An influx of 1099s from sweepstakes casino sites has players wondering what their tax responsibilities are for Sweeps Coins winnings, and what is considered taxable gambling income.
With the April 15 U.S. tax deadline fast approaching, we’ll start by answering your basic questions.
So far, players on a specific sweeps casinos Reddit thread have reported recently receiving 1099s from sites including:
- Modo.us
- High 5
- Chanced
- RealPrize
The short answer is, yes, you have to pay taxes on your winnings at sweepstakes casino sites. And yes, your total SC redemptions are considered taxable income.
Why am I getting a 1099 from a sweeps casino when I lost money overall?
Many sweepstakes players may wonder why they’re getting 1099s from sweeps casino sites where they had net losses in 2024.
Similar to W-2G tax forms you receive when hitting a slot jackpot at the casino or a big lottery win, the amount that gets reported to the IRS is based on gross winnings, or total payout.
So even if you purchased $1,000 in Gold Coins packages, if you redeemed $800 worth of Sweeps Coins, the full $800 is considered taxable income and is likely what will appear on your 1099.
Unless you meet specific requirements for itemizing deductions, you can’t reduce your tax liability on winnings by offsetting them with losses. More about that below.
Are winnings from sweepstakes casinos considered gambling wins?
Yes. In the eyes of the IRS, any winnings from games of chance or wagers on events with uncertain outcomes is considered gambling income and is fully taxable.
Even if you don’t receive a 1099 from a sweepstakes casino where you won real money by playing games of chance (i.e. slots or table games), you are technically required by tax law to report all winnings, including those from sweepstakes casinos, as taxable income (typically on Form 1040).
Why 1099 vs. W-2G?
The difference between a 1099 and W-2G for gambling winnings is based on type and amount of winnings being reported.
If you’ve ever hit a jackpot over $1,200 on a slot machine, you likely received a form W-2G from the brick-and-mortar casino. Tax form W-2G typically covers winnings from casinos, racetracks, and lotteries when they exceed certain thresholds:
- $1,200 for bingo or slot machines
- $1,500 for keno
- $5,000 for poker tournaments
Form 1099 covers miscellaneous income like gambling winnings not included under form W-2G. The types of gambling typically falling in this category are non-traditional gambling activities including online contests (from skill-based to random draws), promotional prizes, and peer-to-peer betting pools. The reporting threshold for winnings in these categories is $600 and will typically be included on a 1099-MISC.
Sweepstakes casinos fall in this miscellaneous gambling winnings category, meaning you may receive a 1099-MISC form if you redeemed $600 or more in virtual currency (Sweeps Coins or other) on a specific site in 2024.
Can you deduct losses?
You can only deduct losses up to the amount of wins you report as taxable income, but you can only do this if you itemize your deductions, rather than claiming the standard deduction.
For tax year 2024, the standard deduction for single taxpayers and married individuals filing separately is $14,600. For married taxpayers filing jointly, the standard deduction is $29,200.
That means it wouldn’t even be beneficial to deduct your losses to offset your wins unless your wins (and losses) exceeded the standard deduction amounts above. If your total reported winnings do exceed the standard deduction amount for your tax filing status, you can itemize deductions and report gambling losses up to your total reported gambling winnings (on Schedule A).
However, this is important: Be sure to consult a tax professional on whether your sweepstakes purchases are deductible — because Gold Coin package purchases are different than spending money on a regulated online casino site — and if it is in your best interest to itemize your deductions versus taking the standard deduction.
In order to deduct losses by itemizing your deductions, the IRS also requires you to keep a log of all winnings and losses. Those logs must include:
- Date and type of gambling you engage in
- Name and address of the places where you gamble (or web address or casino app name)
- Amount you win and lose (net win/loss per session)
- People you gambled with (for in-person wagers)
What if I already filed my taxes before I got my sweeps casino 1099s?
Technically, you are required by the IRS to file an amended return once you receive any new 1099s as your taxable income will be different than what you reported. The IRS form for amending a tax return is 1040-X. If you also need to update itemized deductions, you will need to fill out Schedule A as well.
On the amended form, you will need to provide the previously submitted gross income amount, the additional amount you’re adding (from the 1099), and the new total. TurboTax recommends waiting until the IRS has processed your original return before filing an amended return. If you’re claiming a refund in your amended return, it needs to be filed within three years of the original filing deadline, or within two years of paying the tax due for that year (if that date is later).
If the amended return results in a higher tax penalty, you will need to mail a check for the difference (if you already paid the original tax due) or pay the difference to the IRS online. You can also mail a check along with the amended return to minimize any interest and penalties you might owe.
While it appears not all sweeps casinos are mailing out tax forms to those who redeemed more than $600, many of them are. As such, players would be wise to be prepared to pay taxes on any sweepstakes casino redemptions from 2024 (and going forward).