I have a friend who in the past 6 months has cashed out winnings totaling 35K from his online sportsbook. He is now getting worried because he doesnt know if he should report this on his tax return or not. He has been getting his money via bank wire if that makes any difference. So my question is has anyone here been in this position and if so did you report those winnings on your tax returns? Thanks in advance for the replies. :SIB
Tax Advice On Gambling Winnings
- Thread starter 60 SEC ASSASSIN
- Start date
Depends on how much he makes per year... if he only makes 35K per year and he has doubled it - the IRS will most likely audit him.
If I were you, I would consult a professional.
This topic has come up time and time again in this forum, and you will get conflicting answers.
Half of the forum will tell you to report it, and half of the forum will tell you not to report it.
Consult a tax advisor and he can discuss your friend's specific overall situation with him.
All I can say is this.......if he is worried (which you say he is) then he should report it.
I have consulted a few professionals about this in the past and their advice to me was to report it, especially if you say that his transactions have all gone through his bank.
This topic has come up time and time again in this forum, and you will get conflicting answers.
Half of the forum will tell you to report it, and half of the forum will tell you not to report it.
Consult a tax advisor and he can discuss your friend's specific overall situation with him.
All I can say is this.......if he is worried (which you say he is) then he should report it.
I have consulted a few professionals about this in the past and their advice to me was to report it, especially if you say that his transactions have all gone through his bank.
How much do you make a year at this? If you dont mind me asking how much do you report each year?
I wanted to know because I was thinking about reporting it this year myself.
Also if you report this on your taxs - what form do you get and what do you report it as? Internet gambling?
I would think if you put that it would raise a red flag towards the IRS... or do you report it as Casino winnings?
Thanks!
SBBC,
You just report it as gambling winnings.
The IRS doesn't have to know how or what you won it on......nor do they care.
They are happy that you are reporting it.
This is the safe way to go especially if you make a decent amount doing this.
You can offset your losses against your winnings.
For example, let's say that you won $50,000 this year......but you lost $30,000.......you only have to worry about the $20,000 that you made in profit.
If you consult a professional, he will know what to do.
If he doesn't know what to do, then you need to get a new accountant.
This is basic stuff for an accountant.
You just report it as gambling winnings.
The IRS doesn't have to know how or what you won it on......nor do they care.
They are happy that you are reporting it.
This is the safe way to go especially if you make a decent amount doing this.
You can offset your losses against your winnings.
For example, let's say that you won $50,000 this year......but you lost $30,000.......you only have to worry about the $20,000 that you made in profit.
If you consult a professional, he will know what to do.
If he doesn't know what to do, then you need to get a new accountant.
This is basic stuff for an accountant.
Thanks for the replies fellas.
BB - So in the past you have reported this kind of income or did you let it slide? I guess my only question is wouldnt you need some sort of 1099 to support the winnings?
My suggestion to him was to report it since he is worried and it runs straight through his checking account. It just sucks to have to pay taxes on it. The other option would be just to report the interest he earns on his checking account if any but I don't think he'll just go for that. I'm still waiting to talk to a cpa i know and see what she has to say. i'll let you guys know.
Its such a dicey situation. Damned if you do and damned if you don't.
BB - So in the past you have reported this kind of income or did you let it slide? I guess my only question is wouldnt you need some sort of 1099 to support the winnings?
My suggestion to him was to report it since he is worried and it runs straight through his checking account. It just sucks to have to pay taxes on it. The other option would be just to report the interest he earns on his checking account if any but I don't think he'll just go for that. I'm still waiting to talk to a cpa i know and see what she has to say. i'll let you guys know.
Its such a dicey situation. Damned if you do and damned if you don't.
60, not sure where the closest place is for you to do this but this is what you do. I live in Dallas and we do it in Shreport.
You go to the casino there, or mail it to them before so it can clear, and write a check for say
20k. The give you 20k in chips, play with some of it, stay over night or two and then cash your chips out. If there are ever any questions you have the check receipt and you can basically show where you lost the money. You won 20k betting and lost 20k betting, net 0. The IRS can't do anything.
You go to the casino there, or mail it to them before so it can clear, and write a check for say
20k. The give you 20k in chips, play with some of it, stay over night or two and then cash your chips out. If there are ever any questions you have the check receipt and you can basically show where you lost the money. You won 20k betting and lost 20k betting, net 0. The IRS can't do anything.
Thanks!
I don't make enough each year for them to even bother. From winning and losing the best year I make about 5k..
However one question?
Do you report both your winnings and losses or just your net winnings?
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if you have a giant broom you can go sweep the floors of a horse track and count them in as losses to. Just kidding but every bit helps.
60 Sec,
You really don't need anything to support your winnings. As I said, the IRS is happy to take their cut.
If I were your friend, I would report it. You are right, it sucks either way. You can take your chances and not report it, but if you are making a significant amount then you could be looking at jail time if you get caught.
Or, you could report it, and then one third of your hard earned money will go to government. Either way, it does really suck.
If you are a pro gambler living in Vegas, then there are a lot of expenses that you can write off, so the tax hit is not that bad.
In this case, you would have to declare yourself as a professional gambler.
Being that I am pretty sure that your friend is not a professional gambler, he is not going to be able to get all of these additional write-offs.
Just tell him to report it, and he will sleep better at night.
SBBC,
You report your winnings, and then offset the losses against them.
You really don't need anything to support your winnings. As I said, the IRS is happy to take their cut.
If I were your friend, I would report it. You are right, it sucks either way. You can take your chances and not report it, but if you are making a significant amount then you could be looking at jail time if you get caught.
Or, you could report it, and then one third of your hard earned money will go to government. Either way, it does really suck.
If you are a pro gambler living in Vegas, then there are a lot of expenses that you can write off, so the tax hit is not that bad.
In this case, you would have to declare yourself as a professional gambler.
Being that I am pretty sure that your friend is not a professional gambler, he is not going to be able to get all of these additional write-offs.
Just tell him to report it, and he will sleep better at night.
SBBC,
You report your winnings, and then offset the losses against them.
Thanks for the help BB as well as all the other guys. I'll forward this link to my buddy. Yea my buddy lives in NY so declaring himself as a professional gambler won't work for him either.
If he is in New York that is a good thing considering online gambling is not illegal their - so even if he needs to show proof of his wins/losses they can't nail him for online gambling.
Just have him pay the taxes and he will be good to go.
Just have him pay the taxes and he will be good to go.
How is the IRS going to know about his winnings in the first place. Does the offshore book report to the IRS? I'm just asking.
My buddy's first withdrawal was for 12k after the regular baseball season. The money was wired to his checking account. IRS would know if his bank (Washington Mutual) reported it to them.
SBBC -
Is that true that online gambling is not illegal in NY? That's pretty good. I just assumed it was illegal in all the states.
60 Sec,
As crazy as this may sound, your friend could technically declare himself as a professional gambler even if he lives in New York.
The IRS is only concerned with taxes. They are not concerned with what your friend is doing.
Legally speaking, the IRS cannot report your friend to any other agency if they "think" that he is gambling online.
The IRS deals with taxes and nothing more.
So bottom line, your friend could still declare himslef as a professional gambler.
As SBBC said, online gambling is not illegal in New York. In fact, gambling with a local is not illegal in New York. As long as you are a "player" you are fine. The bookie is the only one who could potentially face any consequences.
The only thing that they could possibly get you on is the wire act, which would be Federal anyway. This would even be a stretch being that this law has not been updated in over 40 years.
As crazy as this may sound, your friend could technically declare himself as a professional gambler even if he lives in New York.
The IRS is only concerned with taxes. They are not concerned with what your friend is doing.
Legally speaking, the IRS cannot report your friend to any other agency if they "think" that he is gambling online.
The IRS deals with taxes and nothing more.
So bottom line, your friend could still declare himslef as a professional gambler.
As SBBC said, online gambling is not illegal in New York. In fact, gambling with a local is not illegal in New York. As long as you are a "player" you are fine. The bookie is the only one who could potentially face any consequences.
The only thing that they could possibly get you on is the wire act, which would be Federal anyway. This would even be a stretch being that this law has not been updated in over 40 years.
Buffalo was correct - a "player" is fine in NY. The law states..
"Fortunately for the player, gambling itself is not illegal under New York law. It is the promotion of gambling, and possession of gambling records or gambling devices which is illegal"
"So it is the Internet casino, not the individual gambler, that is a potential target of New York law. "A person 'advances gambling activity' when, acting other than as a player, he engages in conduct which materially aids any form of gambling activity." Id. ? 225 ?4. Certainly the establishment and maintenance of an Internet server is conduct that "materially aids" gambling. The big question is jurisdiction."
I guess at the Federal level they could try to get someone under the wire act- it has been tried before and failed all times.
