Most people that walk into a racetrack for the first time don’t really know the ins and outs of betting, what a pick three, pick four, exacta, trifecta, etc are. They certainly don’t know what IRS W2-G reporting policy is or what the IRS W2-G withholding policy is.

Some of those that have been going to the racetrack for years don’t even understand those policies. If you buy the post parade program (which I don’t, I use the daily racing form) you can turn to the beginning of the magazine and those policies are explained in two brief paragraphs.

IRS W2-G REPORTING POLICY- Any winning wager or group of identical wagers (same track, race pool and winning numbers) whose individual odds are 300-1 or greater and whose winning dollar value either individually or when added together is between $600 and $5,000 (minus the amount of the indiviudal winning wager (s)) is subject to IRS reporting requirements to be completed on form W2-G.

IRS W2-G WITHHOLDING POLICY- Any winning wager or group of identical wagers whose individual odds are 300-1 or greater and whose winning dollar value either individually or added together exceeds $5,000 (minus the amount of the individual winning wager(s)) is subject to an IRS withholding tax at the rate of 25 percent.

Now basically what this means is that on the reporting policy if you hit a bet lets say that pays $605 for $2 you have to sign and that money is reported to the IRS as income. The only problem is you could have invested $500 into that wager but all that matters is that it was more that $600, less the amount of the wager, which is another misleading statement, it only counts the winning wager, $2, not the entire investment. With the withholdings it gets worse. They can add together identical wagers, which are not really identical wagers in that they are not the same bet. If you hit a bet for lets say $5 and the it pays out $1,100 for $1. You collect $5,500 even though you may have hit it on $5 different wagers but if each one had the wining ticket it is considered identical. Over $1,375 is withheld from your payout at the window again regardless of investment and you have to wait a year to MAYBE get it back.

Problem with this whole secenario is that these levels for reporting and withholding don’t take into account the new wagers that have evolved over the years. The reporting should be at $5,000 and the withholdings some where around $20,000. The amount of money that is taken out of circulation every year not to mention the handle lost for the racetrack and the state is huge. How come after all these years these policies haven’t changed. Not to mention the amount of paperwork on taxes on a yearly basis including all the winnings that go over $600 even when added together is another problem.

When everyone wants to know why the game is losing customers, not cultivating new ones, this is a big reason why. It is hard enough as we all know to win at this game with all the added factors but now if you happen to hit a few bets and it goes over $5,000, the IRS will hold 25% of the money. If you get it back in a year great but I am sure it will not be going back into the windows. The state loses, the bettor loses and the racetrack loses. Change these policies and give the bettor a chance to embrace this once great game.