The world of online sports betting is so complex that bettors try to get the best odds and lines. When you hit a nice windfall at your favorite online sportsbook, taxation suddenly becomes a reality. What exactly should you be aware of when it comes to online sports betting taxes? We aren’t certified tax experts and we advise you to seek professional assistance immediately after a big win. Believe us, it will cost you less to hire a professional tax expert than getting a fine from the IRS.
Do You Have to Pay Tax?
If sports betting is your only source of income, you must pay tax on the money you win. Unfortunately, you can’t dodge the IRS. If you do, you’ll commit a crime. The bottom line is this; pay your taxes on every dime you win at an online sportsbook.
What Online Gaming Is Taxable?
The US tax code on sportsbook winnings is not always easy to grasp. Once you declare your online sportsbook wins, you must fill out W-2G forms. It doesn’t matter if you won a progressive slots jackpot at an online casino or sportsbook. If the amount you won exceeds the minimum threshold, you must pay tax on it.
It’s important to note that if you don’t receive any W-2G forms. It doesn’t mean that you can skip your taxes. Collecting the forms doesn’t say much about you having to pay taxes on your winnings. It’s about nudging you in the right direction. It would be best if you still did your end-of-year calculations according to the applicable tax rules. Which online sportsbook winnings are taxable? Pretty much everything. It includes winnings at sportsbooks, horse racing, dog racing, lottery, game shows, and online casinos.
If you receive a W-2G form for your gaming income, it helps you to crunch the numbers. However, if you don’t, it’s up to you to calculate the gross income number and fill in the winnings accordingly. You’ll need to report your gaming losses, and check that you are indeed eligible. Since the passage of the 2018 Tax Cut and Jobs Act, taxpayers can no longer itemize their deductions.
Finally, there’s one thing that you must be aware of when it comes to W-2G forms. Sometimes the IRS withholds your tax at the time of payment. Initially, it looks a bit bothersome, but we advise you to do it. As it means you won’t run into any problems once you file your tax return. It can become a nasty reality when you overspend, don’t! It’s best to cash out your winnings and report it to the IRS.
Keeping Track of Your Winnings
Note, the US tax code requires filers to record their wins and losses based on sessions. There are no clear indicators of what that means and what counts as a session in sports betting. You must keep the amounts you win and lose but also the dates of the wagers and the names and addresses of the places you play.
Moreover, it’s not enough to know just the net amount of your sports betting results. You must report your wins as well as the money you lost on separate lines. Thankfully, most online sportsbooks keep your histories for you for quite a while. You can access your sports betting history in a matter of seconds. So, there is no need to write everything down. However, we advise you to take a screenshot of all your sessions. Print them out and keep them in a separate file.
Professional Sports Bettors and Online Sportsbook Tax
If you ever take your sports betting ventures to new heights and become a professional sportsbook or casino bettor. It has its pros and cons, especially if you win often. Therefore, you might want to report your sportsbook winnings under the rules of Schedule C.
It’s not easy unless you are someone who spends a lot of hours working on his or her bets. The pros of a professional sports bettor outweigh the cons. That said, we guarantee you that the IRS will investigate your sports betting activities sooner than later. So, it’s best to report your winnings immediately. If you don’t know how to go about it, hire a tax consultant specializing in sportsbook betting and online gambling wins.
Dangers of Not Caring
If you fail to declare your winnings to the IRS, rest assured you’ll face the law’s full brunt. The IRS can’t track every online sportsbook or casino, and it’s aware that there are many unregulated services online. If you win a lot and you withdraw your money via bank wires or checks. A day will come when the IRS will require an audit, and the results might be disastrous.
Gambling Tax Laws Other Countries
All the info mentioned above applies, of course, only to those players that have tax dealings with the United States. That doesn’t mean that you’re entirely free from all such stuff if you reside elsewhere, with different countries applying different rules for sports bettors. Some countries have no taxation for profits from sports betting and other such ventures, quite a few places are going to tax your winnings, especially if they are above a particular sum.
A few countries apply tax on all winnings you derive from sportsbook betting. Therefore, you don’t have to worry about crunching numbers and filling forms. You should check with your local tax office to see what your obligations are.