Hi Steve,
Since I retired from the IRS in 1994 one of my projects has been to put together a "Tax treaty Book" that I sell to various casinos for their poker tournaments. I am currently working on one for this years Binion's World Series of Poker.

My book covers each country that has a tax treaty with the United States. Currently I believe there are 57 such countries. I'll know for sure when I finish each treaty. My book primarily deals with foreign poker players who win poker tournaments but does cover winning situations described in your post.

The casino MUST withold 30% of the slot win from the Canadian resident. The United states tax treaty with Canada does not cover "gaming wins" and therefore the casino as a witholding agent has the responsibility to withold the necessary tax. If the casino does not - the casino becomes responsible to the US Treasury for the tax and can be required to pay back up witholding.

Generally speaking a tax treaty takes precedence over current tax law. However, it is possible that law passed AFTER the treaty was signed could create a few problems .

There is no federal tax witholding for a U.S. citizen when he wins a slot machine jackpot. If the slot win happens to be more than $1,200 a W2-G is issued. A U.S. citizen can voluntarily request the casino to withold tax so at the end of the year the tax "bite" is not as great.

Many of the States that have gaming activity WILL WITHOLD at the source and take state tax money out of the individual's win. However, each State is different.

I answered this question for you because we go way back. As you know I normally will not answer tax questions for free. After all this is how I make extra money for chips. . Your Friend, Jim

P.S. I forgot to pick up your book. Email me your address so I can send you a check.