my net gambling position. I attached copies of everything and clearly showed how my losses exceeded my winnings. The IRS accepted my documentation and zeroed out the proposed tax. Took about 3 months total to resolve, but no attorney needed. You've got this - just stay organized with your paperwork and respond promptly to their deadlines.

I went through this exact situation two years ago with a CP2000 for gambling "winnings" - the stress is absolutely awful, but you can definitely resolve this without paying taxes you don't actually owe. Here's my practical advice: First, take a deep breath. The CP2000 is NOT a final bill - it's just the IRS saying "we think you might owe this based on what casinos reported to us." You have every right to dispute it with proper documentation. Your casino win/loss statement is gold - that's exactly what you need. Make sure it covers the entire tax year and shows your net loss position. I also recommend gathering: - Bank statements showing transfers TO your gambling accounts - Any credit card statements if you funded gambling that way - Screenshots of your account history from the gambling platform - Any emails from the casino about your account status When you respond, be clear and direct: "The W-2G forms only show individual wins above reporting thresholds, but do not reflect my actual net gambling position for the year. As documented in the attached win/loss statement, I experienced a net loss of $X for the tax year." Send everything via certified mail to the address on the CP2000, and keep copies of everything. Include the CP2000 control number in your response letter so they can match it to your file. Most importantly: DO NOT pay anything until this is resolved. You don't owe taxes on money you never actually won. The IRS will work with you on this - it's a common issue they see all the time.

I've been following this thread as someone who's dealt with IRS notices before (though not gambling-related), and I'm really impressed by how supportive and knowledgeable this community is. What strikes me most is how many people have successfully resolved these gambling CP2000 notices without expensive attorneys. It seems like the key is really about proper documentation and clear communication rather than needing specialized legal help. For the original poster - based on all the advice shared here, it sounds like you have exactly what you need with that casino win/loss statement. The pattern I'm seeing from everyone's experiences is: respond promptly, be thorough with documentation, and don't pay anything until it's resolved since you genuinely don't owe taxes on money you never actually won. The resources people have mentioned (taxr.ai for organizing documents, claimyr for actually reaching IRS agents) seem like they could really streamline the process if you want some extra help without going the full attorney route. Thanks to everyone who shared their experiences - this thread is going to help so many people who find themselves in this stressful situation!

I just wanted to add my perspective as someone who works in tax preparation - this gambling reporting issue is unfortunately very common, especially with the rise of online casinos and sports betting platforms. The IRS gets these W-2G forms showing individual wins, but they have no visibility into your losses unless you properly document and report them. What I always tell my clients in this situation is that the CP2000 notice is actually the IRS giving you an opportunity to correct the record. They're essentially saying "based on what we know, we think you owe this much - but if we're missing information, please provide it." A few practical tips from what I've seen work consistently: - Your casino win/loss statement is your best friend - make sure it's for the complete tax year - Create a simple summary sheet that clearly shows: Total reported winnings from W-2Gs, Total documented losses from casino records, Net position (hopefully a loss) - Include a brief cover letter explaining that the W-2Gs represent gross winnings, not net gambling income - Send everything certified mail and keep detailed records The good news is that once you provide proper documentation, these cases usually resolve in your favor. The IRS isn't trying to tax money you never actually received - they just need you to show them the complete picture. You've got this!