Introduction to Taxable Jackpots
One of the most popular slot machine questions on Google searches is: How do slot machines payout taxable jackpots? I’ve assumed this question is about the mechanics of the payout process. A different upcoming post deals with explaining when slot machines payout.
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The Slot Machine Gambling Process
Once a player selects a specific slot machine, that machine operates to accept or reject the inserted cash, ticket voucher, and reward card.
Next, it accepts the player’s selection for denomination and amount of credits to be bet. However, it will merely reject one or both settings if insufficient funds are available to make such a bet.
When the bet is placed, the machine immediately selects the latest random number generated by its RNG to determine the outcome of the bet and update the players club card with the points earned for placing the bet.
At the end of this process, the machine turns the reels to show the outcome of the bet. See below for this player-machine sequence of events.
During slot machine gambling, a sequence of actions and reactions occurs between the player and machine. The player:
- selects a specific machine, inserts money in the form of cash or ticket voucher
- chooses from the denominations available
- selects the number of credits to bet
- places a bet
- observes the results of the bet including any bonus round
- receives winnings from the bet (if any)
- then, either:
- leaves the machine empty-handed
- cashes out any remaining funds and leaves with a ticket voucher
- continues playing the machine.
The player may choose to insert a player card at any time before or during play, then later remove it before leaving the machine.
Between determining the outcome of the bet and turning the reels, the machine executes programming code that sets the reels.
The reels turn in a way the machine’s game designers consider most entertaining to the player – such as stopping on reel symbols for non-wins next to the symbols for sizable jackpots.
As mentioned, the bet’s outcome is determined when the bet is placed, not when the reels stop moving, despite the player’s entertainment value when observing the slot machine’s “action”.
In the event of a win, the machine executes further programming to activate sequences of lights and sounds while updating the information display for the player, which is referred to as a roll-up.
Now What? – The Hand Pay Process
If a jackpot less than the taxable limit is won, slot players can proceed with continuing to play or cash out from that slot machine. The current taxable jackpot limit is $1,200 in the United States.
Meaning, if you have a win of $1,200.00 or more at a slot machine, there is an immediate tax bill resulting in an IRS Form W-2G. If you win $1,199.99 or less, there is no automatic tax bill.
Jackpots that require immediate payment of taxes results in the slot machine locking up.
Many slot players have been surprised by their slot machine locking up when a taxable jackpot is won. It can only be unlocked by a casino employee, e.g., a slot attendant.
A slot attendant will arrive shortly to administer a hand payout. During a hand payout, a slot attendant
- collects personal identification sufficient to both complete a tax form as well as any other state-required documentation
- performs the hand payout (if they have adequate cash on hand)
- unlocks the machine to allow the player to continue.
If the attendant is not carrying enough money with them, or if the player wishes to have a cashier’s check instead of a cash payout, the slot attendant leaves the player with a receipt and returns a short while later with the check or cash.
If the attendant leaves, they typically unlock the slot machine beforehand to allow the player to continue betting while waiting for the slot attendant to return.
Summary of Taxable Jackpots
The most important thing to remember about winning a jackpot is to make sure you’ve brought your government-issued I.D. If you don’t have it, you cannot receive a taxable jackpot.
Related Articles from Professor Slots
- How Slot Machines Work from a Player’s Perspective
- Keeping Gambling Records for Tax Preparation and More
Other Articles from Professor Slots
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