The Ravens are favored as the next NFL Champions in the upcoming Super Bowl. But in an article reported by Bankrate.com, the surest bet is that the Internal Revenue Service will be the big loser on Super Bowl Sunday.
The IRS will get a cut of the income earned by the players, but most earnings from bets placed on the Ravens and Giants will never be seen by the tax collector. To put it simply, many people don't know that gambling winnings are taxable. Of those who do, a good portion simply choose to ignore the law.
Nevada is the only state in the U.S that allows legal betting on sports. Casino's report more than $2 billion in annual wagers on athletic events, including racing and professional and collegiate sports. Over $71 million was waged on last years' Super Bowl, and Super Bowl weekend is one of the largest weekend gambling events in Las Vegas, according to the report.
Casino bets aren't the real concern of the IRS because they do have ways of tracking those winnings. It's a dicier tax proposition when it comes to the millions of dollars bet in the popular offshore sports betting operations, illegal wagers placed with bookies, and all those friendly office pools. All gambling winnings - regardless of the amount - are taxable. But it's ultimately the winner's responsibility to let the IRS know how much was won, even if the casino doesn't have to file a W-2G form.
In 1997, the latest year for which tax data is complete, IRS statistics show 1.2 million tax returns reported $10 billion in gambling earnings. The IRS can only estimate the amount of income that goes unreported from gambling yearly.
The IRS does offer a tax break for those conscientious taxpayers who report their gambling income on line 21 of their Form 1040. Gamblers are allowed to include any gambling losses as itemized deductions, to the extent that the deduction for losses doesn't exceed gambling winnings. You need to keep good records of your gambling losses to support your deduction if you are ever audited. The IRS recommends keeping a diary of gambling winnings and losses, showing the amount spent and the amount won, the date, and the event.