asegura:Is line 21 the only place she reports winnings?
Yes, unless it is the rare case that the taxpayer is engaged in gambling as a trade or business. If it is a trade or business, the winnings (and losses) would go on Schedule C. Note that even in that case, the gambling losses may not exceed winnings. IRC § 165(d). Thus, the principal value of being in a trade or business is that other expenses other than gambling losses (e.g. travel, etc) may be deducted and result in an overall loss for the taxpayer. It also helps in the case where the taxpayer may be subject to alternative minimum tax. But it also means that any net profit from the gambling is subject to self-employment tax.
asegura: She also wants to claim losses.
She does that on Schedule A as an itemized deduction not subject to the 2% limitation, unless as discussed above, the gambling is a trade or business. Again, the gambling losses may not exceed gambling winnings.
asegura: When does gambling become an occupation?
The instances in which the IRS and the courts have held gambling to be a business are fairly rare, but it can happen. The the U.S. Supreme Court, in one of the few taxpayer favorable cases, provided the basic standard:
"We do not overrule or cut back on the Court's holding in
Higgins when we conclude that if one's gambling activity is
pursued full time, in good faith, and with regularity, to the production
of income for a livelihood, and is not a mere hobby, it is a trade or
business within the meaning of the statutes with which we are here
concerned. Respondent Groetzinger
satisfied that test in 1978. Constant and large-scale effort on his
part was made. Skill was required and was applied. He did what he
did for a livelihood, though with a less-than-successful result. This
was not a hobby or a passing fancy or an occasional bet for amusement.
We therefore adhere to the general position of the
Higgins Court, taken 46 years ago, that resolution of this issue 'requires an examination of the facts in each case.' 312 U.S., at 217, 61 S.Ct., at 478. This may be thought by some to be a less-than-satisfactory solution, for facts vary." Commissioner v. Groetzinger, 480 U.S. 23, 35-36, 107 S.Ct. 980, 987 (1987).
Thus, in short, if the gambling is the taxpayer's full-time occupation, pursued with regularity, and from which he produces the income for a livelihood (i.e. from which he supports himself), the gambling would be a trade or business.
asegura: She did not get a W2 or 1099 form from Casino.
She should have kept good records of her winnings and losses. She'll need that should she get audited. If she has those records, then it is not necessary to wait for a W2-G or 1099 to prepare the return unless the casino withheld tax from any payout. ALL her winnings must be reported on her return whether or not the winnings are reported on a W-2G or 1099. Deliberately not reporting that gambling income could constitute tax evasion, a felony offense for the taxpayer and any tax preparer who knowingly assisted in that false reporting. W-2 and 1099 forms are required to be provided by January 31 but no penalty applies unless they are not provided by February 29, so the forms could end up arriving almost any time in February.
