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Death and taxes could be the only certaintys in life. You may be more concerned about taxes and gambling at this time of the year. As we near the deadline for filing your personal income tax in America, you might have serious questions about reporting your casino winnings. We have friends who are able to answer your questions.
Recently, the Super Bowl It was a game. Then, we found ourselves in March Madness. According to the American Gaming Association, both of these events are associated with a large amount of sports betting. Jackson Hewitt Tax Services, a tax service, found that with the increase in bracket contests and office pooling, 62% of taxpayers were unsure of how to handle gambling and taxes. This was especially true when it came to money won through sports betting.
In accordance with IRS reporting rules, earnings from sports bets or gambling are fully taxable and must be reported on Form 1040 as ‘other income’ on both federal and state income tax returns. Examples of ‘other income’ include, but are not limited to, money won from casinos, game shows, raffles and state lotteries. Winnings in foreign countries, such as international gambling, are also taxed and must be declared on federal tax returns.
Our survey revealed that taxpayers were confused and needed the help of a professional to correctly report other sources of income, such as Cash Winnings From gambling. It is important that Americans understand the tax laws of their state and federal governments as sports betting becomes increasingly accessible and available. Mark SteberChief Tax Information Officer of Jackson Hewitt, when speaking about gambling and taxes. “If these earnings were not reported correctly or incorrectly, the taxpayer could face serious penalties from the IRS or their state. They may even be audited.”
48% of taxpayers believe that cash winnings on sports bets can only be taxed if the state in which they live has legalized it. Sports bettingWhen in reality, every income must be declared. What a kick to the pants! Jackson Hewitt’s experts offer some advice on gambling and tax, and three reminders for you to avoid mistakes when you report your winnings.
- Report all gambling winnings as ‘other income.’ Earnings over 600 dollars as well as the fair market value of items should be reported to the IRS as ‘other income’ on Form 1040. The payer can withhold up to 24 percent of the winnings, but the tax bracket determines if the taxpayer owes more.
- Keep organized records of your wins and losses. If the taxpayer itemsizes their deductions in Form 1040, they may deduct gambling losses. The amount of losses deducted cannot be greater than the amount of winnings. Taxpayers can receive a W-2G from an official sports betting organization. If they do not, they still have to prove their winnings.
- Each state has a different approach to gambling winnings. Each state has its own rules and regulations on how to declare income on a state return. This is similar to other tax issues. Even if sports gambling is not legal in the state where the taxpayer won the money, it must still be reported. Also, taxpayers that win in a different state than where they live may have to submit a tax return to the state in which they won.
You can consult a professional for more information about gambling and taxes. Jackson Hewitt commissioned this survey between March 3rd. The survey of 1,000 American adults aged between 18 and 25 was conducted online. DynataThe world’s largest platform for insights, activation, and measurement. One thousand surveys were collected based on the sample framework created using U.S. Census statistics.
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