Did you participate in an office gambling pool or place a few bets with your friends? Well, bad news, big winner: those bets were illegal and your winnings are taxable.
Tax researcher CCH cites unreported gambling winnings as the most prominent of 10 behaviors that can cross the line from tax avoidance to outright evasion.
Simply put, if you receive money, prizes or awards like a trip or new car from a lottery, a local raffle, a casino or sports betting, you are supposed to report the winnings as income on Schedule A of your federal-tax return. You could be subject to estimated tax payments on your winnings as well.
“If you win an informal office pool, you technically are supposed to report it,” said John W. Roth, a senior federal-tax analyst at CCH.
“But I think (the IRS) is more concerned about Internet betting, which is easier to track through credit cards.”
The most likely time a gambling situation could come to the IRS’ attention, he adds, is during an audit.
Gambling losses are actually deductible, but you can only use the deduction to offset gambling wins. You also can’t claim the deduction unless you keep an accurate record of your betting.
So how’d you make out tonight? Illegal winnings or potential deductions?