IRS Doesn't Always Get its Cut of Super Bowl Winnings

The Ravens are favored as the next NFL Champions in the upcoming Super Bowl. But in an article reported by, 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.

You may like these other stories...

Ernst & Young 2013 audit deficiency rate 49%, regulators sayMichael Rapoport of the Wall Street Journal reported on Thursday that the Public Company Accounting Oversight Board (PCAOB) found deficiencies in 28 of the...
Some of your clients may get away to business conventions from time to time. It gives them a chance to rub shoulders with colleagues, catch up on the latest developments, and fine-tune their skills. And, when the meetings or...
PwC must face $1 billion lawsuit over MF Global adviceA federal judge on Wednesday ordered PricewaterhouseCoopers (PwC) to face a $1 billion lawsuit claiming that its bad accounting advice was a substantial cause of the...

Already a member? log in here.

Upcoming CPE Webinars

Sep 9
In this session we'll discuss the types of technologies and their uses in a small accounting firm office.
Sep 10
Transfer your knowledge and experience to prepare your team for the challenges and opportunities of an accounting career.
Sep 11
This webcast will include discussions of commonly-applicable Clarified Auditing Standards for audits of non-public, non-governmental entities.
Sep 24
In this jam-packed presentation Excel expert David Ringstrom, CPA will give you a crash-course in creating spreadsheet-based dashboards. A dashboard condenses large amounts of data into a compact space, yet enables the end user to easily drill down into details when warranted.