Casino and gaming operators and patrons alike should prepare for the implications of the OBBBA on reporting and due diligence for both U.S. and foreign patrons. The OBBBA includes important changes to Forms 1099 and W-2G reporting thresholds and gambling loss limitations that will have a significant impact on the gaming and casino industry, particularly the machine and system controls for brick-and-mortar operators. While casinos may be impacted by other changes under OBBBA, such as new Form 1099-K reporting thresholds and new tip and overtime reporting requirements, a discussion of these issues is beyond the scope of this article; please refer to our prior alert for details.
Specifically, for casinos, section 70433 of the OBBBA amends sections 6041(a) and 6041A(a)(2) to increase reporting thresholds for Form 1099-NEC, Nonemployee Compensation, and Form 1099-MISC, Miscellaneous Income, from $600 to $2,000, as well as the threshold for reporting income on Form W-2G for traditional winnings on games such as slots and bingo from $1,200 and $1,500 to $2,000. In addition to the changes in reporting, operators must also consider the bill’s other implications, including the reduction of the limitation of loss offsets to 90% of losses not to exceed winnings and a requirement for foreign patrons to provide an individual taxpayer identification number (TIN).
In response to these developments, gaming operators must quickly evaluate the plausibility of making significant modifications to their systems now while awaiting further federal guidance as well as guidance from states who may opt not to adopt the higher federal reporting threshold. This includes considering how they will flag payments and update policies for changes in reportable amounts, whether and how to track losses for customers and accounting for the impact of variances in state requirements on impacted machines and promotions.
Background and technical requirements
Section 70433 of the OBBBA amends sections 6041(a) and 6041A(a)(2) to increase the reporting threshold for Forms 1099-MISC (usually used to report prizes and promotional winnings) and 1099-NEC from $600 to $2,000 effective Jan.1, 2026, by explicitly striking the reporting threshold of $600 as referenced in these sections and replacing it to $2,000 as mandated by OBBBA. At the time of the bill’s publication, it was unclear whether OBBBA’s amendments to sections 6041(a) and 6041A support applying the higher $2,000 reporting threshold to Form W-2G reporting of slot machine, keno and bingo winnings since language in OBBBA does not explicitly strike the $1,200 reporting threshold for those games as referenced in governing sections of Reg. sections 1.6041-10 and 3402(q) which mandate reporting of certain winnings and any related withholding on Form W-2G. However, on Dec. 15, 2025, the IRS released draft instructions for Form W-2G, Certain Gambling Winnings. In the instructions’ ‘What’s New’ section, the Service clarifies that the threshold for reporting certain gambling winnings has increased to $2,000 and will be indexed for inflation going forward. Specifically, the draft instructions state that:
“For calendar years after 2025, the minimum threshold amount for reporting certain payments and backup withholding on certain information returns, including the Form W-2G, will be adjusted yearly for inflation. The minimum threshold amount for payments made in calendar year 2026 is $2,000.”
This new guidance from the IRS in the form of the draft instructions clarifies that adoption of the new $2,000 federal reporting threshold also applies to Form W-2G starting Jan. 1, 2026. However, casino and gaming operators should still evaluate their state reporting thresholds for congruity with the new federal threshold as most states have not issued guidance and may not adopt the higher federal reporting threshold. Additionally, the Treasury Office of Tax Policy also recently released the text of its 2025-2026 priority guidance plan, where the service indicates its plans to release regulations under sections 6041 and 6041A as well as the previously referenced instructions. Therefore, we recommend that operators proceed with caution pending issuance of further guidance and examine their current state thresholds when applying the federal reporting thresholds to their system.
If finalized, these changes will have major implications for daily casino operations, particularly in brick-and-mortar establishments with slots and other gaming machines. For example, it is a leading practice, when patrons win at physical machines, that play typically stops and the operator collects a TIN onsite and generates a form reporting the income. However, given timing, budgetary and resource constraints, it may be difficult for operators to update all machines or procedures before Jan. 1, 2026, or in sufficient time to apply the higher threshold consistently going forward. It also makes it difficult for casino operators to determine which slots and other gaming machines to update, often requiring a complete payout analysis. For this reason, some operators are considering updating only select machines before year end as it is simply too difficult to get to them all by years’ end. Others will postpone applying the higher reporting threshold this year pending final guidance from federal and state taxing authorities. While the IRS typically does not impose penalties for continuing to apply the lower reporting threshold across all machines pending issuance of final guidance from the states and additional guidance from the IRS, operators should be consistent with their approach.
Limit to gambling losses and impact on foreign players
Besides the updated reporting thresholds, another major change is the limitation on losses and allowable loss offsets which will cause major operational changes for casinos and professional gamblers. OBBBA limits loss deductions to 90% of losses up to winnings beginning with tax year 2026, effectively creating phantom income for players. For example, a player who wins $100,000, but has a loss of $100,000, will only be allowed to deduct $90,000 of said losses, creating $10,000 of phantom income.
Casino operators should consider updating their systems and processes for more timely and accurate tracking of wins, which will in turn ensure more accurate reporting of winnings by their organization and greater accuracy of related deductions for gambling losses reported by patrons on their personal tax returns. In addition, because of the limitation on losses and the related issue with phantom income, it is expected that more foreign patrons will need to file U.S. tax returns (i.e., Forms 1040-NR) to report gambling winnings or to claim refunds of any over withheld tax. Foreign patrons must have U.S. issued Individual Taxpayer Identification Numbers (ITINs) to file U.S. tax returns or to claim refunds. This requirement, coupled with the U.S. rollout of the Real ID program, will likely result in more foreign patrons needing assistance with applying for ITINs. This is especially true for foreign patrons who are tax residents of countries (such as Canada) that have income tax treaties with the U.S. that allow for loss offsets. For U.S. operators near international borders, a proactive step to ensure compliance is to act as an ITIN Certifying Acceptance Agent (CAA). A CAA is an agency authorized or licensed to assist with immediate application and issuance of an ITIN. With the passage of OBBBA, increased scrutiny should be expected with respect to the issuance of Forms 1042-S to foreign patrons as it relates to professional poker tournaments and slot winnings, which are allowed to be aggregated per session of play. Those already acting as a CAA should review their internal procedures to ensure they comply with IRS requirements. While operating as a CAA is beneficial for ensuring ITIN compliance, operators should also consider whether they have the correct compliance measures in place before applying for this status.
Other practical considerations for casinos and gaming operators
While reporting thresholds are at the forefront of operators’ thoughts, they must also consider the internal operational impacts of OBBBA. Casinos with restaurant operations, for example, must modify systems to track qualified tips and overtime. For online gaming platforms, OBBBA also reinforces transparency in payment flows processed through Third-Party Settlement Organizations (TPSOs). These transactions remain subject to Form 1099-K reporting when annual thresholds are met, requiring casinos to maintain accurate records of player payouts and settlement activity. Operators should implement robust reconciliation and vendor oversight procedures to ensure compliance with IRS reporting obligations and avoid penalties tied to underreporting or misclassification of gaming income. For additional information, please contact Aureon.Herron-Hinds@rsmus.com, Tamarah.Francois-Peek@rsmus.com or Mia.McCarthy@rsmus.com.
