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21 March 2017

March Madness and Your Taxes

March Madness and Your Taxes

Doing well with your March Madness brackets? The IRS is happy for you…as long as you remember their cut of the winnings. Here’s what you should know about how you need to report earnings as well as tips to offset the tax burden (such as claiming other gambling losses).

Whether you enter a contest online or in an office pool, if you win more than $600 and at least 300 times the amount of the wager (combined with other gambling wins for the year), you should receive a 1099, AND income tax may be withheld. Here are some things to note:

  • Nonprofessional gamblers must report the full amount of your gambling winnings for the year on Form 1040 line 21, Other Income.
  • federal form W-2G,Certain Gambling Winnings (downloads as a pdf), should be issued by the payor but, when it comes to office pools, this rarely happens. So the burden to report the winnings falls on you, the winner.
  • Some fantasy sports sites do not consider themselves “gambling” sites. They may, instead, issue you a form 1099-MISC.
  • Gambling losses for the year can be deducted on Schedule A of Form 1040 Line 28, Other Miscellaneous. Deductions, but they cannot exceed the amount of your winnings. You also can't reduce your gambling winnings by your gambling losses and report the difference. Instead, report the full amount of your winnings as income and claim your losses (up to the amount of winnings) as an itemized deduction.
  • It’s important to document your winnings (and losses), taking note of the date and type of wager, the name and address of the gambling institution/payor, names of other people who participated, and the amount you won or loss.
  • Didn’t pay into the office pool but got a prize? It’s still taxable. For those in charge of purchasing office prizes, take note that the value and type of prize matters, especially if employees receive other fringe benefits throughout the year.

For specific questions on how March Madness winnings may affect your taxes (or your employees’ taxes), contact us.

Image Copyright: yobro10 / 123RF Stock Photo

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