Got a letter from the IRS stating I owe $14,000. I do not agree. Question inside?

The IRS is going to ask to see your diary that you kept and other substantiating information before they will consider allowing the deduction for the gambling losses.

Gambling losses are a miscellaneous itemized deduction on Schedule A and are limited to the winnings reported on line 21. You must have kept a detailed contemporaneous diary of all of your gambling activity for the entire year and have other documentation to back that up such as bank records for the withdrawals for gambling and deposits of the winnings, losing betting slips, receipts for chip purchases and cash-outs or lottery ticket purchases, etc. Without the diary and substantiating information the IRS will routinely deny the deduction.

Had you read the instructions on the Form W-2G that the casino gave you, you would know that the winnings had to be reported and that you *might* be able to claim a deduction for gambling losses on Schedule A if you had referred to IRS Pub 529 http://www.irs.gov/pub/irs-pdf/p529.pdf as is explained on the W-2G.

You have to report those winnings no matter how much you lost. You did not get to subtract your losses from the winnings even though this may seem fair.

You can use the losses as an itemized expense. However, the net effect on your taxes will depend on how many other itemized deductions you have for that year. Since this is a large amount of money and you are unfamiliar with the way the law works on this topic, I would strongly suggest you get help from a tax professional who will be able to get you down to the lowest taxes possible.

You must also consider consequences on state taxes owed to the state you live in and the state the money was won in. Get help for this.

You still had to report it....you had to report the winnings and then show your losses. You couldn't just not report it.

So you file an amended return with the correct info and show them they are wrong. Better really have very good proof of the losses.

They will take your whole refund this year if you haven't resolved the issue, which you have not. They are 100% going to require proof of the losses, no bones about that. Disputing isn't going to stop them, you have to RESOLVE the issue. That won't happen for a month or two, at least (been there, done that). Especially now when they are at their busiest.

So, you screwed up your taxes and now you think a letter is enough to straighten it out?

1. You report gambling winnings in total on line 21 of the 1040. Only Canadians can net the losses out. "I have proofe...and did not need to report it." Nope, that's not how it works.

2. You report the gambiling losses on schedule A, limited to the amount you won AND if you have proof you lost that money. If you didn't itemize to begin with, you will discover that you are adding more income on line 21 than you can subtract on schedule A. (There can be other ramefications as well when your AGI jumps.) Rerun the numbers on the year in question and include a check when you reply that you "partially" disagree.

3. As for your 2013 refund, it depends on timing. If you got a CP2000 letter that "proposed" to change your taxes, your refund may not be held. But don't spend it as you are likely to owe a bunch of money due to the gambling income.

you may have proof that you lost the $14K you won but it has to be claimed as income on the 1040 and the losses on Sch A under misc

it is doubtful your response will be treated before your refund is due to be sent for 2013

you might wait until late March, early April to file at all to let your response get their attention

The letter should have a telephone number that you can call. I would call them and tell them that you mailed a check and are waiting for it to clear. If you have a local IRS office you may want to pay them a visit. They could note in their computer that you sent a check. It may just take some time to get through their red tape. The government moves very slowly. I would have thought that you would have gotten your canceled check back by now.

You need a really good tax lawyer, because apparently you tried to deduct a non-deductible expense OR you tried to "cherry-pick" itemizations on a non-itemized return...

They will take your refund and keep it until the matter is cleared up...