MEDIA WARNING – Whereas March Insanity’ brackets will be digital, taxes on earnings are nonetheless actual

0
118
Yahoo Finance

Wolters Kluwer is investigating the tax implications of March Madness winnings and reminding players that sports betting is a taxable activity

Wolters Kluwer Tax & Accounting:

What: March Madness is a popular time to fill in your National Collegiate Athletic Association (NCAA) basketball clips and hope for a winner. Wolters Kluwer Tax & Accounting advises that, according to the Internal Revenue Service (IRS), betting activities can be viewed as gambling, business or hobby – all of which are taxable income. Even the profit of the paperclip pool is a chargeable event. The handling of expenses and the reporting of this income can vary depending on the state law and are another reason to contact a tax advisor for advice.

Why: Placing a bet in the NCAA bracket office pool is considered a game of chance, although participants may claim some skill in selecting their bracket winners. According to the tax code, all income from gambling is taxable, regardless of whether the gambling is legal or illegal. All states are now allowed to offer sports betting following a 2018 Supreme Court ruling, and many have passed laws or are beginning to legislate. This makes it easier to conduct legal sports betting and can also help the IRS and state tax authorities keep track of sports betting activities.

25 states and the District of Columbia have now legalized sports betting (AR, CO, DE, IA, IL, IN, LA, MD, MI, MS, MT, NC, NH, NJ, NM, NV, NY, OR), PA , RI, SD, TN, VA, WA, and WV), some not until November 2020 elections. Most of these states impose an excise tax on the licensed sports betting facility, and states with an income tax usually tax gambling winnings, as do the federal government. Legal sports betting is likely to report winnings to the IRS and state tax authorities, and there may even be tax withholding on larger jackpots.

Under the Unlawful Internet Gambling Act of 2006, fantasy sports were more of a game of skill than a game of chance. As a game of skill, it’s either a hobby or a business depending on the facts. Income from a hobby or business is also taxable. If a person has three out of the last five years of profit from the activity, or if that activity is the main source of income for the taxpayer on a full-time basis, then the person can be considered to be engaged in a trade or business. This makes it more likely that related expenses will be deductible from income.

The story goes on

Who: Tax expert Mark Luscombe, JD, LL.M., CPA, Principal Federal Tax Analyst at Wolters Kluwer Tax & Accounting, can help sort through the various rules, requirements, and report forms for gamers, hobbyists, or businesses, as well as the different art and the way in which expenses and losses are dealt with.

PLEASE NOTE: These materials provide accurate and authoritative information on the topics covered. The information is provided with the understanding that Wolters Kluwer Tax & Accounting does not provide any legal, accounting or other professional services.

Contact: To arrange interviews with Mark Luscombe and other tax experts at Wolters Kluwer Tax & Accounting on this or any other tax topic, please contact Bart Lipinski.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210317005226/de/

contacts

BEARD LIPINSKI
847-267-2225
Bart.Lipinski@wolterskluwer.com