IRS Criminal Tax Investigations Targeting Casino Winnings: What Virginia Gamblers Need to Know

As online gaming and sports gambling continue to grow in popularity, casino gambling remains extremely popular as well. This is especially true in Virginia, with the Commonwealth reportedly ranking in the top 10 for casino gambling revenue. While this is good news for Virginia’s economy—and while it means that gamblers in Virginia have plenty of options available—it also means that casino gamblers in the Commonwealth are at high risk of facing scrutiny from the IRS.

What does this mean for you, and what do you need to know if you are targeted by the IRS? Virginia tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, explains:

Gambling Winnings Are Subject to Federal Income Tax

First and foremost, gambling winnings are subject to federal income tax under the Internal Revenue Code. This is true for both casual and professional gamblers. If you win money gambling at a casino in Virginia (or online), the general rule is that you must report your winnings to the IRS. As the IRS makes clear, “[y]ou must report all gambling winnings on Form 1040 or Form 1040-SR (use Schedule 1 (Form 1040)), including winnings that aren't reported on a Form W-2G.”

Beginning in 2026, Only 90 Percent of Gambling Losses Are Deductible

Previously, gamblers could use their gambling losses to completely offset their gambling winnings if they experienced a net loss during the year. This provided a significant tax benefit, and even those who could not completely offset their winnings could often reduce their federal tax bill substantially.

However, this is set to change in 2026. Under a provision in the Big Beautiful Bill, which President Trump signed into law on July 4, 2025, only 90 percent of gambling losses will be federally deductible starting in 2026. This is going to have a huge impact for many gamblers, unless Congress acts to prevent this change from taking effect.

Improperly Reporting Gambling Winnings or Losses Could Lead to Criminal Charges

The IRS has prioritized gambling-related tax enforcement in recent years. Along with conducting audits, the IRS is conducting criminal tax investigations targeting gamblers as well. While all IRS inquiries present serious risks, criminal inquiries present risks for both fines and prison time.

With this in mind, if you have concerns about your federal filings related to your gambling wins or losses, or if you have been contacted by the IRS, you should consult with an experienced Virginia tax attorney promptly. While you may be able to avoid criminal charges, doing so will require an informed approach and a strategic defense.

Request a Call with Virginia Tax Attorney Kevin E. Thorn

Do you need to know more about facing criminal scrutiny from the IRS related to your gambling wins or losses in Virginia? If so, we encourage you to contact us promptly. To request a call with Virginia tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, please call 703-752-3752 or tell us how we can reach you online today.