March Madness 2018. The Big Dance is finally here, bringing days of non-stop basketball excitement and often, an office pool or two. There are a few things we can count on this time of year; first the quick switch of the screen from March Madness games to the Wall Street Journal as the boss walks by, and second, that the co-worker who organized the tournament office pool isn’t going to send you a W-2G detailing your winnings.
While most brackets are “busted” early on, the IRS, believe it or not, is actually counting on the millions of people who have small, or large winnings, from their March Madness bets to voluntarily report the income on next year’s tax return.
Betting on sports is one the United States biggest past times, but in many instances, and in many states its’ illegal. Statistics show that there is more money bet in Vegas during the NCAA March Madness Tournament than at any other time throughout the year. The FBI estimates that more than $2.5 billion is illegally wagered on March Madness every year. Until those who are for legalizing gambling nationwide get a win, the IRS will continue hoping that you voluntarily report your winnings.
WHAT DO YOU NEED TO KNOW???
- If you win more than $1200 you should receive a form W-2G from your co-worker who is running the office pool (not likely!) and the IRS gets a copy keeping you on the hook for taxes owed.
- In the reverse scenario, if you lose money gambling, you can deduct these losses up to the amount of your winnings. As of now the Tax Cuts and Jobs Act (TCJA) has preserved this deduction. However, some states do not allow for this deduction – New York, Massachusetts, Michigan and Ohio.
- Each state has their own rule when it comes to collecting state income tax. Most states impose tax on gambling winnings, just as the IRS does. The exceptions are Nevada, Florida, Wyoming, Alaska, South Dakota, Texas, and Washington.
Although it’s very unlikely that you will receive a form W-2G from your office pool commissioner, under the law these winnings are taxable whether you receive a W-2G or not. If you win a prize such as a car, vacation, etc. these are taxable on the fair value of the winnings / prize. You may also report these on a W-2G or 1099-MISC.
As you are completing your bracket before the start of Round 1 remember that the half court buzzer beater could have unanticipated results.
For any questions contact a member of our personal tax team today!