With the Super Bowl this weekend, many Americans will be placing bets on who wins the game between the Carolina Panthers and Denver Broncos. Since winnings on bets technically count as a form of income, that winning amount should be reported to the IRS on Form W-2G. However, casinos and legitimate sports betting websites are the only venues that will issue the Form W-2G, and they are only required to issue it if the net income on the bet results in winnings of greater than $600. This concept is similar to that of Keno winnings, where the IRS withholds at least 25% of the winnings. All income is taxable, however, if you were to win money in an office pool or in a group of friends, the odds of that income being reported is extremely unlikely. According to the law, income from winnings from a group should be filled out in IRS Form 5754. The IRS expects these forms to be filled out based on the honor code, but in most cases, these forms will not be looked at by many people betting on the Super Bowl.
http://finance.yahoo.com/news/making-super-bowl-bet-might-175221959.html
It would be interesting to see how much capital gains and income goes unreported over the year. It is unfortunate that there a lot of people who are paid under the table to make money on bets and the government will never know about it. They mention using the honor system, but is there a better way to go about it that may have a low cost? A government with such a large debt, it might be worth it to look into these types of issues.
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ReplyDeleteThank you for sharing this interesting article. I can't believe casinos are only required to issue a W-2G form to those that win more than $600. This means that our government is potentially missing out on a lot of tax revenue. This missed out tax revenue might be able to help our government spending as a lot of government programs have been cut in recent years.
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