Tips are taxable income, even when they come from gambling winnings

You don't have to pay taxes on money you win gambling. But tips from gambling winnings is another story.Wayne Parry/AP Photo

Gambling winnings in Canada are tax-free. Employees’ tips and gratuities are taxable. But what if you work in the gaming industry and a casino patron tips you after hitting the jackpot at the slots?

The Tax Court addressed that issue in a decision released last week involving a slot attendant at the Grand Villa Casino in Burnaby, B.C., who was reassessed by the Canada Revenue Agency for failing to report nearly $24,000 (in 2011) and $39,000 (in 2012) of tips as taxable income on his returns. He was also slapped with gross negligence penalties of $3,059 (2011) and $5,352 (2012) for omitting these tips from his income.

Prior to joining the casino in 1999, the taxpayer was a full-time financial adviser who sold mutual funds and life insurance. Once he began working at the casino, he transitioned to part-time advisory work.

His slot attendant duties included servicing the slot machines, contacting the appropriate casino employees when a patron won and wanted to cash out, showing guests how to use the machines when necessary, and “generally maintaining a friendly, positive attitude in interacting with casino patrons.” The taxpayer was paid an annual salary by the casino of $27,000 in 2011 and $29,000 in 2012.

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