Since cruise ships with casinos are all registered outside the United States -- with their casinos only open when the ships are in international (or at least non-U.S.) waters -- a frequent question is whether a slot jackpot or other big win on the high seas is subject to U.S. income taxes.

The short answer, for any U.S. citizen or permanent resident, is yes.  U.S. tax law provides that all American citizens and permanent residents are subject to income tax on money earned (or in this case won) anywhere on the face of the earth, and you are required to report it on the "Other Income" line when you fill out the old 1040.

But the next question often heard is whether cruise ship casinos (like all U.S. land-based casinos) file a W-2G tax form with the U.S. Internal Revenue Service in the event of a jackpot, and what level of payout triggers this.

The answer varies. Just like land-based casinos, the major cruise lines -- as we understand it -- are supposed to file a W-2G for all slot jackpots of $1,200 or more, and for any table game jackpots and payouts where the odds are 300 to 1 or higher (for instance, a Caribbean Stud progressive jackpot).

But in practice, some of the biggest cruise lines do -- and some don't.

On ship's that do issue W-2G's, the casino typically would get the needed information for the form before handing over the money, and give the lucky winner two copies while keeping one to transmit to the IRS. (By the way, if you win a shipboard bingo jackpot of more than $1,200, even though bingo is not part of the casino, you also may get a W-2G.)

As a general rule, cruise ship casinos do not withhold U.S. taxes on slot jackpots if the winner provides a valid social security number.  (If you decline to provide your social security number, the casinos may withhold at a rate of 28 percent.) 

However, table game payouts subject to tax reporting or any gambling winnings in excess of $5,000 (and at least 300 times the amount wagered) are subject to withholding at a rate of 25 percent (or 28 percent if you decline to provide a valid social security number).

But the good news is that if you are playing high-stakes blackjack, craps, roulette, baccarat or pai-gow on your cruise, W-2Gs probably will not be forthcoming on any of the major cruise lines -- even if you have a great night at the table and win a pile of money.

Keep in mind, however, that cruise ship casinos are subject to U.S. money laundering rules, and the cruise line must file Currency Transaction Reports on aggregate cash transactions by any individual of $10,000 or more in any single day.

Also, if you return to the United States with $10,000 or more in cash in your possession, you need to declare this to U.S. Customs -- even if this has nothing to do with casino winnings, but is your retirement savings that you brought with you when you set sail. (Again, this is related to money laundering and the financing of terrorism.)

Finally, keep in mind that if you are lucky enough to hit a slot jackpot on your cruise, and somehow are not given a W-2G, you have no way of knowing whether the cruise line subsequently filed one for your winnings with the IRS. And, of course, when tax time comes, you still are responsible for declaring the jackpot as income.