If you're a Canadian that gambles and wins across the border, American casinos are instructed to deduct a 30% tax off jackpots larger than $1,200 before they're paid out to the winner.

If you've had this experience, there is a way to get the IRS to send some of that money back. The following tutorial will show you how.

Background
You won some money in Vegas, and had to spend some money to win it (your wagers). When the casino taxes your jackpot they calculate 30% of the jackpot amount, not the amount you were ahead at the end of your gambling activity. You can ask the IRS to factor in the amount you spent gambling, to reduce the amount of tax you'd owe and produce a refund for the difference.

For example:

I won $2,000. I spent $1,000 in order to win my jackpot.
This means my net win was actually $2,000-$1,000=$1,000.
The casino withheld 30% of my $2,000 jackpot amount: $600.
I only came away $1,000 ahead, so I should have only been taxed 30% of $1,000: $300.
I can inform the IRS and ask them for the difference. In this case:
$600 was withheld
$300 was what should have been withheld.
$600-$300=$300 that can be recovered.

NOTE: Be wary of claiming more losses than you actually lost in an attempt to get back all the tax that was withheld. Should the IRS select you for an audit later on and you can't prove all the losses you claimed, you'll wind up having to pay everything back. The only way to legally claim all the tax back is if you lost more money than you won gambling.

To request the recovery, you need to file a US Non-Resident Tax Return with the IRS. You must be all of the following:

- A Canadian resident
- Not a US citizen, nor eligible to obtain a US Social Security Number.
- Have both won and spent some money to win in Gambling activity in the US

Step 1: Collecting Info
You'll need to make sure you have all of the following forms:

- A certified copy of your Canada Passport (you can request this from any passport Canada office in person, bring your passport with you when you go!)
- The form 1042-S that the casino gave you when you won your jackpot.
- Win/Loss Statements from all the US casinos you played at (or as many as possible), or a detailed record of all your US gaming activity for the year of your win. If you use a casino "Players Club" card while gambling, it's very likely that the casino can give you a Win/Loss Statement of the money you spent gambling there. You don't technically have to submit these with your return, but doing so will reduce the likelihood of an audit. It's best to avoid that situation if possible.

Step 2: Filling Out the Forms
2 forms need to be filed. IRS form W-7 if you've never filed a US tax return before, and the 1040NR Tax Return itself. If you won your jackpot in the current year, you should NOT file this application until January of the year following. The IRS will disallow applications for a given tax year before that year is over.

You can download a PDF copy of the W-7 from here, and the 1040NR from here. You only need pages 1, 2, and schedule NEC from the 1040NR, the rest of that form can be discarded.

Download our sample version from here to see how these are filled out. Take note of the checkboxes that are marked and fill your copies out accordingly. Sign all forms where indicated.

NOTE: If you've already recovered gambling tax in recent years, you don't need to file form W-7. You already have an ITIN assigned to you, and should have received it in a letter from the IRS. Put your ITIN number in the "identifying number" box on the 1040NR if you have it, otherwise leave that box blank.

Step 3: Send to the IRS
Once you've filled out the forms, you should have all of the following:

- A certified copy of your passport
- The 1042-S form(s) issued by the casino for your jackpot
- Your Win/Loss Statement(s) from the casino, or gambling activity log if you kept one.
- A completed W-7 form, if you don't already have an ITIN.
- A completed 1040NR Tax return for each year you are claiming. (if you have wins in more than one calendar year, file a tax return for each).

Package all of these forms up in an envelope. If you're including a W-7, send to:

Internal Revenue Service
ITIN Operation
P.O. Box 149342
Austin, TX, USA
78714-9342

If you already have an ITIN, send to:

Internal Revenue Service
P.O. Box 149342
Austin, TX, USA
73301-0215

The IRS generally takes between 12 and 15 weeks to issue a refund from the time you submit your application. They're busiest at tax time of course (April to June), but the fastest way to get your tax money back is to send the application in early January. It will come in the form of a US Treasury Cheque to the address you file your application with.

Full Disclosure & Disclaimer: This tutorial was written based on research by Grants International Inc, and should not be considered a substitute for professional advice. The above process has been tested extensively and should produce a tax refund for those entitled if filed as directed. Grants International assumes no responsibility for the results of any information used in this tutorial.