Do I Have To Pay Taxes On My Winnings?
For anyone who’s ever walked into a casino and won a few bets, the question invariably comes up: Do I have to pay taxes on my winnings? Well, yes. Yes, you do. Whenever you win a substantial amount of money at legal betting sites or tribal casinos or racetracks in the United States, that facility makes sure you pay taxes on those winnings. You’ve got to fill out forms, submit records, and open yourself up to the IRS, so it’s always a good idea to keep your finances in order – even those that come from unrelated sources – if you’re going to make betting a big part of your life.
That said, there are certain situations where most folks aren’t going to pay taxes on their winnings. These, for a variety of reasons, are essentially impossible to be accounted for by the IRS or any other government agency. For example, say you win $15 shooting dice behind the movie theater or $20 playing quarter-bet Hold ‘Em down at Jimmy’s house; you’re supposed to report all that with your yearly income statement. Nobody does. When bets are cash in and cash out, people tend to treat their winnings like “found money.”
That works well enough for modest payouts. Naturally, the larger your haul, the bigger the chances are that Uncle Sam knows what’s up. Banks have to report deposits of more than $10,000 to the government, but even those banks will generally respect your privacy when you’re putting in smaller amounts. Still, if you don’t report all of your winnings, there’s a very real chance that tax season could hurt. Bad.
Do I Have To Pay Sports Betting Taxes?
Yes. Many people consider online sports betting at overseas sportsbooks to be a kind of tax-free loophole. They believe, because online sports betting is unaddressed in so many states (and legally ambiguous in almost all of them), that it must be some huge, ignored avenue for untaxable wealth. It isn’t. You are expected to pay your sports betting taxes along with all of your other winnings.
By law, if you’re an American citizen or US resident, you have to pay taxes on all of your income, regardless of how you’ve earned it (albeit the rules are slightly different for those classified as resident or non-resident aliens). Obviously, that includes sports betting taxes. Even though online sportsbooks are based in other countries and handle payouts from foreign banks, American tax law applies to you. And if the government knows you’ve got unreported income, they will come for it and leave with even more than you allegedly “owed.” It’s just not worth the headache.
However, most online sportsbooks will not report your winnings to any US authority, nor will they help you file your winnings in any taxable form. They also will not parse your sports betting taxes for your convenience or even withhold any money for that purpose. The nuances of IRS regulations represent too much of a risk for any online sportsbook to speak on directly, so they rightfully leave it entirely in your hands, exactly where it belongs. And as a sports bettor, that’s where you should want it. I’m one, and I like being in charge of my money. I have to pay taxes on my winnings, so I do. But I only pay the absolute minimum required by law, and that buys me the privilege of not being otherwise hassled over my income year in and year out.
Do Most Online Gamblers Pay Taxes?
The consensus is that most online gamblers do not pay taxes on their winnings. In fact, only a tiny percentage seem to, and these are likely high rollers or otherwise heavily scrutinized individuals. For the most part, sports betting taxes go completely unpaid.
This simple fact – that the federal and state governments are not getting all of the taxes that they think they’re owed – is what drove New Jersey’s Supreme Court challenge of the Professional and Amateur Sports Protection Act (PASPA, 1992). Further, members of Congress are also toying with the idea of repealing anti-gambling laws like the Unlawful Internet Gambling Enforcement Act (UIGEA, 2006) on the basis that sports betting taxes would generate over $500 billion in annual taxable income. PASPA being struck down by the Court in 2018 is a clear indication that in the future, U.S. sports bettors will need to be more serious about paying their sports betting taxes.
Where Can I Pay My Sports Betting Taxes?
The IRS has provided Form W-2G: Certain Gambling Winnings” to help you organize and pay all your gambling and sports betting taxes. Visit the link to download the form and view instructions on how to fill out and turn in all the necessary paperwork. (If you need more help to organize your files, visit IRS IRS Topic 419.) The IRS policy on gambling taxes may change at any time, so please make sure to always use the most up-to-date versions of all requisite forms. If your individual state has a separate income tax, please refer to your local tax code for more information about gambling and sports betting taxes.
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