Consumer Alert: Beware the tax man cometh if you fail to report your sports bet winnings
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ROCHESTER, N.Y. (WHEC) — The big game is Sunday and thousands of you may be thinking about placing a sports bet for the first time. But be warned. The taxman knows all.
The IRS doesn’t know about your winnings in the moment, but if you win enough money, the taxman may know about it before you’ve even had a chance to spend your cash. That’s because, by law, sportsbooks and casinos have to report it.
You can’t watch television without seeing a sportsbook commercial. Mobile sports betting became legal in the Empire State on Jan. 8. New Yorkers have gone bonkers for betting, making this the number one sports betting state in the country.
But as I told you in Thursday’s Consumer Investigation, it’s important for you to keep careful records of your wins and losses.
Because if you win enough, the sportsbooks are required to tell the taxman.
Let me explain. Your winnings are taxable if you collect $600 or more. But your winnings are also reported to the Feds if you win 300 times your wager, even if it doesn’t equal $600. For example, if you bet $1 and you win $300, your winnings are taxable. The sportsbook or casino will send you a form called a W-2G, and they inform the IRS.
"If some reason you forgot. Let’s say it happened in May. You went to a casino over the weekend, and you forgot your wagering. You forgot you received that form. The IRS will send you a notice and say. ‘Hey, we show this activity on your transcript, on your tax transcript on your end. If so, here’s the proposed adjustment.’ They’ll say, “All right, here’s what we think you owe in tax,’" explained Jim Schnell, a CPA and tax partner at Mengel Metzger Barr & Co.
But what if you have a big win, but you also had some big losses? Guess what? The sportsbook does not report your losses to the IRS.
That’s up to you. And if you want to include those losses to lower your tax burden, you have to itemize them when you file your taxes.
Bottom line: Keep records of all your bets because if you win big, you could lose big if you fail to report it.