TAX-EXEMPT ORGANIZATIONS AND GAMING Publication 3079 (Rev. 10-2018) Catalog Number 25706L Department of the Treasury Internal Revenue Service www.irs.gov
| TAX-EXEMPT ORGANIZATIONS AND GAMING Publication 3079 (Rev. 10-2018) Catalog Number 25706L Department of the Treasury Internal Revenue Service www.irs.gov |
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Introduction
Saturday night bingo in the church hall, one-armed
bandits in the social club, video lottery at the veterans’
club, poker night at the fraternal lodge – these are ex-
1
amples of gaming – sometimes called gambling – by
organizations exempt from federal income tax.
For many years now, exempt organizations have operated these and many other
types of games as a part of their activities. Why do organizations “game”?
Probably the number one reason is to raise funds – either to help cover the
cost of running their organizations or to support worthy causes. For some
organizations, gaming also permits its members to socialize with each other
and fosters fellowship.
Whatever the reason, an organization conducting any type of gaming should
understand the relationship between that activity and its exempt purposes,
and how the activity can impact its federal tax-exempt status. An organization
engaged in gaming activities also needs to understand its tax and informa-
tion reporting responsibilities. This publication provides an exempt organization
with the information it needs to engage in gaming activities in a manner that will
not jeopardize its exempt status or lead to unexpected tax liabilities, whether
the organization is currently running games or is considering whether to start.
Note: Many states and localities regulate gaming by exempt organizations. This
publication does not address state or local gaming licensing requirements. For
licensing requirements, please consult the appropriate agencies in your locale.
1 Gaming includes (but is not limited to): bingo, pull-tabs/instant bingo (including satellite and internet bingo), Texas
Hold-Em poker and other card games, raffles, scratch-offs, charitable gaming tickets, break-opens, hard cards, banded
tickets, jar tickets, pickle cards, Lucky Seven cards, Nevada Club tickets, casino nights, Las Vegas nights and coin-op-
erated gambling devices. Coin-operated gambling devices include slot machines, electronic video slot or line games,
video poker, video blackjack, video keno, video bingo, video pull-tab games and so on.
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CHAPTER 1
Table of Contents
Chapter 1 Gaming’s Impact on Tax-Exempt Status 3
Chapter 2 Gaming and Unrelated Business Income 6
Exhibit A Is It Unrelated Business Taxable Income? 10
Chapter 3 Maintaining Records 11
Chapter 4 Exempt Organizations Reporting Requirements 12
Chapter 5 Workers Conducting Gaming Activities 13
Chapter 6 Reporting Winnings and Withholding Income Tax 18
Chapter 7 Gaming Excise Taxes 22
Exhibit B General Tax Calendar for Organizations That Conduct Gaming 26
Exhibit C Summary of Forms, Publications and Other Resources for
Organizations Conducting Gaming 31
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CHAPTER 1
Chapte
Gaming’s Impact on Tax-Exempt Status r 1
This chapter explores the impact of gaming on an organization’s tax-exempt status according to the section of the Internal
Revenue Code (IRC) under which it is exempt. Chapter 2 explores when an organization’s gaming might give rise to income
tax liability. You should refer to your organization’s exemption letter from the IRS to determine the subsection under which
youare recognized as exempt. If you do not have a copy of your organization’s letter, you can call IRS Tax Exempt and Govern-
ment Entities Customer Account Services at 877-829-5500 (toll-free) to request a copy or to determine your organization’s
subsection.
Gaming, itself, does not further the exempt purpose of most organizations. In general, when gaming does not further the
organization's exempt purpose, gaming is no different than the conduct of any other trade or business carried on for profit.
In most instances, gaming's contribution to the operations of an exempt organization is generation of funds to pay expenses
associated with the conduct of the organization's exempt activities.
The exceptions to the general rule (that gaming does not usually further an exempt purpose) include organizations whose ex-
empt purposes include social or recreational activities. For these organizations, gaming itself may further an exempt purpose.
For more information on specific subsections, see the following summaries and Publication 557, Tax-Exempt Status for Your
Organization.
Section 501(c)(3) – Charities, Schools, Churches and Religious Organizations
An organization may qualify for exemption under IRC Section 501(c)(3) if it is organized and operated exclusively for reli-
gious, charitable, scientific, literary or educational purposes or for the purposes of testing for public safety, fostering national
or international amateur sports competition or preventing cruelty to children or animals. To be exempt under Section 501(c)
(3), an organization must engage in activities that accomplish one or more of these purposes. Examples of Section 501(c)(3)
organizations include schools, churches and non-profit hospitals.
A common misconception is that gaming is a “charitable” activity. There is nothing inherently charitable about gaming. It is a
recreational activity and a business. Although a charity may use the proceeds from gaming to pay expenses associated with
its charitable programs, gaming itself does not further any charitable purpose. Thus, gaming cannot be a more than an insub-
stantial purpose of a 501(c)(3) organization.
In addition, a Section 501(c)(3) organization must not be organized or operated for the benefit of private interests, such as the
creator or the creator’s family, shareholders of the organization, other designated individuals or persons controlled directly or
indirectly by such private interests. No part of the net earnings of a Section 501(c)(3) organization may inure to the benefit of
any private shareholder or individual. An2organization puts its exempt status in jeopardy when gaming results in inurement or
prohibited private benefit to individuals, or where funds from the activity are diverted for private purposes.
A charity conducting gaming as an insubstantial part of its activities will not ordinarily jeopardize its tax-exempt status but may
be subject to the tax on unrelated business income. See Chapter 2.
The IRS determines whether an organization is conducting a “substantial” unrelated activity by examining all the facts and
circumstances. There is no “bright-line” or numerical test prescribed by the IRC. The IRS will consider the dollars raised by
and spent on an unrelated activity as well as the time and other resources devoted to it in making the determination of sub-
stantiality.
Every 501(c)(3) organization has a second important tax classification: It is either a private foundation or a public charity.
Certain types of organizations – schools, hospitals and churches, among others – are specifically listed in the IRC as public
charities. Many organizations, however, must show and maintain a broad base of financial support from the public to be clas-
sified as public charities. If these organizations receive too much of their financial support from a limited number of sources
or from an unrelated trade or business, such as gaming, they may fail the “public support” test and be classified as private
foundations.
If an organization is classified as a private foundation because its sole source of support is from an unrelated trade or business,
it will have excess business holdings in a business enterprise within the meaning of IRC Section 4943(a)(1), and the organiza-
tion must divest itself of them. Generally, the organization must cease to operate its gaming activities (or at least substantially
restructure its operations and sources of support).
For more information about foundation classification, the public support tests for certain public charities and the special tax
2A private shareholder or individual is a person having a personal and private interest in the activities of the organization.
Chapter 1 - Gaming’s Impact on Tax-Exempt Status 3
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rules that apply to private foundations, see Publication 557, Tax-Exempt Status for Your Organization.
Section 501(c)(4) – Social Welfare Organizations
Section 501(c)(4) organizations promote social welfare. These types of organizations are sometimes called civic leagues.
CHAPTER 1 They operate primarily to further the common good and general welfare of the people of a community through civic betterment
and social improvements. No part of a Section 501(c)(4)’s net earnings may be used to benefit any private shareholder or
individual. An organization puts its exempt status in jeopardy when gaming revenue is diverted for private purposes. Examples
of social welfare organizations include civic leagues, volunteer fire companies and homeowners’ associations.
Gaming is considered both a business and a recreational activity; it does not ordinarily promote social welfare. For example,
Revenue Ruling 66-150 holds that a 501(c)(4) organization whose primary activity was to operate a social facility (including
a bar, restaurant and game room) is not exempt under Section 501(c)(4). Therefore, a Section 501(c)(4) organization whose
primary activity is gaming may jeopardize its exempt status.
In very limited situations, however, a social activity such as gaming may be considered a social welfare activity. The volunteer
fire company described in Rev. Rul. 74-361, provided a club room for both on and off duty members of the department when
they were not otherwise engaged in fire calls. The facility was not open to the public. Access to the social club served to in-
crease camaraderie of the firefighters and encouraged better performance of the department, thus promoting social welfare.
Provided that the organization’s primary purpose is the promotion of social welfare, the conduct of gaming will not ordinarily
jeopardize its tax-exempt status, but its gaming income may be subject to the tax on unrelated business income.
Section 501(c)(5) and 501(c)(6) – Labor and Agricultural Organizations and Business Leagues
Section 501(c)(5) describes labor, agricultural and horticultural organizations. Their exempt purposes include bettering the
conditions of workers, improving the grade of products and/or developing a higher degree of efficiency in a particular occu-
pation. Section 501(c)(6) organizations are devoted to the improvement of conditions of one or more lines of business. Like
Section 501(c)(3) and Section 501(c)(4) organizations, inurement of any part of the net earnings of a Section 501(c)(5) or
Section 501(c)(6) organization to the benefit of any private shareholder or individual jeopardizes its exemption.
Gaming does not further the exempt purposes of any of these types of organizations. Thus, an organization exempt under Sec-
tion 501(c)(5) or 501(c)(6) may jeopardize its exemption if gaming becomes the organization’s primary activity. Even if the
activity does not jeopardize the organization's exempt status, and the gaming income may be subject to the tax on unrelated
business income.
Section 501(c)(7), 501(c)(8) and 501(c)(10) – Social Clubs and Fraternal Organizations
The exempt function of organizations classified under these sections includes providing social and recreational activities for
members and their bona fide guests. Thus,3social clubs and fraternal organizations may engage in gaming involving only
members without jeopardizing their exempt status.
Gaming open to the public does not further the exempt purposes of social clubs or fraternal organizations. Section 501(c)(7),
501(c)(8) and 501(c)(10) organizations whose primary activity is public gaming jeopardize their exempt status and the gaming
income may also be subject to the tax on unrelated business income.
Section 501(c)(7) social clubs endanger their exempt status when receipts from nonmembers – including those from gaming
activities – exceed certain thresholds. A social club may receive no more than 35 percent of its gross annual receipts (includ-
ing investment income) from sources outside of its membership. Within that 35 percent, no more than 15 percent of gross
receipts can come from the public’s use of club facilities or services. If those limits are exceeded, the club’s exempt status
may be in jeopardy.
Section 501(c)(19) – Veterans’ Organizations
This subsection describes posts or organizations of past or present members of the U.S. Armed Forces. To qualify for ex-
emption under Section 501(c)(19), at least 75 percent of the members must be past or present members of the U.S. Armed
Forces and at least 97.5 percent of all members must be past or present members of the U.S. Armed Forces, cadets (including
only students in college or university ROTC programs or at armed services academies) or spouses, widows, widowers, ances-
tors or lineal descendants of past or present members of the U.S. Armed Forces or of cadets. In addition to these membership
requirements, a veterans’ organization must be operated for one or more of the following purposes:
To promote the social welfare of the community.
To assist disabled and needy war veterans and members of the U.S. Armed Forces and their dependents and the
widows and orphans of deceased veterans.
4 Chapter 1 - Gaming’s Impact on Tax-Exempt Status
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CHAPTER 1
3 For Section 501(c)(7), 501(c)(8), 501(c)(10) and 501(c)(19) organizations, the term “bona fide guests” is generally defined as individuals whom the
member invites and for whom the member pays. If, for example, a nonmember pays for his or her own wagers in gaming activities, he or she is considered
to be a member of the public and not a guest, even though he or she may have entered the organization’s premises with a member. Also, if an organization
requires only a nominal payment to join as a “member,” individuals making this payment to gain admission to the organization’s facilities or activities may not
be considered members or bona fide guests.
To provide entertainment, care and assistance to hospitalized veterans or members of the U.S. Armed Forces.
To carry on programs to perpetuate the memory of deceased veterans and members of the Armed Forces and to
comfort their survivors.
To conduct programs for religious, charitable, scientific, literary or educational purposes.
To sponsor or participate in activities of a patriotic nature.
To provide insurance benefits for its members or dependents of its members or both.
To provide social and recreational activities for its members.
(Note: Some older veterans’ organizations hold exemption as 501(c)(4) social welfare organizations. A veterans' organization
that is unsure of the IRC section it is classified under in IRS records should contact Customer Account Services at 877-829-
5500.)
Gaming that is limited to members and bona fide guests furthers a 501(c)(19) veterans’ organization’s social and recreational
purposes. However, if a 501(c)(19) organization permits the public to participate in its social and recreational activities
– including gaming – the activity does not further an exempt function.
Veterans’ organizations may endanger their exempt status if a social or recreational activity open to the public becomes a
primary activity of the organization. If a social or recreational activity (such as gaming) that is open to the public is not the
primary purpose of a veterans’ organization, exemption will not be jeopardized, but the gaming income may be subject to the
tax on unrelated business income.
In addition, inurement of any part of the net earnings of a Section 501(c)(19) organization to the benefit of any private share-
holder or individual jeopardizes its exemption.
For more information about veterans’ organizations, see Publication 3386, Tax Guide – for Veterans’ Organizations.
Section 527 – Political Organizations
A political organization exempt under IRC Section 527 is organized and operated primarily for the purpose of directly or
indirectly accepting contributions or making expenditures to influence or attempt to influence the selection, nomination,
election or appointment of an individual to a federal, state or local public office.
Generally, political organization income (including contributions and proceeds from political fundraising or entertainment
events) is not subject to federal income tax, as long as the income results from events that are political in nature and not
carried on in the ordinary course of a trade or business. One factor that indicates an event is “political” is the extent to which
it is related to a political activity aside from the need of the organization for income or funds.
Political organizations might conduct raffles to raise funds. In general, the proceeds from a raffle are taxable unless the raffle
is conducted during a political fundraising or entertainment event. Where there is no evidence that the sale of raffle tickets is
closely related to a political event, the IRS will generally conclude that revenue is taxable income.
Income from bingo may be exempt function income for political organizations, provided it is segregated for use for an exempt
(political) function. To be exempt, the game from which the income is derived must meet the requirements for the statutory
bingo exclusion described in Chapter 2.
Chapter 1 - Gaming’s Impact on Tax-Exempt Status 5
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Gaming and Unrelated Business Income
An exempt organization is not taxed on income from an activity that is substantially related to its exempt purposes even if that
activity is a trade or business. However, if an exempt organization regularly carries on a trade or business that is not substan-
tially related to its exempt purpose, except that the trade or business provides funds to carry out that purpose, income from
the unrelated trade or business may be subject to tax. As explained in Chapter 1, gaming is considered related to an organiza-
tion's exempt purpose only in specific circumstances. As a general rule, gaming is considered unrelated to exempt purposes.
Chapte This chapter provides an overview of the unrelated business income (UBI) tax and the exclusions from that tax. See Publication
r 2 598, Tax on Unrelated Business Income of Exempt Organizations, for a more in-depth discussion of the unrelated business
income tax and additional information about filing requirements and computing unrelated business income.
CHAPTER 2 4
The following three conditions must be met before an activity may be classified as an unrelated trade or business:
1. The activity must be considered a trade or business;
2. The activity must be regularly carried on; and
3. The activity must not be substantially related to the organization’s exempt purpose. (The fact that the activity gener-
ates income for the organization to spend on its charitable programs does not make the activity related to the orga-
nization’s exempt purpose.)
When will gaming generate UBI? Let’s look at each of the three parts of the definition in relation to gaming.
First, gaming is generally considered a “trade or business” if it generates revenue.
Second, gaming is considered “regularly carried on” if it is conducted with a frequency and continuity similar to comparable
activities of a non-exempt organization and if pursued in a manner similar to commercial gaming activities. Gaming activi-
ties will not ordinarily be treated as regularly carried on if they occur only occasionally or sporadically. For example, gaming
conducted only at an annual fundraising event is not regularly carried on. On the other hand, gaming that occurs weekly is
considered to be regularly carried on.
Third, gaming is generally not an exempt activity. As discussed in Chapter 1, whether gaming is substantially related to an
organization’s exempt purposes will depend on the classification of the exempt organization, and the circumstances under
which the activity is conducted.
Even if a gaming activity meets the three conditions above, some UBI exceptions may apply. These include:
• Certain bingo games;
• Activities conducted with substantially all volunteer labor;
• Qualified public entertainment activities; and
• Games of chance conducted in North Dakota.
These exceptions are explained below in more detail. In addition to these exceptions, gaming does not generate taxable in-
come when it actually furthers the exempt purposes for which an organization exists. This can be the case for membership
organizations (generally, Section 501(c)(7), 501(c)(8), 501(c)(10) and 501(c)(19) organizations), as explained in Chapter 1.
Bingo
Certain bingo games are not included in the term “unrelated trade or business.” To qualify for this statutory bingo exclusion, a
game must:
• Meet the definition of bingo under the IRC and Regulations;
• Not violate state or local law where it is played; and
• Be played in a jurisdiction where bingo games are not regularly carried on by for-profit organizations.
Bingo is defined in the IRC and Regulations as a game of chance played with cards that are generally printed with five rows of
five squares each. Participants place markers over randomly called numbers on the cards in an attempt to form a pre-selected
pattern such as a horizontal, vertical or diagonal line or all four corners. The first participant to form the pre-selected pattern
wins the game. In addition, for a game to meet the legal definition of bingo, wagers must be placed, winners must be deter-
mined and prizes or other property must be distributed in the presence of all persons placing wagers in that game.
4 Social clubs exempt under Section 501(c)(7) are treated differently under the UBI tax rules. See the separate discussion on Unrelated Business Income
Tax and Section 501(c)(7) Social Clubs on page 8.
6 Chapter 2 - Gaming and Unrelated Business Income
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A wagering game that does not meet the definition of bingo under the IRC and Regulations does not qualify for the exclusion
regardless of its name. For example:
Satellite and internet bingo do not qualify because these games are conducted in many different places simultane-
ously and those placing wagers are not all present when the wagers are placed, the winners are determined and the
prizes are distributed.
CHAPTER 2
“Instant Bingo,” “Mini Bingo” and similar pull-tab or scratch-off games do not qualify. In these games, a player places
a wager by purchasing a card containing pre-printed numbers or a pattern covered by tabs or film. By uncovering the
numbers or pattern, the player discovers whether the card is a winner. Unlike bingo meeting the exclusion, the winners
of these games are pre-determined.
The bingo exclusion applies only if the game is legal under the laws of the jurisdiction where it is conducted. Even if a
jurisdiction rarely enforces or generally disregards a law prohibiting bingo, the conduct of bingo is not legal for this purpose.
The bingo exclusion applies only if for-profit organizations cannot regularly carry on bingo games in any part of the same juris-
diction. Jurisdiction is normally the entire state; however, in certain situations, local law may control.
Example: Church Z, a tax-exempt organization, conducts weekly bingo games in State O. State and local laws in State O
expressly provide that bingo games may be conducted by tax-exempt organizations. Bingo games are not conducted in State
O by any for-profit businesses. Because Z’s bingo games are not conducted in violation of state or local law and are not the
type of activity ordinarily carried out on a commercial basis in State O, Z’s bingo games qualify for the exception from an un-
related trade or business.
Because of the statutory bingo exclusion, an exempt organization may conduct games meeting the exclusion to raise funds,
and the activity will not generate unrelated business income subject to taxation. (The exception does not apply to 501(c)(7)
social clubs. See below.)
Volunteer Labor
Does your organization use volunteers to conduct its gaming? Even if gaming is not limited to bingo games that meet the
bingo exclusion, the gaming will not be considered an unrelated trade or business – and the income earned from it will not
be taxed – if substantially all the work is performed by volunteers. Although “substantially all” is not defined in this context,
an unofficial guideline borrowed from other areas of exempt organization law is 85 percent. Absent other factors, if at least
85 percent of the work (as measured by the number of hours
worked) is carried on by people who work without pay and no
more than 15 percent of the work is carried on by people who
are compensated, as a general rule, "substantially all" work will Tip: If you rely on the volunteer labor exclu-
have been performed by volunteers. sion to exclude gaming from unrelated trade or
business, you should maintain accurate records
Example: A volunteer fire company regularly holds a slot ma- reflecting the number of hours worked by com-
chine night that is open to the public. Regularly holding public pensated and volunteer workers.
slot machine nights may, given the facts and circumstances, be
considered unrelated trade or business. However, because un-
paid volunteers performed the work at the slot machine night,
the income from the wagering is not taxable as unrelated business income.
“Compensation” is interpreted broadly and may include payments to bartenders, waitresses, snack bar staff, maintenance
workers, security and other workers, as well as the tips these workers receive from patrons at the gaming session. Workers
who obtains good or services at a reduced price in return for their services may be considered to be compensated.
Example: ABC Organization operates a private school and sponsors gaming to raise revenue for the school. Parents who
work at the gaming session are given a tuition reduction of $50 for each week they work. This reduction of tuition is compen-
sation to the parents; they are not working as “volunteers.”
Compensation may also include non-monetary benefits, such as free drinks or food, if the items are more than a mere gratu-
ity and are intended to be compensation for the workers’ services. On the other hand, a worker who receives insignificant
monetary or non-monetary benefits is considered a volunteer, not a compensated worker. Determining whether a benefit is
insignificant requires consideration of the value of the benefit and:
The quantity and quality of the work performed;
The cost to the organization of providing the benefit; and
The connection between the benefit received and the performance of services.
Chapter 2 - Gaming and Unrelated Business Income 7
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Note that the volunteer labor exclusion is separate from the bingo exclusion. Thus, if gaming satisfies the bingo exclusion, the
bingo income is not taxed even if workers are paid, as long as state or local law does not prohibit payment. Many jurisdictions,
however, require as a condition of receiving a gaming license that exempt organizations conduct their gaming activities with
all volunteer labor. If an exempt organization violates the requirement by compensating its bingo game workers, then the bingo
exception would not apply if the payment made the game illegal under state law.
Compensation includes tips. If tipping is allowed, the exception for volunteer labor may not apply. Many jurisdictions prohibit
tipping at gaming venues. When the organization conducts bingo, the bingo exclusion may not apply if tipping occurs in viola-
tion of the jurisdiction’s prohibition.
Qualified Public Entertainment
CHAPTER 2 Income from qualified public entertainment activities is also excluded from the definition of unrelated business income. A
“public entertainment activity” is one traditionally conducted at a fair or exposition promoting agriculture and education, includ-
ing any activity whose purpose is designed to attract the public to fairs or expositions or to promote the breeding of animals
or the development of products or equipment. A “qualifying organization” is an organization exempt under Section 501(c)
(3), 501(c)(4) or 501(c)(5) that regularly conducts an agricultural and educational fair or exposition as one of its substantial
exempt purposes.
To be excluded from the term “unrelated trade or business,” a public entertainment activity must be conducted by a qualifying
organization:
In conjunction with an international, national, state, regional or local fair or exposition;
In accordance with provisions of state law that permit only qualifying organizations (or an agency, instrumentality or
political subdivision of the state) to conduct the activity; or
In accordance with provisions of state law that permit a qualifying organization to be granted a license to conduct the
activity for 20 days or less on payment to the state of a lower percentage of the revenue from the licensed activity
than is required from non-qualifying organizations.
Example: Organization X, a 501(c)(5) agricultural organization, conducts harness racing at an agricultural fair in State L
pursuant to a state law that permits the organization to conduct parimutuel betting in connection with the races. Income from
wagers placed is excluded from the tax on unrelated business income.
Games of Chance Conducted in North Dakota
Most games of chance conducted by exempt organizations in North Dakota are not unrelated trades or businesses if conduct-
ing the games does not violate any state or local law. See Section 311 of the Deficit Reduction Act of 1984, as amended by
Section 1834 of the Tax Reform Act of 1986.
Unrelated Business Income Tax and Section 501(c)(7) Social Clubs
Most types of exempt organizations pay tax on their unrelated business taxable income. A Section 501(c)(7) social club, on
the other hand, must pay tax on its gross income except that portion that is considered exempt function income.
The exempt function income of a social club is, generally, its gross income from dues, fees and charges received from
members in return for providing recreational and social facilities or services to those members, their dependents or guests.
Because gaming is recreational and social, the income a social club receives from gaming activities limited to its members is
considered exempt function income and is not subject to tax. On the other hand, income received from gaming activities open
to nonmembers is part of the social club’s gross income that is subject to the unrelated business income tax.
Social clubs do not qualify for any of the exclusions explained above. Even if a social club conducts a bingo game that would
fall within the bingo exclusion or uses only volunteers to conduct all its gaming, if the public participates, the income will be
taxable. In addition, the nonmember income, if a large enough percentage of the social club’s overall income, may jeopardize
its exempt status.
Determining Whether Gaming Generates UBI – Flow Chart
At the end of this chapter is a flow chart to help you assess whether your gaming – or other – activity creates UBI for your
organization. Exhibit A is for all organizations except 501(c)(7) social clubs. The flow chart is a summary of the unrelated busi-
ness income rules and exclusions. See Publication 598, Tax on Unrelated Business Income of Exempt Organizations, for a
complete explanation.
Reporting UBI and Paying Tax
When gross UBI (gross receipts) equals or exceeds $1,000, an organization must file Form 990-T, Exempt Organization Busi-
ness Income Tax Return. If an organization’s total anticipated tax for the year equals or exceeds $500, it must pay quarterly
estimated tax. Form 990-W, Estimated Tax on Unrelated Business Taxable Income for Tax-Exempt Organizations, may be help-
8 Chapter 2 - Gaming and Unrelated Business Income
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ful in computing the tax. However, do not send this form to the IRS. Failure to pay estimated taxes as required or to file the
appropriate forms may subject the organization to penalties.
If you find that you are unable to file Form 990-T by the original due date, you can request an extension of time by filing Form
8868, Application for Automatic Extension of Time To File an Exempt Organization Return, by that original due date. If you are
a corporation or a trust, you may request an automatic 6-month extension.
CHAPTER 2
You must pay any unrelated business income tax due by the original due date for filing Form 990-T. No extension for paying the
tax will be given. Do not send the payment with Form 990-T. You must deposit the tax by the Electronic Federal Tax Payment
System (EFTPS).
Chapter 2 - Gaming and Unrelated Business Income 9
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Is It Unrelated Business Taxable Income (UBTI)? (Does Not Apply to 501(c)(7) Organizations)
NO
Is gaming a trade or
business?
YES
NO
Is gaming regularly
carried on?
YES
YES
Is gaming substantially
related to exempt
Chapter 3 purpose?
NO
CHAPTER 3
YES Income is not
UBTI
Does gaming meet
bingo exception?
NO
YES
Is gaming conducted
with substantially all
volunteer labor?
NO
YES
Is gaming a game of
chance conducted in
North Dakota?
NO
YES
Is gaming a qualified public
entertainment activity conducted
by a 501(c)(3), 501(c)(4) or
501(c)5 organization?
NO Income is
UBTI
10 Chapter 3 - Maintaining Records
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Maintaining Records
Recordkeeping
An exempt organization must maintain complete books and records so it can meet its reporting responsibilities and determine
any tax liabilities it may have. Exempt organizations must keep the same types of books and records that other businesses
maintain. These include cash receipt and disbursement journals, accounts payable journals, general ledgers, detailed source
documents and copies of any federal tax returns filed. See Publication 583, Starting a Business and Keeping Records, for
general information about tax recordkeeping requirements.
Publication 4221-PC, Compliance Guide for 501(c)(3) Public Charities, or Publication 4221-NC, Compliance Guide for Tax
Exempt Organizations (other than 501(c)(3) Public Charities and Private Foundations), contain information on recordkeeping
requirements that apply specifically to exempt organizations. Revenue Procedure 71—17, explains the recordkeeping required
of 501(c)(7) social clubs to document member vs. nonmember income. Fraternal organizations (Section 501(c)(8) and 501(c)
(10)) and veterans' organizations (Section 501(c)(19)) should also maintain complete records of member and nonmember
income.
Organizations that conduct gaming must maintain records of gross receipts from gaming, prize payouts and other related
disbursements to substantiate information submitted on the exempt organization information return (Form 990 or 990-EZ) and
the income tax return (Form 990-T), if one is required.
An organization must maintain records until the statute of limitations expires; generally three years from the later of the filing or CHAPTER 3
due date of a return. Employment tax returns should be kept for four years after the due date of the return, or four years from
the date when the organization paid the tax, if the payment date was later than the due date.
Effective Gaming Controls
Gaming can generate substantial amounts of income. Much of it is cash that passes through many hands at each gaming
session. Exempt organizations should carefully oversee and control gaming to ensure that funds are not diverted to private
individuals or for private purposes.
Effective oversight is more than simply choosing a location to hold the gaming and approving the lease or other arrangements
with the gaming operator. The exempt organization should maintain active involvement in the conduct of the games themselves.
Here is an example of appropriate oversight for a bingo operation that conducts multiple sessions per week:
• A gaming manager controls the execution of the games, including payouts, and records transactions on a “daily
sheet.”
• A cashier – a different person from the gaming manager – receives funds and records serial numbers of games sold.
• A third person serves as cash controller and prepares inventory/paid out reports, independently counts cash receipts
and matches the cash to the reports prepared by the gaming manager. He or she also prepares and makes the bank
deposit.
• A fourth person serves as inventory controller and reviews the daily sheets received from the gaming manager to
determine inventory usage and profit achieved. The inventory controller may also receive the bank statement directly
and ensure that all deposits stated on the daily sheet appear on it.
• A fifth person writes the checks to pay gaming expenses.
• The organization’s board of directors reviews and compares bingo reports or daily sheets with previous reports for
consistency. The board monitors the games to ensure that internal controls are functioning properly.
If an organization also sells pull-tabs at its bingo sessions or conducts other forms of gaming, it will want to implement ad-
ditional controls, such as verifying that the gaming manager reports all receipts.
State and local laws may require additional recordkeeping and reporting and impose specific internal controls over gaming.
Contact the appropriate agencies to determine the state and local rules that may apply.
Chapter 3 - Maintaining Records 11
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Exempt Organizations Reporting Requirements
The IRC requires most exempt organizations to file an annual information return showing gross receipts and disbursements
and other information the IRS needs to administer the tax laws. Form 990, Return of Organization Exempt From Income Tax,
or Form 990-EZ, Short Form Return of Organization Exempt From Income Tax, are the standard forms used to make this re-
port. (See the IRS website for the filing thresholds for each of these forms.) Filing a 990-T to report UBI will not satisfy an
organization's obligation to file an annual return or notice.
Most small tax-exempt organizations whose annual gross receipts are normally $50,000 or less may meet their filing require-
ments by submitting online Form 990-N, also known as the e-Postcard, unless they choose to file a complete Form 990 or
Form 990-EZ instead.
For a gaming organization, gross receipts include all amounts wagered in games, not just the net proceeds after winning
wagers have been paid out. Therefore, most organizations conducting gaming will have gross receipts well above the Form
990-N filing threshold.
Note: If an organization eligible to file an e-Postcard chooses to file a Form 990 or 990-EZ instead, it must file a complete
return, including all required sections and schedules.
Churches and certain other religious organizations are excepted from filing either an annual return or an e-Postcard. See the
Instructions for Form 990 or Form 990-EZ for a description of the religious organizations that are excepted from the require-
ment to file an annual return or e-Postcard.
If you are required to file an annual return or e-Postcard, you must file it by the15th day of the 5th month after your accounting
period ends. If your accounting period coincides with the calendar year, file your return or e-Postcard by May 15th following
the close of the tax year.
You can get an automatic 6-month extension of time for filing a Form 990 return by filing Form 8868, Application for Automatic
C Extension of Time To File an Exempt Organization Return, by the original due date of the return. You cannot get an extension
of the due date for filing an e-Postcard.
h
Chapter 4a If you are required to file an information return or e-Postcard, and you fail to do so for three consecutive years, your exempt
p status is automatically revoked by law.
te CHAPTER 4 You must make a copy of your Form 990 or 990-EZ annual information returns available for public inspection during normal
r business hours at your principal office and at regional or district offices. A return must be made available for a period of three
4 years from the date it was required to be filed. Most organizations are not required to disclose the names and addresses of
any contributors reported on Schedule B of the return.
Schedule G, Form 990 or Form 990-EZ
If your organization’s revenue from gaming exceeds a threshold amount, you will be required to complete and attach Schedule
G, Supplemental Information Regarding Fundraising or Gaming Activities, to your Form 990 or Form 990-EZ. (For details on
the threshold amounts triggering filing of Schedule G, see the instructions for Form 990 or Form 990-EZ.)
Use Part III of Schedule G to report specific information about your organization’s gaming activities. To be able to complete
this part, for each tax year you will need to know:
• Gross revenues from bingo, pull-tabs/instant bingo and other types of gaming;
• Cash and non-cash prizes paid for each type of gaming;
• Rent or costs of facilities and other direct gaming expenses;
• Percentage of your organization’s games operated in your own facilities and in outside facilities;
• Percentage of volunteer labor for each type of gaming;
• States in which you operated gaming activities and the states in which your organization holds gaming licenses;
• Revocation, suspension or termination of any of your organization’s gaming licenses;
• Amount of mandatory charitable distributions from gaming proceeds required under state law, or the amount of pro-
ceeds spent on your organization’s own exempt activities;
• Names and addresses of the gaming manager and the person who prepares your gaming/special events books and
records; and
12 Chapter 4 - Exempt Organizations’ Reporting Requirements
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• Information about third parties with which your organization has contracts to receive gaming revenue.
For detailed information about filing requirements for Forms 990, 990-EZ or 990-N, see their instructions, which include an
explanation of the public inspection rules for these forms.
Workers Conducting Gaming Activities
It's Saturday night and your lodge is hosting its weekly bingo game for members and their guests. During the game, Mr. P
tends the bar and Ms. J calls the numbers. The lodge pays Ms. J $10 an hour for calling numbers. Mr. P, though not paid for
tending bar, does receive tips from bingo patrons. You probably know that you should withhold income, Social Security and
Medicare taxes from Ms. J’s wages and send these taxes and the employer share of Social Security and Medicare taxes to the
IRS, as well as report the wages and tax to both Ms. J and the Social Security Administration on Form W-2, Wage and Tax
Statement. But did you also know that you may have reporting and withholding requirements for Mr. P’s tip income?
This chapter will help your organization determine whether its gaming employees should be classified as employees,
independent contractors or volunteers. (Different compliance requirements apply to each type of worker.) This chapter also
examines compensation: Is your organization compensating its gaming workers and if so, how, and how much? (Just a “tip”
here: Mr. P’s tips count as compensation!) Then, the information in this chapter will help you make sure that your organization
does not inadvertently turn its gaming “volunteers” into compensated employees.
This chapter ends with a quick survey of your organization’s reporting and withholding responsibilities for any compensated
employees and independent contractors. (These requirements apply to any workers your organization pays – not just those
employed in its gaming activities.) The chapter also discusses the recordkeeping and reporting that employees must do for
tip income.
Employee, Independent Contractor or Volunteer?
A worker at your organization’s gaming activity is:
• An employee – someone whose work your organization has the right to control and direct;
• An independent contractor – someone your organization contracts with to provide a specific service or product. Your
organization contracts with the person for the end product or service and does not have the right to supervise or
direct how the independent contractor does the work; or
• A volunteer – someone who works for your organization for no compensation, either monetary or non-monetary. Note
that volunteers can be either employees or independent contractors under the common law test. CHAPTER 5
Generally, if a worker is compensated in any manner, he or she will be either an employee or an independent contractor. As Ch
noted above, someone is your employee when you have the right to control and direct that person’s work, not only as to the apt
result to be accomplished but also as to the details and means by which that result is accomplished. In other words, an em- er 5
ployee is someone who is subject to your will and control not only as to what will be done but how it will be done. You need
not actually direct or control how the person works; simply your right to do so is sufficient to make the person your employee.
For more information on how to determine whether a worker is an employee or independent contractor, see Publication 15-A,
Employer’s Supplemental Tax Guide, and Publication 1779, Independent Contractor or Employee. Then, if you are still unsure
whether the person you are paying is an employee or independent contractor, you can ask the IRS for a ruling by filing Form
SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding.
Types of Compensation
All pay you give to an employee for services performed is considered wages and is subject to federal employment taxes unless
an exception applies. The pay may be in cash or in other forms. It includes salaries, bonuses, commissions and fringe benefits.
How you measure or make the payments does not matter.
If your organization uses a method other than cash or a check to pay its workers, you are paying them “in kind.” Payments in
kind may be in the form of goods, lodging, food, clothing or services. Generally, the fair market value of the payments at the
time they are provided is subject to employment taxes.
Tips gaming activity workers receive from players, whether cash or non-cash, are taxable income. Tips paid to a worker in
cash, checks or other cash equivalent (including charged tips) of more than $20 in a calendar month while working for any
one employer are also wages subject to employment taxes.
Volunteers and Gaming Activities
Exempt organizations often rely on uncompensated workers when conducting gaming. In fact, many states and localities
require that exempt organizations use all (or substantially all) volunteer labor to conduct their games to qualify for a license.
Chapter 5 - Workers Conducting Gaming Activities 13
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If a “volunteer” worker at a gaming activity is permitted to receive tips from players and the volunteer is subject to the direction
and control of the organization, he or she becomes a compensated employee. The organization would have the same report-
ing and withholding requirements for this person as for any other employee. In addition, by permitting the otherwise-volunteer
worker to receive tips, the organization may be violating state or local rules that require all volunteer labor for licensed gaming
organizations.
Exempt organizations often want to recognize and thank their volunteers, and often do so with awards or gifts. In general, if
these are non-cash items of nominal value, such as turkeys or hams around the holidays, they would not constitute taxable
wages. However, cash items, including gift certificates as well as any other taxable fringe benefit, would be a payment of tax-
able compensation, and if the volunteer is subject to the organization’s right to direct and control, the amounts are wages. This
is true even if the organization receives donated gift certificates, which it then passes on to its volunteers. Organizations should
be aware that their methods of thanking or recognizing volunteers may create employment tax and reporting responsibilities.
What if an organization permits an individual to help out at a gaming activity and thereby “work off” a program payment or fee
that he or she would otherwise have? These arrangements – whether “voluntary” or required – can also result in a worker
having wages subject to employment taxes.
Example: Private school X, a 501(c)(3) organization, conducts a weekly bingo game to raise funds for the school. Parents
who work at the bingo games are given a tuition reduction of $100 for each week they work.
The fair market value of the parent’s or guardian’s work at the weekly bingo game is $100 – the amount of the tuition reduction.
Generally, the parent would be subject to the organization's right to direct and control (unless the parent is in the business of
running bingo games); thus, a parent who works at the weekly bingo game has compensation of $100.
Your Organization’s Reporting and Withholding Responsibilities for Employees
If your organization’s gaming workers are employees, you are responsible for withholding and paying employment taxes and
filing and furnishing the required employment tax forms and information returns. This section provides a general discussion
about withholding and reporting employment taxes. If your organization has employees, see Publication 15, (Circular E), Em-
ployer’s Tax Guide, and the Instructions for Forms W-2 and W-3 for the specific rules you will need to follow.
Soliciting a Social Security Number – An employer has a requirement to solicit an employee’s Social Security number
(SSN) at the time the employment begins. Because the employee is required to furnish Form W-4, Employee’s Withholding
Allowance Certificate, to the employer on commencement of employment, Form W-4 may be used for the initial solicitation
of the employee’s SSN. See Publication 1586, Reasonable Cause Regulations and Requirements for Missing and Incorrect
Name/TINs, for more information about solicitation requirements when employees do not furnish their SSNs.
Withholding Income Tax – As an employer, you must withhold federal income tax from your employees’ wages. To know
how much tax to withhold, you should have a Form W-4 on file for each employee. Ask all new employees to give you a signed
Form W-4 when they start work. You can provide Formulario W-4(SP), Certificado de Exención de Retenciones del Empleado,
in place of Form W-4, to your Spanish-speaking employees. Generally, a Form W-4 remains in effect until the employee gives
you a new one.
CHAPTER 5
In some cases, where a serious under-withholding problem is found to exist for a particular employee, the IRS may issue a
notice (commonly referred to as a “lock-in letter”) to the employer specifying the withholding rate (marital status) and maximum
number of withholding allowances permitted for a specific employee for purposes of calculating the required withholding. The
IRS will provide the employee with an opportunity to dispute the determination before the employer adjusts withholding based
on the lock-in letter.
After the lock-in letter takes effect, the employer must disregard any Form W-4 that results in less tax withheld, until the IRS
notifies the employer otherwise. However, the employer must honor any Form W-4 that claims a withholding rate (marital sta-
tus), withholding allowances and any additional amount that results in more income tax withheld than at the withholding rate
and withholding allowances specified in the lock-in letter. Employers who use electronic Form W-4 systems must make sure
the employee cannot override the lock-in letter to decrease withholding through the electronic Form W-4 system.
Withholding and Paying FICA Taxes – The Federal Insurance Contributions Act (FICA) imposes taxes on both the em-
ployee and the employer. FICA taxes are composed of two elements: old-age, survivor and disability insurance (OASDI, com-
monly known as Social Security) and hospital insurance (Medicare).
The Social Security tax rate is 12.4 percent, split equally between employee and employer. The tax applies to wages up to
a “wage base” limit. The wage base limit is the maximum wage that is subject to the tax for the year. The wage base limit is
adjusted annually.
The employee and employer each pay the Medicare tax rate of 1.45 percent on wages, for a total of 2.9 percent. There is no
wage base limit for Medicare tax; all covered wages are subject to Medicare tax.
14 Chapter 5 - Workers Conducting Gaming Activities
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The employer collects the employee portion of the Social Security and Medicare taxes by deducting the tax from the em-
ployee’s wages at the time of each payment. For tipped employees, an employee’s regular pay may not be enough to withhold
all the taxes owed on the regular pay plus reported tips. If this happens, an employee can give the employer money until the
close of the calendar year to pay the rest of the taxes.
If the employer cannot collect all the Social Security and Medicare taxes on the tips reported by an employee, the uncollected
taxes must be reported on Form W-2. See Employee’s Responsibility for Tip Income, below, for more information. As an
exempt organization, you need not withhold or pay FICA taxes for an employee that you pay less than $100 for the calendar
year.
If income, Social Security or Medicare taxes that are required to be withheld are not withheld or are not paid, the organiza-
tion is liable for the taxes and certain individuals may be personally liable for the amount of the employee taxes as a trust fund
recovery penalty.
Paying FUTA Taxes – Employers are subject to a federal unemployment (FUTA) tax on the total employment wages during
the calendar year. Only the employer pays FUTA tax. FUTA tax is not collected from the employee’s wages.
Services performed in the employ of a Section 501(c)(3) organization are excluded from the definition of “employment” for
FUTA tax purposes. Consequently, 501(c)(3) organizations do not pay FUTA tax on their employees’ wages.
Services performed in the employ of other types of exempt organizations are excepted from the definition of FUTA employment
in any calendar quarter in which the remuneration earned for those services is less than $50.
Application of these FUTA exceptions is based on the status of the common law employer.
Filing Form 941, Employer’s Quarterly Federal Tax Return – Every employer liable for withheld income and FICA taxes
must report its liability. The report is ordinarily made quarterly on Form 941, which must be filed by the last day of the month
following the close of the calendar quarter. If, by that date, you made timely deposits (see below) in full payment of your taxes
for the quarter, you can take an additional 10 days to file Form 941. If you discover an underpayment or overpayment error on a
previously filed Form 941, use Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund, to make the
correction. Publication 15, (Circular E), Employer’s Tax Guide, and the instructions for Form 941-X provide more information.
Filing Form 944, Employer’s Annual Federal Tax Return – If, based on your Form 941 reporting history, the IRS esti-
mated that your liability for FICA tax and withheld income tax for the year will be $1,000 or less, or you inform the IRS that
you expect your annual tax liability to be $1,000 or less, you may be notified to file an annual return on Form 944 instead of
the quarterly Form 941. You must get IRS approval to start (or to stop) filing Form 944. Form 944 is due by January 31 fol- CHAPTER 5
lowing the end of the calendar year of the return. If, by that date, you made timely deposits in full payment of your taxes for the
calendar year, you can take an additional 10 days to file Form 944. If you discover an underpayment or overpayment error on a
previously filed Form 944, use Form 944-X, Adjusted Employer’s Annual Federal Tax Return or Claim for Refund, to make the
correction. Publication 15, (Circular E), Employer’s Tax Guide, and the instructions for Form 944-X provide more information.
Filing Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return – If you are liable for FUTA tax in any
calendar year, you must file Form 940 by January 31 of the following year. If you deposited all FUTA taxes for the year when
due, you can take an additional 10 days to file the return.
Depositing FICA, FUTA and Withheld Income Taxes – If you report less than a $2,500 tax liability for the quarter on Form
941 (or for the year on Form 944), you may remit those taxes with the return. Otherwise, you must deposit on a monthly or
semiweekly schedule using the EFTPS. For more information about the deposit schedule you will be required to follow, see
“Depositing Taxes” in Publication 15.
Note: Employers who file Form 941 do not have to make deposits during a quarter if their accumulated tax liability for either
the current quarter or the prior quarter is less than $2,500 and they fully pay the amount due with a timely filed return for the
current quarter.
Deposit income taxes withheld from wages and FICA taxes separately from non-payroll withheld income taxes (such as in-
come tax withheld from gambling winnings).
FUTA taxes must be deposited by the last day of the month following the end of any calendar quarter in which your undepos-
ited tax liability is more than $500. If your FUTA tax liability in any quarter (except the fourth) is $500 or less, carry it over to
the next quarter. If your liability for the fourth quarter is $500 or less, you can either deposit the amount by EFTPS or pay it
with your Form 940 by January 31.
Filing Forms W-2, Wage and Tax Statement and W-3, Transmittal of Income and Tax Statement – Tax-exempt orga-
nizations must furnish each employee with a copy of Form W-2, Wage and Tax Statement, by January 31 of the year after the
Chapter 5 - Workers Conducting Gaming Activities 15
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year of payment. If employment ends before December 31 and an employee asks for Form W-2, give the employee Form W-2
within 30 days of the request or within 30 days of the final wage payment, whichever is later. The organization must file Form
W-2 with the Social Security Administration (SSA) by January 31. Paper Forms W-2 are transmitted to the SSA using Form
W-3, Transmittal of Income and Tax Statements.
If your employees give their consent, you may be able to furnish Forms W-2 to your employees electronically. See Publication
15-A, Employer’s Supplemental Tax Guide, for additional information.
If you are required to file 250 or more Forms W-2, you must file them electronically, unless the IRS granted you a waiver. You
are encouraged to file electronically even if you are filing fewer than 250 Forms W-2. The 250 threshold applies separately to
each type of form. Thus, for example, if a person is required to file 200 returns on Form 1099-MISC and 350 returns on Form
W-2 for a calendar year, the person is not required to file Forms 1099-MISC electronically but is required to file Forms W-2
electronically.
Employee’s Responsibility for Tip Income
Employees who receive tips should keep a daily tip record so they can accurately report tips to the employer and on their tax
returns. The daily tip record can take the form of a tip diary such as that found in Form 4070A, Employees Daily Record of Tips.
Every employee who, while working for your organization, receives cash tips in any calendar month of at least $20 must report
those tips in a written statement by the 10th day of the following month. To report, the employee may use Form 4070, Em-
ployee’s Report of Tips to Employer, or some other written statement containing the:
• Employee’s name, address and Social Security number;
• Employer’s name, business name (if different) and address;
• The month for which the report is made; and
• The total tips received in that month.
You may establish an electronic tip reporting system in lieu of receiving tip statements in paper form.
An employee who fails to report tips that are required to be reported must pay the employee’s portion of the FICA tax on those
tips by filing Form 4137, Social Security and Medicare Tax on Unreported Tip Income, with the employee’s Form 1040, U.S.
Individual Income Tax Return. The employee is also subject to a penalty equal to 50 percent of the employee’s portion of the
FICA tax on the unreported tips unless the failure was due to reasonable cause and not due to willful neglect.
For more information on an employee’s responsibilities with respect to reporting tip income, see Publication 531, Reporting
Tip Income.
If the taxes on an employee’s tips are greater than the regular pay from the employer, the employee can either pay the taxes
when the employee files Form 1040 or the employee can give the employer money to be applied to the underwithheld taxes.
The employer will report any uncollected FICA taxes on Form W-2. If the employee waits to pay the taxes with the employee’s
CHAPTER 5
Form 1040, the employee may be subject to a penalty for underpayment of estimated taxes. See Publication 505, Tax With-
holding and Estimated Tax, for more information.
Your Organization’s Reporting Responsibilities for Independent Contractors
Soliciting a TIN - Your organization should solicit an independent contractor’s TIN before the independent contractor
provides services, and before you pay the person. You can use Form W-9, Request for Taxpayer Identification Number and
Certification Formulario. W-9(SP), Solicitud y Certificación del Número de Identificación del Contribuyente, may be used in
place of Form W-9, for Spanish-speaking nonemployees. Form W-9 certifies the correct TIN and name of person receiving
payments, and will help the organization verify whether it needs to complete Form 1099-MISC with respect to a payment.
Form W-9 is not filed with the IRS, but kept in your organization’s records.
If your organization pays independent contractors – in other words a compensated worker who is not your organization’s em-
ployee – it does not have to withhold or pay FICA taxes. However, you may be required to withhold 24 percent of any report-
able payments for federal income tax. This is referred to as backup withholding, and applies when a payee refuses or neglects
to provide a Taxpayer Identification Number (TIN) or the IRS notifies the organization that the reported TIN is incorrect. See
Publication 1281, Backup Withholding for Missing and Incorrect Name/TIN(s). Whether your organization has made report-
able payments may depend on the amount paid during the year and whether an exception applies.
Filing and Furnishing Form 1099-MISC, Miscellaneous Income – Use Form 1099-MISC to report payments of $600
or more to independent contractors. Include fees, salaries, commissions, prizes and awards for services performed as a non-
employee. Generally, payments to a corporation are not required to be reported on Form 1099-MISC. However, you must use
16 Chapter 5 - Workers Conducting Gaming Activities
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Form 1099-MISC to report payments of $600 or more for medical or health care services provided by corporations, including
professional corporations and legal services provided by corporations. Forms 1099-MISC must be furnished to payees by
January 31. File Form 1099-MISC on paper or electronically by January 31, if you are reporting nonemployee compensation
(NEC) in box 7. File all other Forms 1099-MISC (not reporting NEC in box 7) with the IRS by February 28. Paper Forms 1099-
MISC are transmitted to the IRS using Form 1096, Annual Summary and Transmittal of U.S. Information Returns. You may
furnish the copies to the payees electronically. See the General Instructions for Forms 1099, 1098, 3921, 3922, 5498, and
W-2G for more information. If you are required to file 250 or more Forms 1099-MISC, you must file them electronically, unless
the IRS granted you a waiver. You are encouraged to file electronically even if you are filing fewer than 250 Forms 1099-MISC.
Example: Organization Y pays Ted Oaks $100 per week for 9 weeks to clean up the hall where it holds bingo sessions. Mr.
Oaks operates a janitorial service as a sole proprietorship, has the right to hire and fire workers and provides needed tools and
supplies. Y does not have the right to direct and control Mr. Oaks. Therefore, Mr. Oaks is not a Y employee. Y must file Form
1099-MISC with the IRS and furnish a copy of Form 1099-MISC to Mr. Oaks.
For more details on the types of payments that must be reported on Form 1099-MISC, see the instructions for Form 1099-
MISC.
CHAPTER 5
Chapter 5 - Workers Conducting Gaming Activities 17
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Reporting Winnings and Withholding Income Tax
It’s Saturday night again, and your organization is hosting a bingo game meeting the statutory bingo exclusion. Mr. S pays $5
for a bingo card and sits down to play. “B-I-N-G-O!!!” It’s Mr. S’s lucky night. He wins the game and the jackpot of $1,200.
In tax terminology, the “wager” is $5 and the “winnings” are $1,200. Did you know that your organization must report Mr. S’s
winnings to the IRS?
Reportable Winnings
If you pay the winner or winners of a game more than a certain amount, you must report the amount and information about
the winners to the IRS. The threshold amount at which winnings become reportable depends on the type of game involved.
Unless the winnings are from poker, keno, bingo or slot machines, you must report a payment of winnings, including raffle
prizes, when the amount paid is:
• $600 or more, and
• At least 300 times the amount of the wager.
In determining whether the $600 threshold is met, you may reduce the winnings by the amount of the wager.
Example: Mr. G buys a $2 raffle ticket from your organization. At the raffle, Mr. G’s number is drawn and he wins $1,000.
Because the winnings ($998) are greater than $600 and more than 300 times the amount of the wager, you must report Mr.
G’s winnings to the IRS.
Example: Mr. S buys a $2 pull-tab and wins $600. You may reduce the winnings by the amount of the wager, in which case
the winnings are $598. You do not have to report Mr. S’s winnings because the $600 threshold is not met.
Keno Games: Keno is a gambling game, a variety of the game of lotto, played with numbered balls or knobs, and cards also
numbered.
You must report winnings from a keno game that are $1,500 or more after deducting the amount of the wager. That is, you
must reduce the amount of the winnings by the amount of the wager in determining whether the $1,500 threshold is met.
Example: One of your gaming activities is keno. Ms. E wagers $5 on keno and wins $1,500. The winnings are less than
$1,500 after deducting the amount of the wager ($1,495), so you do not have to report Ms. E’s winnings.
Bingo Games and Slot Machines: You must report winnings from a bingo game or slot machine that are $1,200 or more
before deducting the amount of the wager.
Example: You have a slot machine in the barroom of your lodge. Ms. C feeds a quarter into the slot machine and wins $1,200.
You must report Ms. C’s winnings because the winnings are $1,200 or more before deducting the amount of the wager.
Poker Tournaments: If you sponsor a poker tournament, you must report any winnings of more than $5,000 after deducting the
wager (in other words the entry or “buy-in” fee). You need not report poker tournament winnings paid before March 4, 2008,
or winnings that are $5,000 or less.
C
ha Summary of Reportable Winnings
pt
Type of Game Winnings Amount at Least: Reduced by Amount of Wager?
er CHAPTER 6
6 Bingo $1,200 No
Slot machines $1,200 No
Keno $1,500 Yes
Other wagering transactions
$600 and at least 300 times the
(instant bingo, pull-tabs, raffles and At option of payer
wager
so on)
Poker tournaments $5,000.01 Yes
18 Chapter 6 - Reporting Winnings and Withholding Income Tax
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Reporting Winnings
Each time you pay reportable winnings, you must complete a Form W-2G, Certain Gambling Winnings, to report those win-
nings to the IRS and to the person receiving the winnings (the payee). The payee should provide you with his or her name,
address and Social Security number, and you should verify the information from the person’s driver’s license, Social Security
card, voter registration card or other proper identification.
If you use a paper form, you must file copy A of Form W-2G with the IRS by February 28 following the calendar year in which
you paid the winnings. Use Form 1096 to transmit paper Forms W-2G to the IRS. If you file electronically, you must file Form
W-2G by March 31 following the calendar year in which you paid the winnings. If you complete 250 or more Forms W-2G in
a year, you cannot file the paper form; you must file electronically instead.
In addition to filing Form W-2G with the IRS, you must give the winner copies B and C of Form W-2G by January 31 following
the calendar year in which you paid the winnings.
Multiple Winners: When the payee is one of a group of two or more winners, or is not the actual winner, he or she must com-
plete and sign a Form 5754, Statement by Person(s) Receiving Gambling Winnings, and give it to you. The payee enters his
or her name, address and taxpayer identification number in Part I. In Part II, the payee enters the name, address and taxpayer
identification number of each person entitled to the winnings, together with the amount won and the amount of any additional
winnings from identical wagers. You then prepare a separate Form W-2G for each winner listed in Part II of Form 5754.
Regular Income Tax Withholding
Ms. V pays $10 for a ticket in your church raffle. As luck would have it, hers is the winning ticket. You pay Ms. V winnings
of $6,000. You now know that you have to report the winnings to the IRS. But did you also know that you have to withhold
income tax from Ms. V’s winnings?
You must withhold income tax from a payment of winnings when
the proceeds from the wager are more than $5,000 and the wa-
ger was placed in: Exceptions:
1. Do not withhold income tax on winnings from bingo,
A sweepstakes, wagering pool, lottery, raffle or poker
keno or slot machines no matter what the amount of
tournament; or
winnings. (However, see below.)
Any other wagering transaction, if the proceeds are at 2. You need not withhold income tax on winnings from
least 300 times the amount wagered. a poker tournament as long as you report the win-
nings on Form W-2G.
The “proceeds from a wager” are the difference between the
amount of the winnings and the amount of the wager. When the
winnings are in the form of a non-cash payment, such as a car
won at a raffle, the proceeds from the wager are the difference between the fair market value of the item won and the amount
of the wager.
You must deduct and withhold tax from the cash winnings in an amount equal to the product of the third lowest rate of tax
applicable under IRC Section 1(c) (in other words, the rates that apply to unmarried individuals) and the amount subject to CHAPTER 6
withholding. The applicable rate is 24 percent. The amount subject to withholding is the proceeds from the wager, as defined
above. Withhold on the entire amount, not just on that portion greater than $5,000.
Example: In 2018, your organization conducts a raffle, and Mr. L purchases a $1 ticket. At the drawing, Mr. L wins $6,000.
Because the proceeds from the wager are more than $5,000 ($6,000 prize minus $1 ticket), you must withhold $1,440
($5,999 x .24) from the winnings.
A non-cash prize, such as a car, with a fair market value exceeding $5,000 after deducting the amount of the wager is also
subject to withholding. The tax is computed and paid under either of the following two methods:
The winner pays the withholding tax to the organization conducting the gaming activity. In this case, the withholding
amount is 24 percent of the fair market value of the non-cash item less the amount of the wager.
The organization pays the withholding tax for the winner. In this case, the withholding amount is 31.58 percent of the
fair market value of the non-cash item less the amount of the wager. (The withholding percentage in this case is higher,
because the winner gets not only the value of the prize but also the value of having the taxes paid by the organization.)
Signature of the Payee on Form W-2G: Any person who receives a payment of winnings from which you are required to with-
hold tax must sign the Form W-2G on which those winnings are reported. By signing, the payee declares that no other person
is entitled to any portion of the payment and that the winnings are subject to regular gambling withholding.
Chapter 6 - Reporting Winnings and Withholding Income Tax 19
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Backup Withholding
You may be required to withhold 24 percent of gambling winnings (including winnings from bingo, keno, slot machines and
poker tournaments) for federal income tax. This is referred to as backup withholding, and applies when:
The winner of reportable winnings does not furnish a correct TIN;
Regular gambling withholding was not withheld (currently 24%); and
The winnings are at least $600 and at least 300 times the wager (or the winnings are at least $1,200 from bingo or
slot machines or $1,500 from keno or more than $5,000 from a poker tournament).
Example: Your organization has slot machines in its barroom. Mr. B wins $1,200 at the slot machine. Mr. B refuses to give
you his taxpayer identification number. Because winnings of $1,200 or more from a slot machine are reportable winnings, you
must report the winnings on Form W-2G. Slot machine winnings are not subject to regular withholding at the 24 percent rate,
but because Mr. B refuses to give you his taxpayer identification number so that you can properly complete the Form W-2G,
you must backup withhold $288 ($1,200 X .24).
You will pay Mr. B $912 ($1,200 - $288) instead of the entire amount of winnings. If you mistakenly pay Mr. B the entire
$1,200, your organization will be responsible for paying the backup withholding amount of $288.
Backup withholding applies to the total amount of the winnings reduced by the amount wagered, if the payer chooses to make
that reduction.
Summary of Withholding Requirements
Backup Withholding at 24% if
Regular Withholding at 24% if
Type of Gaming Winner Does Not Provide TIN
Winnings Are:
and Winnings Are:
Bingo N/A ≥ $1,200
Slot machines N/A ≥ $1,200
Keno N/A ≥ $1,500
Sweepstakes, wagering pools,
> $5000 $600 to $5,000
lotteries and raffles
Wagering transactions when
winnings are at least 300 times the > $5,000 $600 to $5,000
amount wagered
N/A if winnings are reported on
Poker tournaments > $5,000
Form W-2G
CHAPTER 6 Reporting Withheld Taxes
Report the amount of any taxes withheld from winnings (whether at the regular or backup withholding rate) in box 2 of the Form
W-2G on which you report the winnings.
Withholding Tax on Nonresident Aliens
Generally, gambling winnings paid to a nonresident alien are subject to withholding at 30 percent on the gross proceeds un-
less the income is exempted by treaty. But winnings of a nonresident alien from blackjack, baccarat, craps, roulette or big-6
wheel are not subject to withholding and reporting.
The winnings and tax withheld are reported on Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign
Persons, and Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding. For more information, see Publica-
tion 515, Withholding of Tax on Nonresident Aliens and Foreign Entities.
Annual Return of Non-Payroll Withheld Taxes
Taxes withheld from gaming winnings are called non-payroll withheld taxes. You must report the total amount of federal
income tax you withhold from these payments during the year on Form 945, Annual Return of Withheld Federal Income Tax.
20 Chapter 6 - Reporting Winnings and Withholding Income Tax
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Non-payroll payments include gaming winnings subject to either regular or backup withholding. Therefore, the amounts you
report on your annual Form 945 must include the total amount of tax withheld from gaming winnings that you reported on
all the Forms W-2G filed for the year. You must file Form 945 by January 31 following the close of the reporting year. If you
discover an underpayment or overpayment error due to an administrative error on a previously filed Form 945, use Form 945-
X, Adjusted Annual Return of Withheld Federal Income Tax or Claim for Refund, to make the correction. See Publication 15,
(Circular E) Employer’s Tax Guide and the instructions for Form 945-X for more information.
Depositing Non-Payroll Withheld Taxes
If you report less than a $2,500 non-payroll tax liability for the year, you may pay the tax with your annual timely-filed Form 945.
If your non-payroll tax liability is $2,500 or greater, you must deposit those taxes on a monthly or semiweekly schedule using
the EFTPS. Be sure to deposit non-payroll withheld taxes separately from any payroll taxes for which your organization may
be liable.
For more information about the deposit schedule you will be required to follow, see “Depositing Taxes” in Publication 15,
(Circular E), Employer’s Tax Guide.
CHAPTER 6
Chapter 6 - Reporting Winnings and Withholding Income Tax 21
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Gaming Excise Taxes
Most gaming requires the participant to stake, or bet, some money for the chance of winning a prize, award or jackpot. The
money a bettor places in a game is called the wager. If you are engaged in the business of accepting wagers, you may be
required to pay two separate excise taxes. These are in addition to any unrelated business income tax that gaming may gener-
ate. The excise taxes are:
• A tax on wagers (wagering tax) under IRC Section 4401(a); and
• An occupational tax on persons in the business of accepting wagers and on persons who receive wagers on behalf
of someone in the business of accepting wagers (occupational tax) under IRC Section 4411(a).
You are engaged in the business of accepting wagers for an event or contest if, depending on the outcome, you are assuming
the risk of profit and loss. This is true regardless of how few bets you accept or how infrequently you take them.
Wagering Tax
You are required to pay the wagering tax when you accept a wager from a bettor:
• On a sports event;
• On a contest;
• Participating in a wagering pool with respect to a sports event or contest, if the wagering pool is conducted for profit;
or
• Participating in a lottery conducted for profit.
(Some wagers are exempt – see the section “Wagers Exempt from Wagering Tax,” below.)
Conducted for Profit: A wagering pool or lottery is conducted for profit if it earns a direct profit, if it is expected to generate
an indirect profit such as increased sales or attendance, or if the operator takes a percentage of the contributions or charges
a fee to join the pool.
Wagers Subject to Wagering Tax
Note: Any person or entity in the business of accepting wagers will be liable for the wagering excise tax even if the business
is illegal in the state where it is conducted. The categories of wagers to which the tax applies are detailed below.
Sports Events: If you accept a wager placed on a sports event, you must pay the wagering tax on the wager. It does not matter
whether the sports event is an amateur, scholastic or professional event. Typical sports events on which wagers are placed
include horse, auto or dog racing; boxing or wrestling matches; baseball, football or basketball games; tennis or golf matches;
or track meets.
Contests: You are responsible for paying the wagering tax if you accept a wager placed on a contest. A contest includes any
kind of contest involving speed, skill, endurance, popularity, politics, strength, appearances and so on. Typical contests on
which wagers are placed include dance marathons, log-rolling contests, wood-chopping contests, spelling bees and beauty
contests.
Ch Wagering Pools: If you conduct a wagering pool for profit and accept a wager placed in the wagering pool, you must pay the
apt wagering tax on the wager. A wagering pool is any scheme or method where prizes are distributed to one or more winning
er bettors based on the outcome of a sports event or contest or a combination of both.
7 CHAPTER 7
Lotteries: If you conduct a lottery for profit and accept a wager placed in the lottery, you must pay the wagering tax on the
wager. A lottery is a type of wagering in which:
• A prize is offered;
• Participants pay for the opportunity to win the prize; and
• The prize is awarded by chance.
A lottery also includes “numbers game” types of wagering in which the player pays a fixed amount and selects a number or
combination of numbers. If the selected number or numbers appear or are published in the mutually understood manner, the
lottery operator pays the player a prize. Tip jars, raffles, pull-tabs and similar games meet the definition of wagers placed in a
lottery.
22 Chapter 7 - Gaming Excise Taxes
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Wagers Exempt from Wagering Tax
There is no wagering tax on wagers placed in:
• Games when all participants are present;
• Drawings conducted by exempt organizations; or
• Games played on a coin-operated device.
Games When All are Present: A wager placed in a game in which the wagers are placed, the winners are determined and the
prizes are distributed in the presence of all persons placing wagers in the game is not subject to the wagering tax.
Games of this type involve group play, and include bingo meeting the statutory bingo exclusion (as described in Chapter 2),
keno, card games, dice games and games involving wheels of chance, such as roulette wheels.
Drawings Conducted by Exempt Organizations: A wager placed in a drawing conducted by a tax-exempt organization is not
considered a “wager placed in a lottery conducted for profit” (and, thus, is not subject to the tax on wagers) so long as no part
of the net proceeds from the drawing “inures” to the benefit of any private shareholder or individual.
Drawing: A drawing is any physical drawing of a ticket or use of a wheel or similar device by which the winner is conclusively
determined by a number, letter, legend or symbol without reference to an outside event that is beyond the operator's control.
Inures to the Benefit of Private Shareholders or Individuals: This phrase comes directly from the IRC and describes a circum-
stance where a drawing benefits an individual personally in some way. This could happen if, for example, the drawing opera-
tor’s salary is unreasonable, or if the operator receives a percentage of the total wagers as compensation.
When the drawing is conducted by a membership organization, such as a social club, fraternal society or veterans’ organiza-
tion, the drawing could benefit the members if wagers are accepted from nonmembers and used for operating expenses or
to pay for member benefits or services. If, however, the wagering revenue is separately accounted for and earmarked solely
for charitable purposes, there is no inurement and no liability for wagering tax arises. And, if the wagers are accepted from
members only, proceeds of a drawing may be used for the organization’s operations without triggering the wagering tax.
Example: S, a social club exempt under Section 501(c)(7), sells lottery tickets. Only club members may purchase tickets.
The winners receive a portion of the proceeds from the sale of the tickets. The remaining proceeds go to the general funds of
the club and are used to defray its operating expenses or to offset losses incurred in the club’s activities, which are devoted
exclusively to the pleasure and recreation of its members. Because the drawing is limited to members and the net proceeds
are used solely to meet the club’s operating expenses, none of the proceeds inure to the benefit of any private shareholder or
individual. Therefore, the club is not engaged in the business of accepting wagers placed in a lottery conducted for profit and
is not liable for wagering tax.
Example: B, a veterans’ organization exempt under Section 501(c)(19), occasionally sells pull-tabs at bingo games which are
open to the public. A portion of the proceeds from pull-tab sales are used to pay B’s operating and administrative expenses,
without which B would have to increase its dues or other member contributions. Because a portion of the net proceeds from
the pull-tabs indirectly inures to the members, B is considered to be engaged in the business of accepting wagers placed in CHAPTER 7
a lottery conducted for profit and is liable for wagering taxes.
Example: Y, a Section 501(c)(3) organization, sells pull-tabs. The organization uses net proceeds from pull-tab sales to carry
out its exempt purpose. There is no inurement or private benefit to individuals, so the wagering tax does not apply to the sales
of the pull-tabs.
Coin-Operated Device: There is no wagering tax on amounts spent to operate coin-operated devices, which include slot ma-
chines, pinball machines and video machines such as those that display poker hands.
Parimutuel Wagering: There is no wagering tax on wagers placed with or in a wagering pool conducted by a parimutuel en-
terprise licensed under state law.
State-Conducted Lotteries: There is no wagering tax on wagers placed in lotteries, sweepstakes or wagering pools conduct-
ed by a state, under state law where the wager is placed with the state or its authorized employees or agents.
Rate of Wagering Tax
The tax rate depends on whether the wager is authorized under the law of the state in which it is accepted, in other words, on
whether the wager is legal. The tax on legal wagers is 0.25 percent of the amount of the wager. The tax on unauthorized, or
illegal, wagers is 2 percent of the amount of the wager.
Example: Lodge Y, a fraternal beneficiary society exempt under Section 501(c)(8), sells pull-tabs at its bar to both members
and nonmembers. The proceeds go to Y’s general account to pay administrative and operating expenses. Y is liable for
Chapter 7 - Gaming Excise Taxes 23
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wagering tax because the proceeds from pull-tab sales to nonmembers inure to the private benefit of Y’s members. The rate
of tax is 0.25 percent because Y is licensed by the state to sell pull-tabs and the wager is legal under state law.
The amount of the wager is the sum risked by the bettor, including any charges incurred in placing the bet. If you charge the
bettor for the wagering tax as a separate charge, the charge is not included in the amount of the wager.
If you engage in illegal wagering, paying the wagering tax does not shield you from any penalties or punishment under federal
or state law.
Monthly Return of Wagering Tax
You must file a return on Form 730, Monthly Tax Return for Wagers, for every month in which you accept a wager on which
you owe wagering tax. Use Form 730 to report the gross amount of wagers accepted and to figure the tax on those wagers.
File the Form 730 by the last day of the month following the month for which you are reporting. For example, if you accepted
wagers in April, you would report them on your Form 730 due by May 31. Once you file a Form 730, you must continue to file
it every month, regardless of whether you owe wagering tax, until you stop accepting wagers. If you stop accepting wagers,
check the “final return” box on the last Form 730 you file.
Paying the Wagering Tax
You can pay the wagering tax either electronically by using the EFTPS or by mailing a check or money order with your Form
730. Include the payment voucher Form 730-V whenever you mail any payment.
Occupational Tax
An annual occupational tax must be paid by:
• Any person or organization that is responsible for paying wagering tax; and
• Any person who receives wagers on behalf of a person or organization that is responsible for paying wagering tax.
In other words, if you are in the business of accepting wagers and are required to pay wagering tax, then you and each of your
employees or agents who receive wagers on your behalf must separately pay an occupational tax. If your games meet any of
the exemptions to the wagering tax shown above, you will not be liable for the occupational tax.
If you engage in illegal wagering, paying the occupational tax does not shield you from any penalties or punishment under
federal or state law.
Amount of the Tax
The amount of the occupational tax depends on whether the wager is authorized, in other words, legal, under the laws of the
state in which the wager is accepted.
• If the person or organization required to pay the occupational tax accepts only authorized wagers, the amount of the
tax is $50 per year.
• If the person or organization required to pay the occupational tax accepts any wager that is not authorized, the amount
of the tax is $500 per year.
Registering and Paying the Occupational Tax
Each person required to pay the occupational tax must register with the IRS by filing a return on Form 11-C, Occupational Tax
and Registration Return for Wagering. The occupational tax must be paid when filing the return.
Initial Return: You must file the first return on Form 11-C and pay the occupational tax before you start accepting wagers. The
CHAPTER 7
tax for the year in which you start accepting wagers is determined proportionately, from the first day of the month in which you
begin accepting wagers to the following June 30. For example, if you accept wagers for the first time on April 14, you must pay
a prorated tax for the period from April 1 to June 30. You would pay a tax that is 91/365ths of the annual tax.
Subsequent Returns: After your initial return, you must file subsequent returns on Form 11-C by July 1 of each year to cover a
one-year period beginning July 1 and ending June 30 of the following year. You must pay the tax for the entire year, even if you
accept wagers for only a part of the year.
Recordkeeping by the Organization for Wagering and Occupational Taxes
Daily Record: You must keep a daily record showing the gross amount of all wagers on which wagering tax is due. The record
for each day’s operations must show:
• The gross amount of wagers accepted;
• The gross amount of each class or type of wager accepted on each separate event, contest or other wagering medium;
24 Chapter 7 - Gaming Excise Taxes
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• The gross amount, separately, of wagers:
• You accepted directly or at your registered place of business; and
• You or your agents accepted at any place other than your registered place of business; and
• The gross amount of tax collected from or charged to bettors as a separate item.
Records of Agents and Employees: You must maintain a separate record of each agent or employee receiving wagers on your
behalf. The record must include the employee’s or agent’s name, address, periods of employment and employer identification
number.
Form 730 and Form 11-C: You must keep a copy of each Form 730 and Form 11-C that you file.
You must keep each record at your principal place of business for at least three years from the due date of the return to which
the record pertains. The record must be available to the IRS at all times.
Recordkeeping by Agents and Employees
Every agent or employee of your organization who receives wagers on your behalf at any place other than your registered place
of business must keep a daily record of:
• The gross amount of wagers received;
• The amount, if any, retained as a commission or as compensation for receiving the wagers; and
• The amount turned over to you.
The records must be kept for at least three years from the date the wager was received, and must be available to the IRS at
all times.
CHAPTER 7
Chapter 7 - Gaming Excise Taxes 25
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General Tax Calendar for Organizations That Conduct
Gaming (Calendar Year Filers)
Fiscal Year Filers: If you use a fiscal year as your accounting
period rather than a calendar year, change the dates in this Note: This calendar does not account for Sat-
calendar as follows: urdays, Sundays or legal holidays. If a due date
• File Form 990 or 990-EZ (or file Form 8868 to apply for for performing any act for tax purposes falls
an extension to file Form 990 or 990-EZ) by the 15th day on a Saturday, Sunday or legal holiday, it is de-
of the 5th month after your accounting period ends. layed until the next day that is not a Saturday,
Sunday or legal holiday. See Publication 509,
• File Form 990-T (or file Form 8868 to apply for an exten- Tax Calendars, for due dates adjusted to take
sion to file Form 990-T) by the 15th day of the 5th month account of the weekends and holidays of the
after your accounting period ends. particular calendar year.
• Pay estimated unrelated business income tax by the 15th
day of the 4th, 6th, 9th and 12th months of your fiscal
year.
The first quarter of a calendar year comprises January, February and March.
By January 10
Employees who work for tips: If you received $20 or more in tips during December, report them to your employer. You can
use Form 4070, Employee’s Report of Tips to Employer.
By January 15
Social Security, Medicare and withheld income tax: If the monthly deposit rule applies, deposit the tax for payments in De-
cember.
Nonpayroll withholding: If the monthly deposit rule applies, deposit the tax for payments in December.
By January 31
Employers: Give your employees their copies of Form W-2 for the previous year.
If you use paper or file electronically, you must file Copy A of all Forms W-2 issued for the previous calendar year by the last
day of January, with the Social Security Administration. Use Form W-3, Transmittal of Wage and Tax Statements, to transmit
Forms W-2 to the SSA. For information on reporting Form W-2 information to the SSA electronically, visit the Social Security
Administration’s webpage.
Payers of independent contractors: If an employer is reporting nonemployee compensation payments either paper or elec-
tronically in box 7 on Form 1099-MISC, they must be filed with the IRS on or before January 31. Use Form 1096, Annual
Summary and Transmittal of U.S. Information Returns, to transmit paper Forms 1099-MISC to IRS.
Payers of gambling winnings: If you either paid reportable gambling winnings or withheld income tax from gambling winnings
the previous calendar year, give the winners their copies of Form W-2G.
Nonpayroll taxes: File Form 945 to report income tax withheld the previous calendar year on all nonpayroll items, including
backup withholding and withholding on gambling winnings. Deposit or pay any undeposited tax. If your tax liability is less than
$2,500, you can pay it in full with a timely filed return. If you deposited the tax for the year in full and on time, you have until
February 10 to file the return.
Ex
Social Security, Medicare and withheld income tax: File Form 941 for the fourth quarter of the previous calendar year. Deposit
hi
or pay any undeposited tax. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited
bi the tax for the quarter in full and on time, you have until February 10 to file the return.
t EXHIBIT B
Certain small employers: File Form 944 to report Social Security, Medicare and withheld income taxes for the previous calen-
B
dar year. Deposit or pay any undeposited tax. If your tax liability is $2,500 or more the entire previous year but less than $2,500
for the fourth quarter of the previous year, deposit any undeposited tax or pay it in full with a timely filed return.
Federal unemployment tax: File Form 940 for the previous calendar year. If your undeposited tax is $500 or less, you can
either pay it with your return or deposit it. If it is more than $500, you must deposit it. If you deposited the tax for the year in
full and on time, you have until February 10 to file the return.
Wagering tax: File Form 730 and pay the tax on wagers accepted during December.
26 Exhibit B - General Tax Calendar for Organizations That Conduct Gaming
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By February 10
Employees who work for tips: If you received $20 or more in tips during January, report them to your employer. You can use
Form 4070, Employee’s Report of Tips to Employer.
By February 15
Social Security, Medicare and withheld income tax: If the monthly deposit rule applies, deposit the tax for payments in January.
Nonpayroll withholding: If the monthly deposit rule applies, deposit the tax for payments in January.
By the Last Day of February (February 28 or February 29 in leap years)
Wagering tax: File Form 730 and pay the tax on wagers accepted during January.
File paper Forms W-2G and paper Forms 1099-MISC without box 7 checked with the IRS by February 28.
By March 10
Employees who work for tips: If you received $20 or more in tips during February, report them to your employer. You can use
Form 4070, Employee’s Report of Tips to Employer.
By March 15
Social Security, Medicare and withheld income tax: If the monthly deposit rule applies, deposit the tax for payments in Febru-
ary.
Nonpayroll withholding: If the monthly deposit rule applies, deposit the tax for payments in February.
By March 31
Wagering tax: File Form 730 and pay the tax on wagers accepted during February.
The second quarter of a calendar year comprises April, May and June.
By April 2
For electronically filed Forms W-2G, and electronically filed Forms 1099-MISC without box 7 checked, file with IRS by April
2. For information on filing information returns electronically with the IRS, see Publication 1220, Specifications for Electronic
Filing of Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2G.
By April 10
Employees who work for tips: If you received $20 or more in tips during March, report them to your employer. You can use
Form 4070, Employee’s Report of Tips to Employer.
By April 15
Social Security, Medicare and withheld income tax: If the monthly deposit rule applies, deposit the tax for payments in March.
Nonpayroll withholding: If the monthly deposit rule applies, deposit the tax for payments in March.
Unrelated business income tax: If total expected tax for the tax year is $500 or more, deposit the first installment of estimated
tax. Use Form 990-W to figure your estimated tax liability.
By April 30
Social Security, Medicare and withheld income tax: File Form 941 for the first quarter of the calendar year. Deposit or pay any
undeposited tax. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax
for the quarter in full and on time, you have until May 10 to file the return.
Federal unemployment tax: Deposit the tax owed through March if more than $500.
Wagering tax: File Form 730 and pay the tax on wagers accepted during March. EXHIBIT B
By May 10
Employees who work for tips: If you received $20 or more in tips during April, report them to your employer. You can use Form
4070, Employee’s Report of Tips to Employer.
By May 15
Social Security, Medicare and withheld income tax: If the monthly deposit rule applies, deposit the tax for payments in April.
Nonpayroll withholding: If the monthly deposit rule applies, deposit the tax for payments in April.
Exempt organization annual information return or notice: File annual information return (Form 990 or 990-EZ) or e-Postcard
(Form 990-N). If you want an automatic 6-month extension to file Form 990 or 990-EZ, file Form 8868. Then, file Form 990 or
990-EZ by November 15. There is no extension for Form 990-N.
Exhibit B - General Tax Calendar for Organizations That Conduct Gaming 27
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Unrelated business income tax return: File Form 990-T to report your unrelated business income and unrelated busi-
ness income tax liability for the previous calendar year, and deposit any tax due in full. Corporations and trusts may re-
quest an automatic 6-month extension to file Form 990-T by filing Form 8868. Then, file Form 990-T by November 15.
Reminder: Fiscal year (non-calendar year) filers do not use this date for Form 990-series returns and notices. Use the 15th
day of the 5th month after your fiscal year ends.
By May 31
Wagering tax: File Form 730 and pay the tax on wagers accepted during April.
By June 10
Employees who work for tips: If you received $20 or more in tips during May, report them to your employer. You can use Form
4070, Employee’s Report of Tips to Employer.
By June 15
Social Security, Medicare and withheld income tax: If the monthly deposit rule applies, deposit the tax for payments in May.
Nonpayroll withholding: If the monthly deposit rule applies, deposit the tax for payments in May.
Unrelated business income tax: If total expected tax for the year is $500 or more, deposit second installment of estimated tax.
Use Form 990-W to figure your estimated tax liability.
By June 30
Wagering tax: File Form 730 and pay the tax on wagers accepted during May.
The third quarter of a calendar year comprises July, August and September.
By July 1
Occupational excise taxes: File Form 11-C to register and pay the annual tax if you are in the business of taking wagers.
By July 10
Employees who work for tips: If you received $20 or more in tips during June, report them to your employer. You can use Form
4070, Employee’s Report of Tips to Employer.
By July 15
Social Security, Medicare and withheld income tax: If the monthly deposit rule applies, deposit the tax for payments in June.
Nonpayroll withholding: If the monthly deposit rule applies, deposit the tax for payments in June.
By July 31
Social Security, Medicare and withheld income tax: File Form 941 for the second quarter of the calendar year. Deposit or pay
any undeposited tax. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the
tax for the quarter in full and on time, you have until August 10 to file the return.
Certain small employers: Deposit any undeposited tax if your tax liability is $2,500 or more for the calendar year but less than
$2,500 for the second quarter.
Federal unemployment tax: Deposit the tax owed through June if more than $500.
Wagering tax: File Form 730 and pay the tax on wagers accepted during June.
By August 10
Employees who work for tips: If you received $20 or more in tips during July, report them to your employer. You can use Form
4070, Employee’s Report of Tips to Employer.
EXHIBIT B
By August 15
Social Security, Medicare and withheld income tax: If the monthly deposit rule applies, deposit the tax for payments in July.
Nonpayroll withholding: If the monthly deposit rule applies, deposit the tax for payments in July.
28 Exhibit B - General Tax Calendar for Organizations That Conduct Gaming
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By August 31
Wagering tax: File Form 730 and pay the tax on wagers accepted during July.
By September 10
Employees who work for tips: If you received $20 or more in tips during August, report them to your employer. You can use
Form 4070, Employee’s Report of Tips to Employer.
By September 15
Social Security, Medicare and withheld income tax: If the monthly deposit rule applies, deposit the tax for payments in August.
Nonpayroll withholding: If the monthly deposit rule applies, deposit the tax for payments in August.
Unrelated business income tax: If total expected tax for the year is $500 or more, deposit third installment of estimated tax.
Use Form 990-W to figure your estimated tax liability.
By September 30
Wagering tax: File Form 730 and pay the tax on wagers accepted during August.
The fourth quarter of a calendar year comprises October, November and December.
By October 10
Employees who work for tips: If you received $20 or more in tips during September, report them to your employer. You can
use Form 4070, Employee’s Report of Tips to Employer.
By October 15
Social Security, Medicare and withheld income tax: If the monthly deposit rule applies, deposit the tax for payments in Sep-
tember.
Nonpayroll withholding: If the monthly deposit rule applies, deposit the tax for payments in September.
By October 31
Social Security, Medicare and withheld income tax: File Form 941 for the third quarter of the calendar year. Deposit or pay
any undeposited tax. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the
tax for the quarter in full and on time, you have until November 10 to file the return.
Certain small employers: Deposit any undeposited tax if your tax liability is $2,500 or more for the calendar year but less than
$2,500 for the third quarter.
Federal unemployment tax: Deposit the tax owed through September if more than $500.
Wagering tax: File Form 730 and pay the tax on wagers accepted during September.
By November 10
Employees who work for tips: If you received $20 or more in tips during October, report them to your employer. You can use
Form 4070, Employee’s Report of Tips to Employer.
By November 15
Social Security, Medicare and withheld income tax: If the monthly deposit rule applies, deposit the tax for payments in Oc-
tober.
Nonpayroll withholding: If the monthly deposit rule applies, deposit the tax for payments in October.
Exempt organization annual information return: If you requested an automatic 6-month extension to file your annual informa-
tion return, file Form 990 or 990-EZ. EXHIBIT B
Unrelated business income tax: If you requested an automatic 6-month extension to file your exempt organization business
income tax return (corporations and trusts), file Form 990-T.
Reminder: Fiscal year (non-calendar year) filer Form 990-series extensions end on the 15th day of the 5th month after your
tax year ends (not November 15).
By November 30
Income tax withholding: Ask employees whose withholding allowances will be different next calendar year to fill out a new
Form W-4, Employee’s Withholding Allowance Certificate.
Wagering tax: File Form 730 and pay the tax on wagers accepted during October.
Exhibit B - General Tax Calendar for Organizations That Conduct Gaming 29
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By December 10
Employees who work for tips: If you received $20 or more in tips during November, report them to your employer. You can use
Form 4070, Employee’s Report of Tips to Employer.
By December 15
Social Security, Medicare and withheld income tax: If the monthly deposit rule applies, deposit the tax for payments in No-
vember.
Nonpayroll withholding: If the monthly deposit rule applies, deposit the tax for payments in November.
Unrelated business income tax: If total expected tax for the year is $500 or more, deposit fourth installment of estimated tax.
Use Form 990-W to figure your estimated tax liability.
December 31
Wagering tax: File Form 730 and pay the tax on wagers accepted during November.
EXHIBIT B
30 Exhibit B - General Tax Calendar for Organizations That Conduct Gaming
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Summary of Forms, Publications and Other Resources
for Organizations Conducting Gaming
Forms
Form 990, Return of Organization Exempt From Income Tax
Form 990-EZ, Short Form Return of Organization Exempt From Income Tax
Form 990-N, e-Postcard (electronic only)
Form 8868, Application for Automatic Extension of Time To File an Exempt Organization Return
Schedule G, Form 990 or Form 990-EZ, Supplemental Information Regarding Fundraising or Gaming Activities
Form 990-T, Exempt Organization Business Income Tax Return
Form W-2G, Certain Gambling Winnings
Form 1096, Annual Summary and Transmittal of U.S. Information Returns
Form 5754, Statement by Person(s) Receiving Gambling Winnings
Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons
Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding
Form 945, Annual Return of Withheld Federal Income Tax
Form 730, Monthly Tax Return for Wagers
Form 11-C, Occupational Tax and Registration Return for Wagering
Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding
Form W-4, Employee’s Withholding Allowance Certificate
Form 941, Employer’s Quarterly Federal Tax Return
Form 944, Employer’s Annual Federal Tax Return
Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return
Form W-2, Wage and Tax Statement
Form W-3, Transmittal of Wage and Tax Statements
Form 4070A, Employee’s Daily Record of Tips
Form 4070, Employee’s Report of Tips to Employer
Form 4137, Social Security and Medicare Tax on Unreported Tip Income
Form W-9, Request for Taxpayer Identification Number and Certification
Form 1099-MISC, Miscellaneous Income
Publications
Publication 557, Tax-Exempt Status for Your Organization
Publication 598, Tax on Unrelated Business Income of Exempt Organizations
Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities EXHIBIT C
E
Publication 15, (Circular E), Employer’s Tax Guide
x
Publication 15-A, Employer’s Supplemental Tax Guide h
Publication 531, Reporting Tip Income i
b
it
Exhibit C - Summary of Forms, Publications and Other Resources for Organizations Conducting Gaming 31
C
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Publication 583, Starting a Business and Keeping Records
Publication 1779, Independent Contractor or Employee
Publication 4221-PC, Compliance Guide for 501(c)(3) Public Charities
Publication 4221-PF, Compliance Guide for 501(c)(3) Private Foundations
Publication 4221-NC, Compliance Guide for Tax-Exempt Organizations (Other than 501(c)(3) Public Charities and Private
Foundations)
Other Resources
IRS Tax Exempt and Government Entities Customer Account Services: 877-829-5500 (toll-free). This department can
answer your technical and procedural questions concerning charities and other non-profit organizations.
Business and Specialty Tax Line: 800-829-4933 (toll-free). This department can answer your specific questions about
employment and wagering taxes.
IRS Forms and Publications: 800-829-3676 (toll-free) You can order tax forms and publications for delivery by U. S. mail. Be
aware that quantities are limited.
IRS.gov
Tax Information for Charities & Other Non-Profits
Social Security Administration
IRS Forms, Instructions & Publications
Filing Information For Charities & Non-Profits
EO Update: The IRS electronic newsletter with information for tax-exempt organizations and the practitioners who represent
them
Life Cycle of an Exempt Organization
Stay Exempt – Tax Basics for 501(c)(3) Organizations: A specialized educational website from the IRS Exempt
Organizations office
EXHIBIT C
32 Exhibit C - Summary of Forms, Publications and Other Resources for Organizations Conducting Gaming
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