College hoops fans will be filling in their brackets this month for the March Madness betting, but many may not be aware of the tax rules surrounding gambling wins and losses. The Illinois CPA Society has some tips from the pros who know how to make the layups.
According to the American Gaming Association, nearly 40 million Americans filled out brackets for last year’s tournament and bet an estimated $2 billion. Beyond the brackets, total wagering on the tournament runs as high as $9 billion.
The Illinois CPA Society reminds all basketball fans to keep these key federal tax rules in mind during March Madness and for all types of gaming, so the IRS doesn’t call foul:
• Special tax reporting is required for gambling wins of at least $600 or 300 times the original wager.
• Gambling wins of $5000 or more may require withholding taxes to be taken out before payout.
• All cash and non-cash gambling winnings are taxable.
• Casual gamblers must report win and loss totals separately—not simply state the overall difference.
• Keep all printed gaming receipts or records of wagers for official tax documentation.
Gambling winnings are reported to the Internal Revenue Service on Form W-2G, but if sharing a cash prize with a group, taxpayers also need IRS Form 5754 to file their taxes. And if they don’t want federal withholding taxes taken out of a lesser cash prize before receiving a payout, winners need to provide Form W-9 to the payer to prevent mandatory withholding on amounts of $600 or more.