Earlier this month I fired $85.
I didn’t use a lighter or a match. Instead, I joined and then immediately bombarded a group of NFL survivors. These contests require each entrant to choose an NFL team to win each week, not choosing the same team twice. If your team wins, you survive another week. Lose, and you’re done for the year.
After two wild weeks of NFL action, even more serious players are feeling the burn: Of the 6,133 attendees who paid the $1,000 entry fee to participate in the Survivor Pool offered by Circa Sportsbook in Las Vegas, there are only 2,033 left.
Can you blame us though? The prize for winning Circa’s pool is north of $6 million. The pot for my more modest pool is worth over $40,000. Imagine what you could do with that kind of money.
As a financial writer, I’m here to tell you: First, you would pay taxes on it.
“Every CPA will tell you that you have to report income from any source,” says Ray Kondler, a certified public accountant at Kondler & Associates in Las Vegas. “If you make $100 in your office pool, in theory, you should report it.”
This goes for winnings from legal casinos and sportsbooks as well as payouts from unofficial pools like the one I’m no longer in.
If you get a modest score, say a few hundred dollars, it’s up to you to report your winnings to the IRS – neither a casino nor Bob of Accounts Payable will do that for you.
If you are a big winner at a casino (usually if your winnings are at least $600 and at least 300 times your bet amount), you will receive an IRS Form W-2G. The winner of my pool won’t receive such documents, but it would be wise to follow the law, Kondler says.
“They can take the $40,000 and put it in their bank account,” he says. But “if they are audited, they will find it difficult to explain what it is”.
As for us losers, there’s a silver lining: the IRS allows gamblers to deduct their losses – with some important caveats.
First of all, if you are an amateur player, you will need to detail to qualify for the deduction. These days, since the standard deduction for single filers is $12,950, most people don’t itemize, which means you’ll probably have to bear the loss on your chin.
Professional players have it a bit better. If you are a professional, you can deduct your losses as business expenses on Annex C without having to detail.
Whether you’re a pro or not, you can only deduct losses to the extent that they offset your winnings. If you have $500 in winnings (which would be taxed as income) and $1,000 in losses, you can only deduct $500 in losing bets.
If you plan to do gambling calculations on your tax return, it’s a good idea to keep a separate log of your wins and losses throughout the year, Kondler says. “In a perfect scenario, you’ll be able to show all of your income and deduct all of your losses,” he says. “If you play different events, try to keep track of things you enter and lose.”
If you’re lucky enough to land a huge win like my survivor pool prize, having losses to report could help reduce an otherwise large tax bill. But make sure they are, in fact, your losses.
The last time I was at a sportsbook in Vegas, a gentleman wandered into the room asking for losing tickets before frustrated bettors tore them up or ransacked them – he even offered to redeem coupons. free drinks against my losing slips.
It turned out that he had reached a bet of $100,000 at the start of the year and planned to use this collection of losing bets to offset his winnings. You don’t have to be an accountant to know that this strategy could land you in extremely hot water with the IRS.
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