Audit: Stores buying Michigan lottery tickets from players

Comment #41

Stack47 — Mon, 24 Nov 2014 21:34:04 GMT

The only difference between the lottery self serve vending machines and those at casinos is paying off in cash, vouchers, or tickets. Slot machines are programmed to stop functioning, except with all the bells and whistles when a must fill out a W2-G prize is won. And as you said, casinos will pay off accumulative winnings without requiring players to fill out W2-G.

If someone did have 100 winning pick-3 straight tickets, it would probably take much longer to get paid in full, but it could... [ More ]

Comment #40

chris-chase — Sun, 23 Nov 2014 13:15:01 GMT

100% agree. When you lose they don't give two $hits about you. So it should be the same when you win, right

Comment #39

chris-chase — Sun, 23 Nov 2014 13:09:11 GMT

Any Casino I have been to in Atlantic City or Parx in pa..when i won on a machine I cashed out on a self serv machine.

I have cashed out over $2000 on self serv machines meaning no teller or human interaction needed and also meaning no ID required.

The 2k I have won were all on individual tickets worth about $500 ea or less. Played either on a video roulette wheel or in AC on

an Airball (organic Roulette wheel) where there is no live dealer (croupier) at all.

With all that being sai... [ More ]

Comment #38

Stack47 — Sun, 23 Nov 2014 00:28:23 GMT

The first time I went to AC, I wondered why anyone would build mega casinos in a slum area and 15 years later is was still the same. The hand writing was on the wall when PA passed casino gambling legislation.

As you probably noticed, there is lots of casino gambling misinformation, but even though I've never been carded to play table games, it's possible. And speaking of misinformation, Before Ohio passed their casino legislation, people opened Internet caf s that were slot machines payin... [ More ]

Comment #37

Tami333 — Sat, 22 Nov 2014 02:18:09 GMT

A gas station owner on my way to work told me his lottery machine broke down WEEKS ago. Then it was the Satellite . I assumed the MSL replaces broken equipment but he told me they wanted $10K because he broke it. LOL! Now that this article was posted, I wonder if he was one of those retailers. He continues to tell me next week, next week. Well, when I noticed his scratch-offs started to disappear, it all makes sense now. Interesting

Comment #36

chris-chase — Sat, 22 Nov 2014 02:13:47 GMT

LottoMetro, yes you are correct. Except the casino part. I been to every casino in Atlantic City and Eastern Pa and was never once

asked for an ID unless a slot hit was over $1299 (if i remember correctly)...

As far as a players card...only a fool would use.

And as correct as you are as far as income goes, sure it it SUPPOSED to be reported. But then again so are those tax free internet purchases

made online supposed to be reported to your state (if your state has a sales tax) so you... [ More ]

Comment #35

Tami333 — Sat, 22 Nov 2014 01:59:43 GMT

Where are all the Michigan losers? I'll just be the first one to be honest I guess.

1) The Michigan State Lottery has a few grand of my money from all the 3-digits I lost on!

2) If I add up years of my generous contributions, I believe that I have purchased at least a dozen or so computers for Michigan Schools. (Hmm?)

3) Therefore, should I be so lucky to hit $500 on a few tickets, I have already paid my taxes, donated to schools, bought the executives dinner, etc.....and yes, I love t... [ More ]

Comment #34

Coin Toss — Sat, 22 Nov 2014 00:26:14 GMT

Stack47,

Atlantic City did a lot to ruin the business and what you described is part of it. And sadly most river boast casinos follow the AC model. the pit bosses are down in the lowest deck of the boat looking at computers and doing paperwork.

The floor calls down and says some one wants a $5,000 marker and the pit says, Who is this guy?

Sad.

No dealers don't ask for ID, dealers have enough to do just dealing the game. The floor asks, Would you like to have your play rat... [ More ]

Comment #33

LottoMetro — Fri, 21 Nov 2014 19:27:58 GMT

Yes, the retailer's winnings were reported to the IRS via W2-G as you said. The problem is the retailer's didn't put this W2-G information on their own tax returns. It would be like a casino issuing you a form with the information you are supposed to put on your tax return, but you ignore it.

Like I said, they had ongoing investigations into discounters and that's why they suspected them. It wasn't until after further digging that they discovered the issue was much more widespread than their... [ More ]

Comment #32

Stack47 — Fri, 21 Nov 2014 19:15:31 GMT

You keep saying the retailers didn't report their winnings, but their winnings were reported to the IRS on a W2-G when they cashed the tickets. It's pretty obvious some didn't buy all the tickets just based on the volume, but it doesn't prove they bought them at a discount so someone could avoid back taxes, child support or whatever.

And you're correct, it's not complicated because there is no W2-G issue on tickets valued undered $601 and without a paper trail impossible for the Michigan a... [ More ]

Comment #31

Stack47 — Fri, 21 Nov 2014 18:16:39 GMT

Everybody agrees that ID is required for cashing large amount of chips at the cage, but I asked if you as a Craps dealer was required to ask every player for ID before they could make a bet as Metro is suggesting.

The Resorts in AC began using hosts instead of pit bosses to comp their players in the 80s though the tables tracked the play. In some of the smaller casinos, bosses wear two hats and basically are still doing the same job bosses did back in the day . Today most of the large corp... [ More ]

Comment #30

LottoMetro — Fri, 21 Nov 2014 18:14:26 GMT

confused the auditors into believing the retailers must pay taxes on all the non-taxable tickets they cashed?

This didn't happen. The auditors said nothing about $600 prizes. The retailers who discounted reportable tickets did not report all of their reported winnings on their tax forms. That's it, not much more complicated than that. Guess I wasn't clear enough in my responses.

Btw the auditors' report is here: http://www.audgen.michigan.gov/finalpdfs/14_15/r271045013.pdf

You list gene... [ More ]

Comment #29

Stack47 — Fri, 21 Nov 2014 17:55:07 GMT

I did read the rest of your post and started wondering if we're discussing the same thing. If the average prize is about $3000, Federal law requires the Michigan Lottery to issue a W2-G for prizes over $600. In Michigan players with winning tickets valued $601 to $50,000 must go to a regional office, lottery headquarters, or a designated bank in the Northern part of the state and the Upper Peninsula. If you, me, a lottery retailer, or anybody buys a ticket valued over $601 at a discount, to coll... [ More ]

Comment #28

Coin Toss — Fri, 21 Nov 2014 01:19:14 GMT

The casinos requiring ID started with Regulation 6A. At first it was for any cash transaction over $10,000. Then the amount changed a few times.

Go to nvbar.org and do a search for Goodbye 6A Hello BSA.

As far as asking for personal information the casinos know they are in the ego business as much as the gaming business. The information requests are for marketing so then can send tournament invitations out, etc... ad nauseam. Every gambler thinks the are a 'good' player and that's wh... [ More ]

Comment #27

LottoMetro — Thu, 20 Nov 2014 23:29:59 GMT

I just re-read my response to the highlighted portion and realized it probably wasn't clear:

They likely determine it by as I said, a record comparison. If Bob reported income of $100,000 but the lottery says he won $200,000, he obviously didn't report $100,000 in winnings. At the very least he should have reported $200,000 in income, showed an offset of $100,000 for AGI of $100,000 (minus std. deductions of course but you get the idea). The methodology isn't in the report, just the findings.... [ More ]

Comment #26

LottoMetro — Thu, 20 Nov 2014 21:58:26 GMT

How exactly did auditors determine the $509,211 was gambling winnings and how did they know it wasn't reported on the store owner's 1040?

The prizes that these owners were cashing were not little $500 prizes. If you read the rest of my post, you should have seen where I mentioned the average prize was about $3,000. Who knows how many little prizes the owner's cashed but didn't report. What they DO know is that lottery records showed prizes claimed by these owners that were not reported on the... [ More ]

Comment #25

Stack47 — Thu, 20 Nov 2014 21:50:45 GMT

If you mean including it on their taxes, I don't believe this is true at all.

Some stores cash tickets all day long in amounts under $600 and most probably don't require players to sign the back of winning ticket. The auditors only know the store cashed tickets worth an amount, but don't know who was paid.

I don't think the auditors are stupid. The store owners didn't report $509,211 in winnings on their tax forms.

How exactly did auditors determine the $509,211 was gambling winnings... [ More ]

Comment #24

Stack47 — Thu, 20 Nov 2014 20:46:39 GMT

I'm starting to wonder if all of us are discussing different topics because as you said, there is a huge difference between cashing $509,000 worth of tickets and cashing one ticket worth that amount. I just handed a clerk a Keno bet slip that cost $12 and then handed him a Keno ticket worth $18 and he paid me $6. Some people will say I won $6 by forgetting or ignoring I was out $12 before the transaction. The IRS requires us to report gambling winnings and that usually means winnings that requir... [ More ]

Comment #23

LottoMetro — Thu, 20 Nov 2014 18:12:33 GMT

You're exactly right, and this is part of the reason I mentioned net winnings.....in all likelihood there will only be a few people who would ever fall into this category.

It kinda boils down to the ethics and technicality of it; the reality is that most people either wouldn't know or care that X beyond your deductions is actually taxable.

I mean, if I won a bunch of Pick3 pairs would I reallllly go out of my way to pay Uncle Sam? Does the IRS care about a small fry? Probably not. Most lik... [ More ]

Comment #22

Uluska — Thu, 20 Nov 2014 18:01:34 GMT

Stores are probably scaring their lottery buyers purposefully and unnecessarily. I mean, many debts, like for mortgage, for example, long cancelled if they are over 7 years old. Also, if one won million they can easily cover their debts. Of course, if those people ow millions, they don't even need to win lottery.

Comment #21

Growler — Thu, 20 Nov 2014 17:43:39 GMT

LottoMetro, I've read through this interesting thread. I have no doubt you are correct, but I am thinking, from a player's (as opposed to lottery retailer's) perspective, it is highly unlikely anyone would have more than a handful of $500 or so wins that don't have to be reported, throughout the calendar year. And if someone did, say, buy 100 one-dollar pick 3's straight for a single draw, and hit it -- if they were crafty enough about it -- ie.. buying from multiple locations, etc. -- and cashe... [ More ]

Comment #20

LottoMetro — Thu, 20 Nov 2014 14:23:39 GMT

From the original report (emphasis added):

Although the Bureau reported the retail owners' winnings to the Department of Treasury for income tax reporting purposes, 6 (40%) of the 16 20/20 winners for calendar year 2012, who were licensed lottery retail owners, did not report $509,211 of their lottery prize winnings on their State income tax returns for calendar year 2012. Section 206.30(6) of the Michigan Complied Laws indicates that lottery prize winnings must not be excluded from a taxpay... [ More ]

Comment #19

LottoMetro — Thu, 20 Nov 2014 13:58:57 GMT

Lottery retailers cash tickets for the lottery and any unreported winnings (under $600) is included with all the tickets.

Are you a lottery retailer? If you mean including it on their taxes, I don't believe this is true at all. It isn't in my state at least. If you can provide documentation or some clarification on that it would be great.

I don't think the auditors are stupid. The store owners didn't report $509,211 in winnings on their tax forms. Not their sales forms. Not winnings of oth... [ More ]

Comment #18

GAman03 — Thu, 20 Nov 2014 11:15:39 GMT

Stack47 you can win $100,000 for many small wins under $500 without paying taxes. You can win for $509,000 without paying taxes. As long as they are from winnings under $500. Michigan Auditors should dip their noses into finding work for people in the State. They should stop making up jobs to keep themselves in business. Their investigations are so bogus.

Comment #17

GAman03 — Thu, 20 Nov 2014 11:03:44 GMT

If you hit for $500, taxes are already taken out. You can hit under $500 as many times as you wish and not be taxed. Technically state lottery should payout $1,000 for cash 3 winners instead of $500. The government get their 50% before you get your money.

Anything under $500 is not taxable so I agree with Stack. Any smart player would not mark the same straight or straight/box bet on the same cash 3 or 4 ticket. Anything on the same ticket over $500 is taxable.

In all reality, player... [ More ]

Comment #16

Stack47 — Thu, 20 Nov 2014 07:09:41 GMT

Lottery retailers cash tickets for the lottery and any unreported winnings (under $600) is included with all the tickets. The audit is implying every ticket cashed belongs to the store and the owners are taxed on that amount.

And none of casinos required ID to cash out my chips. Where did you see that most casinos require ID

Comment #15

LottoMetro — Thu, 20 Nov 2014 04:49:54 GMT

I don't disagree that one or two $500 wins wouldn't subject you to tax; however, it is simply wrong that many MULTIPLE $500 wins accumulating a taxable amount would not be subject to tax (which is what your original post was saying in response to the hundreds of thousands not reported by the retailers).

I'm not sure why you don't understand this. It is taxed as regular income. If you get a paycheck of $500 a week, do you then say that isn't taxable? It doesn't matter if you chop it into littl... [ More ]

Comment #14

VenomV12 — Thu, 20 Nov 2014 04:23:33 GMT

I made it pretty clear in my original post that I was talking about wins in amounts under $500 that would not be subject to tax or any kind of documentation. Casinos kind of sort of require IDs but that has no bearing on what you win and if it is taxed. You don't have to have a player's card as a requirement at any casino that I have ever been to and even then I have no idea how much information the player's cards have and if the IRS even has the right to the access of the info on them seeing as... [ More ]

Comment #13

LottoMetro — Thu, 20 Nov 2014 03:08:44 GMT

In your original post, you said, that is not taxable, in reference to a large accumulation of small wins.

I showed the contrary, and that was really the only purpose of my post. If you win any sum of measurable amount you will have to put it through the system at some point, and that is where they would nab you. The saying goes, even drug dealers pay their taxes. The IRS is not one to mess with.

You, like most casino/lottery players, may win $100 here and there, but at the end of the day,

Comment #12

VenomV12 — Thu, 20 Nov 2014 02:40:45 GMT

Once again, still not true, only technically. If I win scratchoffs or jackpots that are under $500, I will get cash in my hand from the retailer and no one is the wiser. If you are not intelligent, you will deposit in the bank and file it with the IRS, but that is your choice and your problem. You can go to the casino everyday, win $100 and there is no documentation or paper trail which will require you to pay any taxes, and that is reality. If I win $100 on a scratchoff, I walk in, hand the ret... [ More ]

Comment #11

Coin Toss — Thu, 20 Nov 2014 01:07:41 GMT

This sounds like a bizarre twist on the old I can't cash the ticket I'm an illegal scam, except that there is a payoff.

Sounds like some Michigan lottery retailers are the J C Wentworth of lotto

Comment #10

Stack47 — Wed, 19 Nov 2014 22:41:34 GMT

Without much proof, other state agencies are assuming all the tickets are being cashed at a discount. We really can't expect buyers to pay the winner the full value of a ticket before state and federal taxes are deducted. But that doesn't change the fact the taxes will eventually be deducted so it's not the tax people complaining.

Either I missed the memo saying our personal income tax returns which includes our SS number, are now public record or there is no way of knowing if the lottery... [ More ]

Comment #9

LottoMetro — Wed, 19 Nov 2014 22:33:36 GMT

If I won a $100,000 in prizes from scratch-off tickets, as long as they are under $500, I am under no obligation to report my winnings to anyone, just like if you went to the casino, put $10 in the machine and won $100.

This is simply incorrect. Gambling winnings are taxed as regular income. This means that if you won $100,000 during the year, you owe taxes on $100,000, regardless the size or frequency of your individual wins. The lottery/casino is only required by law to withhold a certain p... [ More ]

Comment #8

VenomV12 — Wed, 19 Nov 2014 22:03:41 GMT

This is what makes no sense. If you win anything over $500 it has to be claimed at the Lottery Office and taxes are taken out before hand, anything under that can be cashed by the retailer and that is not taxable, therefore that $509,211 had to be lottery winnings that were not taxable to begin with, prizes under $500, therefore the government would be illegally trying to get tax money that they were not entitled to in the first place.

If I won a $100,000 in prizes from scratch-off tickets,

Comment #7

VenomV12 — Wed, 19 Nov 2014 21:53:54 GMT

The State better watch it before the retailers cut them off at the knees, that's who holds the real power with the lottery. Most if not all stores could stop selling lottery tomorrow and it would have little to no effect on their bottom lines. If you sell a $1 bag of chips you make 50 cents before all expenses. In comparison if you sell a $1 lottery ticket, you make 6 cents before expenses. The State is getting their money, the government is getting their taxes which they really should not since... [ More ]

Comment #6

noise-gate — Wed, 19 Nov 2014 16:52:34 GMT

..13 Retailers were disciplined during the Audit. Oh Boy that had to hurt!!

*Scene at home..

Wife: Honey l know you did not get much sleep last night due to your meeting with the Auditors- how did that go?

Husband: Rather well my love- we were disciplined!

Wife: Well what exactly does that mean?

Husband:Well l interpreted it to mean that our actions have caught the attention of the lottery Commission. .

Wife: So we stop altogether?

Husband: No, just be cautious moving forw... [ More ]

Comment #5

Get paid — Wed, 19 Nov 2014 15:34:26 GMT

The only way they can combat this is to make it illegal until then people owing the goverment thousands in taxes,the same in chid support,will continue to do it,because its not illegal.

Comment #4

LottoMetro — Wed, 19 Nov 2014 06:13:39 GMT

Perhaps discounting is legal in the general sense, but it is still against lottery regulations which makes it illegal in terms of the retailer's agreement. So essentially, a breach in contract that would leave the door open for a lawsuit from the state. Not to mention aiding tax evasion, but that would be difficult to prove.

This takes the cake though:

Six store owners didn't report $509,211 in lottery winnings on their 2012 tax forms.

If they are not reporting winnings on their taxes... [ More ]

Comment #3

Stack47 — Wed, 19 Nov 2014 05:42:09 GMT

They already know which retailers and forgot it's not against the law to purchase a lottery ticket for less than face value. I never did it, but if someone offered me a legitimate pick-4 $5000 winning ticket for $2000, I probably would.

There sure are lots of state agencies and reporters trying to get their five minutes of fame on something that is apparently legal.

Comment #2

RJOh — Wed, 19 Nov 2014 04:45:01 GMT

We recommend that the (Lottery) Bureau sufficiently identify and investigate lottery retail owners who repurchased winning lottery tickets, likely at a discount, the Office of the Auditor General said.

The Office of the Auditor General didn't say who was going to pay for the identification and investigation work. Does he expect the lottery to pay for it out of their profits and pass the benefits to other state departments who job it is to do that

Comment #1

MzDuffleBaglady — Wed, 19 Nov 2014 04:31:10 GMT

Wow

Audit: Stores buying Michigan lottery tickets from players

Lottery Post — Wed, 19 Nov 2014 03:13:02 GMT

Some Michigan stores that sell lottery tickets are hitting the jackpot by buying winning tickets from desperate players at a discount, according to auditors who are urging a crackdown on the illegal practice.

Lottery players who owe back taxes or other debts don't want the state to learn their identity. So they're probably selling winning tickets back to retailers for less than what they're worth, the audit found.

An audit released Tuesday said 37 store owners turned in winning tickets wor... [ More ]