Death and taxes may be the only certainties in life. But this time of year you may be wondering more about gambling and taxes. As we approach the deadline to file personal income tax here in America, you may have some serious questions about how (and whether you have to) report your wins at the casino. Luckily, we have some friends who can help answer questions.
Recently, the Super Bowl was played. Then we found ourselves in March Madness. Both of these events have a huge amount of sports betting associated with them, according to the American Gaming Association. With the surge of bracket contests and office pools, Jackson Hewitt Tax Services found that 62% of taxpayers are unclear on how to with gambling and taxes, especially when it comes to money won from sports bets.
In accordance with IRS reporting rules, earnings from sports bets or gambling are fully taxable and must be reported on Form 1040 as ‘other income’ on both federal and state income tax returns. Examples of ‘other income’ include, but are not limited to, money won from casinos, game shows, raffles and state lotteries. Winnings from foreign countries, including international gambling are also taxable and must be reported on federal tax returns.
We saw in our survey that taxpayers are confused and need the guidance of a tax professional to help them correctly report additional sources of income like cash winnings from gambling. As sports betting becomes more available and accessible to Americans, it is important for taxpayers to know the intricacies of federal and state tax law,” said Mark Steber, Chief Tax Information Officer at Jackson Hewitt when speaking on gambling and taxes. “If these earnings are reported incorrectly, or not at all, there is major risk for the taxpayer: they could be penalized from the IRS, their state, or even audited.”
Additionally, 48% of tax payers falsely believe cash winnings from sports bets are only taxable if their respective state has legalized sports betting; when in reality, all income must be reported. How’s that for a kick in the pants? Well, the experts at Jackson Hewitt offer do have some suggestions about gambling and taxes, and they have three reminders to help you avoid mistakes when reporting your winnings:
For more information on gambling and taxes you can visit a professional. This survey was commissioned by Jackson Hewitt between March 3rd and 6th last year, among 1,000 American adults aged 18 and older, and conducted online by Dynata, the world’s largest first-party data platform for insights, activation and measurement. One thousand complete surveys were collected using the sample framework based on U.S. Census data.
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