How to report Super Bowl & all gambling wins to the IRS
Monday, February 05, 2018
It was not a super Sunday for either the New England Patriots or Nevada's casinos.
When all the numbers are tallied, it looks like the Silver State's sports books might lose only their third Super Bowl in 28 years thanks to the Philadelphia Eagles' 41-33 upset of the New England Patriots in Super Bowl LII.
However, a Vegas mystery bettor is very happy. He or she reportedly won more than $10 million on at least $7.4 million in Super Bowl money-line wagers.
That person's good luck also delights the Internal Revenue Service. The federal tax collector will be getting its cut of that bettor's take, as well as on the money pocketed by all the other lucky Nevada gamblers.
Gambling wins are taxable income: Since they put their money on the big game in the only state authorized to take sports bets, there's a record of the winnings. The Silver State casinos will, where required, withhold federal taxes from the Super Bowl payouts.
Folks who bet illegally and won, however, will likely compound their skirting of U.S. laws by not reporting their under-the-table winnings.
That's bad news for the IRS.
It also eventually could be bad news for folks who ignore their obligation to report and pay tax on all their gambling proceeds, regardless of how they were won. If they ever are caught, they are in big trouble.
Uncle Sam doesn't care if you get your money via criminal enterprises, be it illegal gambling or some other nefarious scheme. He just wants his due portion of the taxable income. Remember the most notorious tax scofflaw, Al Capone.
I know all the readers of the ol' blog, however, are very honest taxpayers. For all y'all Super Bowl and other bet winners, here's how to let the IRS know about your taxable luck.
Look for the tax statements: If you win at a casino, race track or other legitimate gambling venue, depending on the game of chance and amount you win, you will get a Form W-2G from the betting parlor detailing your winnings.
Sometimes the amounts won trigger the new, slightly lower withholding rate of 24 percent when the lucky gambler is paid. In other instances, a gambling establishment simply will ask winners for a tax ID (the individual's Social Security number) for tax-reporting purposes.
With or without withholding, if you get a W-2G, be sure to include the amount on the form on your tax return. The IRS will get a copy of this form, too, so if you don't report it, tax agents will come asking.
Use the long 1040 form: If you're a casual gambler (like me!), with a trip now and then to Las Vegas, Atlantic City or your nearest casino, you should report the annual total of all your gambling winnings, with and without W-2Gs, on line 21 of Form 1040 see updated form information below.
UPDATE, Aug. 31, 2018: The many tax law changes in the Tax Cuts and Jobs Act prompted the IRS to redesign Form 1040. The proposed new shorter federal tax return, if approved, will be the only income tax filing form, replacing the long 1040, the 1040A and the 1040EZ. In condensing the 1040, a lot of lines were moved from the actual 1040 to a variety of schedules that will be filed along with the shorter return.
For reporting 2018 tax year gambling income, you'll enter the amount of your winning wagers as additional income on line 6 of the proposed new Form 1040, with details entered on, yes, line 21, Other income on the new Schedule 1 that will be sent to the IRS as an attachment to your federal return.
The amount of prizes or awards, either the cash you received or the value of merchandise won, also goes here.
Take advantage of your losses: Another reason to use the long 1040 because you can itemize all your gambling losses on Schedule A to help offset your taxable winnings. You'll enter that amount in the "Other Miscellaneous Deductions" section of Schedule A.
Wait, you say. Didn't the new tax law, the Tax Cuts and Jobs Act that took effect on Jan. 1 and, as just noted, also led to the revising of Form 1040, do away with that itemizing option?
You're thinking of the "Job Expenses and Certain Miscellaneous Deductions" section of Schedule A. That was eliminated.
But the segment just below it (at least on the 2017 form) is for other deductions, including gambling losses. It wasn't touched by the new tax law, which means that unlike the prior miscellaneous deduction section, these "other" deductions are not subject to the 2 percent of adjusted gross income threshold in order to be claimed.
Note, however, that your bad betting luck only goes so far. You can only use your gambling losses to offset, perhaps zero out, your winnings. You cannot use them to produce an income loss on your return.
Gambling records are key: To make sure you get the most from those bad bets, keep good records.
You generally can prove your winnings and losses through official documentation like the previously mentioned W-2G or Form 5754, Statement by Person(s) Receiving Gambling Winnings.
Other gambling winnings and losses can be verified by wagering tickets, canceled checks, substitute checks, credit records, bank and ATM withdrawals and statements of actual winnings or payment slips provided to you by the gambling establishment.
The IRS also suggests keeping your own documentation in the form of a diary. I'm not talking about a journal where you note, "Dear Diary, the slot machines at Kay's Kasino suck, as in sucked up all my paycheck!" (although that might be cathartic if you're on a losing streak).
Rather, keep a log of your losses and winnings. You can find more record keeping details based on the type of gambling you prefer (Keno, Bingo, poker, horse racing, etc.) in IRS Publication 529.
The IRS doesn't want to see your gambling records when you file your return. The agency has enough to sort through already. But if an IRS examiner sees something suspicious, your complete gambling journal and accompany records will help you show how you cut your $10,000 in winning Super Bowl bets to zero.
Tax timing: Finally, remember that your winnings from yesterday's game will go on your 2018 return due next year.
For this year's April 17 Tax Day, you'll need to dig out last year's winning receipts — and losing tickets — to tally the correct amounts to include on your 2017 forms and schedules.
To save you from such filing scrambling in 2018 and future years, start gambling diary and collection of supporting documents now.
And good luck, on both your taxes and future games of chance.
You also might find these items of interest:
- It's Super Bowl prop bet (and tax) time again!
- Even on big sports gambling days, Uncle Sam comes up short
- Professional gamblers' deductions narrowed a bit under new tax law
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