As the NFL Season Begins Tonight, Here is Your Friendly Reminder to Not Forget the Tax Man..
In an attempt to return to normalcy, the United States is excited for the kickoff of the 2020 NFL Season. While only an extremely small number of people will attend the game in-person, millions will be watching from the television, laptop, or tablet around the world. While COVID has slowed down a lot of the world, it hasn’t stopped the gamblers and fantasy sports fanatics in the United States.
If you are “smart” (lucky) enough to select the right players/bets, you’ll pocket some cash. However, take note that the Internal Revenue Service may be entitled to a portion of those winnings. In case you didn’t know, fantasy sports and gambling winnings are both taxable; whether obtaining legally in state or illegally overseas. Whenever your winnings exceed a certain threshold, the casino/betting parlor will generally fill out a Form W-2G and send it to the IRS. This form contains not only your personal information, but your winnings. If you refuse to provide this information to the casino/betting parlor, they will automatically withhold 24% of your winnings to offset the taxes owed.
However, recreational players should not be alarmed. The threshold only applies if you receive:
$1,200 or more in gambling winnings from bingo or slot machines,
$1,500 or more in winnings (reduced by the wager) from keno,
More than $5,000 in winnings (reduced by the wager or buy-in) from a poker tournament,
$600 or more in gambling winnings (except winnings from bingo, keno, slot machines, and poker tournaments) and the payout is at least 300 times the amount of the wager; or
Any other gambling winnings subject to federal income tax withholding.
$600 or more in daily fantasy sports winnings (reduced by the wager) on sites like FanDuel or DraftKings.
Even if your jackpot is not enough to prompt a W-2G, you're still legally required to report those smaller winning amounts to the IRS and, where applicable, your state tax collector. However, if you itemize on your tax return, you can take a deduction for gambling losses to offset the winnings. The professionals at The Center for Financial, Legal, and Tax Planning are more than knowledgeable with regards to the tax code and other ways to minimize your tax burden. Please contact us at (618) 997-3436 with any questions.