promoearn: The Daily Money: Do you have to pay taxes for winning your March Madness pool?

Sunday, March 27, 2022

The Daily Money: Do you have to pay taxes for winning your March Madness pool?

ALL THE MONEY NEWS YOU NEED TO KNOW

Sunday, March 27

Happy Sunday, Daily Money readers! It's Brett Molina back to talk taxes again.

It's a glorious time to be a basketball fan. The NBA is approaching playoff time, while March Madness continues to dominate both NCAA men's and women's college basketball.

And I'm going to bet there are a lot of you out there who joined a college basketball pool, whether it's through your office or with friends.

But it's more than just brackets. As USA TODAY+ Sports Betting insider Lance Pugmire notes, legalized sports betting has expanded beyond 30 states, including New York, which reported $2.4 billion in sports bets during its first five weeks of business (including the Super Bowl) earlier this year.

And of course, there's the emergence of betting apps like DraftKings and FanDuel, where sports fans can quickly bet on games right from their smartphone.

"The online sports betting business is quickly becoming a new way of Americans' daily lives, as the numbers reflect and the ongoing partnerships with sports leagues manifest," said Pugmire. "Once taboo, betting on sports is becoming as easy as purchasing a hot dog and beer at the nation's arenas and stadiums, creating a new (and guaranteed) windfall of cash without the risk accepted by the avalanche of bettors."

Score a big payday last year, whether via sports betting app or your college hoops bracket pool? Technically, the IRS wants you to report it.

"Gambling winnings are fully taxable and you must report the income on your tax return," reads a note on the IRS website.

"There is no exclusion for the office pool. There is no exclusion for the home poker game," said Mark Steber, chief tax information officer at Jackson Hewitt.

There isn't specific data on how many people don't report winnings from office pools and other events. Steber said if you don't report winnings and the IRS finds out, they can tack on penalties and interest based on the size of the underreported income.

However, Steber notes you can deduct gambling losses from your return "to the extent you have winnings." For example, let's say last year you won $100 in sports bets but lost $200 overall. You can deduct a maximum of $100, so long as you are able to document those losses with information such as receipts, print-outs from casinos or even journals detailing the dates and amounts.

Steber says while there's no specific definition for what counts as documentation, the IRS "takes into account the totality of the facts and circumstances and taxpayer information in making their determination."

For apps like FanDuel and DraftKings, if you have net earnings for the year over $600, they are required to report that to the IRS, which means you'll receive a tax form noting that income.

Your weekend tax break

Now that I'm done playing Debbie Downer, soothe yourself with some Wordle. Wait, you already did today's puzzle? Then try out one of these 10 fantastic spinoffs.

That's a wrap for this Sunday's special tax season edition. See you next week.

Follow Brett Molina on Twitter: @brettmolina23.