# How Do Slot Machine Jackpots Work

On a slot machine, a random number generator (RNG) picks a random number for each reel, which each number matching a stop on its reel. Then the machine directs the reels to stop on the spots selected by the RNG. Note that by the time the reels are spinning, the game is already over. Progressive slot machines build big jackpots by adding a percentage of each bet to the jackpot until somebody wins. Standalone progressives build the jackpot from bets at a single machine, linked progressives build a jackpot from bets on a number of electronically linked machines and wide-area progressives build jackpots from bets on machines.

Most amateur gamblers believe that if a slot machine hits the jackpot, then it immediately goes ‘cold’. They also believe the opposite is true; if a machine runs cold for hours, then it’s ‘due’ for a big payoff. But if you look inside modern slot machines, you learn the cold hard truth. Every single pull of the lever has equal odds of winning, and those odds are steep.

Since the earliest mechanical slot machines, gaming manufacturers have weighted the machines to tweak the odds. If you look closely at the reels of old machines, you’ll find many more blanks and low-scoring symbols than pots of gold, especially on the third or final reel. This creates the famous ‘near miss’ effect.

Modern slots have replaced the gears, cranks and stoppers with precision step motors and random number generators (RNG). When you pull the crank on a modern slot, a built-in RNG selects three numbers between one and 64. Each number corresponds to one of 22 spots on the three reels. The trick is that half of the numbers between one and 64 correspond to blank spots and only one random number matches the jackpot symbol. The odds of nailing the jackpot are 1/64 x 1/64 x 1/64 or one in 262,144.

The lever is just for show. Three internal step motors spin each reel and stop them precisely at the positions chosen by the RNG. Still feeling lucky?

### Return vs payback

There is no such thing as a ‘loose’ or ‘tight’ slot machine. In modern casinos, slot machines are programmed to deliver a precise return percentage, somewhere around 95 per cent. That means 95 per cent of the money that goes into a slot machine is paid back out to the players and the casino keeps the rest.
But here’s where things get tricky. The return percentage is not the same as the payback, which is the actual amount of money you win or lose during each gambling session at a slot machine. If you sat down at a slot machine for eternity and pulled the lever an infinite amount of times, your payback percentage would be exactly 95 per cent. Likewise, in a casino full of gamblers, the collective machines will pay back roughly 95 per cent of the total money gambled during the course of a day.

Unfortunately, you are only one person and you don’t have infinite pulls. So your odds of winning are equally good or bad every pull. You could lose all day and that doesn’t mean the machine is rigged. And it doesn’t mean that the guy who wins the jackpot found the ‘loose’ machine. He just got very, very lucky.

### Top 5 Facts: Gambling stats

1) Big jackpot, big odds

The odds of winning the jackpot on a ‘progressive’ slot machine like Megabucks is one in 50 million, although if you are that one you’re likely to become very rich.

2) ‘Easy’ money

68 per cent of people who gamble at Las Vegas play the slot machines most often. And there’s a large target market as nearly 90 per cent of visitors to Las Vegas gamble.

3) The house wins

In the United States, gaming was a \$92 billion industry in 2007, double what it was a decade ago. And in the UK, there were 143 casinos as of 31 March 2009.

4) United States of Slots

Even though Nevada is widely considered the gambling state, there are 37 US states with some form of legalised electronic gaming device like slot machines or video poker.

5) Vegas’ most wantedNew quil ceda creek casino.

The Nevada Gaming Commission maintains a list of 35 people who are not allowed in any casino or gambling establishment. Only one of them is a woman.

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Players dream of hitting a big jackpot when they play the slots. When that day comes for you, you'll have questions about the taxes you must pay on the winnings.

## Hand Pay Jackpots

When you hit the winning combination of symbols for a large jackpot, your slot machine locks up. Depending on the machine, the lights on top of the machine may come on and start flashing, music may play or bells ring. A slot attendant arrives promptly to see what you have won.

On jackpots smaller than \$5,000, an attendant verifies that you hit the jackpot and then assists you in claiming your money at the cashier's cage. In the case of a large or progressive jackpot, the casino may have technicians come and check the machine to certify that it was functioning properly when the jackpot hit. If you hit one of the wide-area progressive machines such as MegaBucks, the slot company that operates the game comes out and verifies that machine before giving you a check.

When you hit a jackpot, you have the option of taking your winnings in cash or check. Usually, large amounts are paid by check. In the case of the MegaBucks or similar multi-million dollar jackpots, you receive a check for the partial amount, and then you have 90 days to decide if you want to be paid a lump sum or an annual annuity on the balance. If you select the lump sum option, you receive only a percentage of your actual winnings. For example, the full winnings of one multi-million slot jackpot is paid in 25 annual installments, or you can take a lump sum of 60 percent of the winnings.

## IRS Withholding

All casino winnings are subject to federal taxes. However, the IRS only requires the casinos to report wins over \$1,200 on slots and ​video poker machines or other games such as keno, lottery or horse racing. When you have a win equal to or greater than \$1200, you are issued a W-2G form. This form lists your name, address and Social Security number. The casinos are not required to take out withholding tax on jackpots under \$5,000 as long you supply your Social Security number. If you don’t provide your Social Security number, the casinos withhold 28 percent on small jackpots.

### Slot Machines How They Work

You can request a specific amount of withholding tax to be taken out of any jackpot you win. Some players like to do this to avoid a big tax payment in April when they file their income tax returns. The additional withholding may not be necessary if you keep a log book. The law allows you to deduct gambling losses up to the amount of your winnings. You can only do this if you have documentation of your losses. Keeping a diary or log book is the way to do this.

## Proper Identification

Casinos can refuse to pay you until you produce proper identification—a photo ID such as a driver’s license, military ID or passport.

### How Do Slot Machine Jackpots Work Against

If you don’t produce an ID, you are photographed and the casino holds your winnings until you come back with proper ID. For this reason, you should always carry a valid form of identification with you when you visit the casino.

When the casino checks your identification, it also checks your age to make sure you are legally old enough to play. The minimum age for gambling varies from state to state, but under-age gamblers are not be paid if they hit a jackpot. This is the law in all jurisdictions, and it has been upheld in court.