March Madness is here. This is the time of year when employees, friends and family members participate in pools based on the bracket parings for the NCAA basketball tournament. While most brackets are busted early on — the tournament has a rich history of upsets — some prescient “brackentologists” walk away winners.
But there’s more to the story. Technically, March Madness pools are a form of gambling, subject to the usual tax rules for these activities. Therefore, if you win, you’re required to report the taxable income on your federal tax return, although it’s often ignored. And this can also lead to state income tax complications.
Starting point: Winnings from office pools and other March Madness bets are fully taxable, just like winning wagers from other sporting events like the Super Bowl and World Series.
Similarly, betting at casinos, racetracks and other venues counts as gambling for tax purposes, as well as bingo games at the local church or temple and lottery tickets at a convenience store. If you’re in it to win it and you do, you owe income tax.
If you’re lucky enough to win $1,200 or more, you should receive a Form W-2G listing the amount. As with a W-2 for wages, the IRS gets its own copy. So, if the person in the next cubicle running the pool meets this obligation — not very likely — you’re officially on the hook. Typically, entities such as nonprofit organizations that provide NCAA pools will follow through on reporting responsibilities.
About Ken Berry
Ken Berry, Esq., is a nationally known writer and editor specializing in tax, financial, and legal matters. During his long career, he has served as managing editor of a publisher of content-based marketing tools and vice president of an online continuing education company. As a freelance writer, Ken has authored thousands of articles for a wide variety of newsletters, magazines, and other periodicals.