The coronavirus pandemic has not only affected sports leagues, athletes and fans, but also gamblers and the state tax collectors that have come to rely on that related tax revenue.
Shortened seasons, revised playoff rounds, cardboard fans in stands. Still, Americans' love of sports and boredom with COVID-19 self-isolation, along with the events being televised, has helped the seasons continue.
But the actual reduction in the games mean fewer events on which to place bets. Unless bettors make that up by betting more on the remaining games, associated revenue, tax and otherwise, is likely to fall.
And now a new Internal Revenue Service legal memo also could cost some popular fantasy sports operations, too.
Fewer bets to place: March Madness, the men's collegiate basketball tournament, was canceled. The National Football League's (NFL) Super Bowl may be the biggest single sports betting event, but the weeks of college hoops pulls in the most money.
The spring's professional sports also had to revise their plans. This meant adjustments to the usual National Basketball Association (NBA), as well as its female counterpart WNBA and National Hockey League (NHL) playoffs.
Major League Baseball (MLB) started its shortened season late, with rejiggered schedules that eliminated some much-anticipated pre-pandemic match-ups.
Then there's football.
The NFL still is the most popular of the professional U.S. sports. It did away with late-summer exhibition games and, right now, is still scheduled to kick off its fall season on Thursday, Sept. 10. Unless, of course, there's a coronavirus outbreak.
Many other prefer college football to watching the pro version. A lot of these fans will be out of luck this fall.
Several college athletic conferences have canceled football (and other) games this year, aiming for a spring season. Others plan to power through, but that could change as soon as young athletes come down with COVID-19 symptoms.
Less revenue to collect: While these sports changes have dismayed fans, those who include betting in their sports world also are facing challenges.
That's also put a dent into gambling revenue that states and cities have come to count on each fiscal year.
It's particularly painful here in the United States for the gambling meccas that expanded their operations after the May 2018 Supreme Court ruling that allowed sports wagering in most parts of the United States.
Four of this weekend's Saturday Shout Out pieces focus on sports betting during coronavirus time.
- PR Newswire's Financial Morning Post looks at How Sports Betting is Thriving Despite COVID-19 Lockdowns.
- Sports Illustrated, or SI as it now calls itself, explores The World of Sports Betting in a World Without Sports.
- The Atlantic take a global view of the coronavirus effect on sports betting in What Happens to Gambling When Sports Shut Down?
- The New York Times examines How Does the Coronavirus Affect Sports Betting?
In so many activities nowadays, folks look for a digital option. Online gambling provides that to digitally savvy bettors.
It also means that folks don't have to worry about socially distancing themselves. Instead of physically showing up at a casino sports book or off-track-betting (OTB) parlor to place their bets, all they need is an electronic device and internet connection.
"Even before COVID-19 struck, the online gambling industry has been growing exponentially for years," notes the PR Newswire story listed above. "In 2017, the global market was valued at around $45.8 billion. By 2024, some experts predict global online gambling bets will hit nearly $95 billion. And the global market for online gambling is estimated to grow by 11.5% annually until 2027."
Online tax stream: Tax departments are taking note of the electronic betting trend. And we're not just talking state tax collectors.
The IRS also is getting in on the gambling revenue game from the side of taxes paid by the businesses offering online betting.
That tax tidbit comes from today's fifth and final Saturday Shout Out. It goes to Bloomberg Tax reporters Allyson Versprille and Sam McQuillan for their piece on DraftKings, FanDuel Fees Deemed Taxable in Landmark IRS Memo in which they note:
"Daily fantasy sports companies like FanDuel and DraftKings must pay federal excise tax on their entry fees, the IRS has decided, in an internal memo that could cause a major shakeup in the industry.
An IRS Chief Counsel Memorandum said those companies must pay tax on every wager—the entry fee—they accept as well as an annual occupational tax on each person accepting those wagers. Those taking wagers must also register with the IRS."
That means fantasy sports companies, which data show have generated billions in entry fees and millions in total revenue and have long been the target of state regulators and tax collectors, now could face huge federal tax bills if they haven't been paying and are challenged by the IRS.
Paying the tax piper: Personally, I don't bet on sports. Games are aggravating enough when my teams lose. I don't need to add to my misery by losing money on top of it.
But if you do and you're finding some escape betting on coronavirus-affected sporting events, I wish you luck.
I also remind you (again) that your winnings are taxable income, at both the federal level and in many states. If you do pocket some payouts, my earlier post has tips on Reporting gambling winnings, other income on Schedule 1.
Yes, it's a pain to hand over some of your lucky payout to Uncle Sam. But it's better for bettors to do so from the get go rather than have to pay the due tax bill and added charges if you get your non-paying bet called later by an IRS auditor.
You also might find these items of interest:
- Are you ready for some legal Super Bowl betting beyond Nevada?
- It's Jersey, baby, as Garden State passes Nevada as sports betting hub
- COVID-19 is screwing up sports and complicating some professional athletes' taxes
|Coronavirus Caveat & More Information
In 2020, we're all dealing with extraordinary circumstances,
both in our daily lives and when it comes to our taxes.
The COVID-19 pandemic and efforts to reduce its transmission
and protect ourselves and our families means that,
for the most part, we're focusing on just getting through these trying days.
But life as we knew it before the coronavirus will return,
along with our mundane tax matters.
Here's hoping that happens soon!
In the meantime, you can find more on the virus and its effects on our taxes
by clicking Coronavirus (COVID-19) and Taxes.