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Win big in the office Super Bowl pool? Don’t forget to tell the IRS

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imagesCA7C0LLNWe have all done it. Participated in the office pool for the Super Bowl. I once won $250 a few years back by betting $20 on my team to win. Should I have reported those winnings to the IRS? Good question.

According to Kay Bell, tax blogger for this recent article published by bankrate.com, I did not necessarily need to report my winnings since the amount was less than $5,000 and less than 300 times my amount bet.  Plus my little office pool was not a regulated gambling establishment or entities such as state lotteries, casinos,  the tracks or any other betting operation. But with any IRS tax matter, there can be many different interpretations to consider.

With gambling on the annual Super Bowl estimimated to be over $100,000,000 there are certain to be winners with purses over $5000. Did they report their bounty to the IRS? Most did not and probably didn’t even consider reporting their winnings to the IRS.  Some estimates of off the books sports betting surpass $380 billion annually. The IRS would love to get a fraction of this windfall.

How would the IRS know if they won in the first place? The answer is if the gambler wagered in a regulated betting establishment, the IRS requires them provide a tax ID aka social security number to collect the payout. What if one  refuses to provide that information? The licensed casino or track will withhold 28% of the winnings before releasing the balance of the winnings.

Think you can win big in off shore internet gambling sites and not pay Uncle Sam? Think again. The IRS has gotten wiser to not just the winners but to the sites owners who promote and manage the sites and the executives that process the financial transactions. Serious charges including bank fraud, illegal gambling, and money laundering, have been successfully brought against these businesses.

So how do you know what to claim on your taxes and what not to? Simply, if you had to provide your social security number to the betting establishment to claim your financial prize, then yes you do.

If you consider yourself  a professional gambler, meaning you gamble regularly in order to support yourself or your family, then yes you do need to declare your winnings as income.

What if you are just a recreational gambler that has not necessarily hit it big but wins smaller amounts consistently? Yes, you should declare your winnings as ‘other’ income and itemize your losses to offset the tax liability of the wins. Losses can also be used to offset the tax implications.

If you are in doubt that you should claim that good guess in your office Super Bowl pool or your casino winnings have caught the attention of the IRS , feel free to call us at The Pappas Group.  We have handled many gambling related tax returns for our clients  for the past 20 years. We can be reached at 407-648-2555 or visit pappastax.com for answers to all your tax related questions.

 


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