Your Super Bowl Winnings are Taxable and Your Losses Might be Deductible

If you won a wager on yesterday’s Super Bowl game, congratulations. Here’s the bad news: It’s taxable.

According to the IRS, all income (unless it is considered “exempt”) is taxable whether from legal or illegal sources. Remember The Untouchables? This was how Eliot Ness ultimately nailed Al Capone – for failure to report taxable income.Image

Needless to say, legal gambling winnings, whether from Las Vegas, Atlantic City, Lotto, or Native American casinos, will be reported to the IRS and is fully taxable. However, illegal gambling winnings are also fully taxable, whether from the office Super Bowl pool, or even a friendly game of poker. Remember when Mitt Romney offered to bet Rick Perry $10,000that he was misquoted about healthcare? If Rick Perry won the money, the income would be taxable.

What do you do with your gambling winnings? Report them on the first page of your tax return. Here’s the Catch-22: You will be signing your tax return under penalty of perjury. If you report illegal gambling income, you have just admitted to (and signed) a statement that you committed a crime. On the other hand, if you don’t report your illegal gambling income, then you have understated income on your tax return, another criminal offense.

Since illegal gambling winnings, like most other illegal sources of income, are rarely reported to the IRS, many taxpayers in this situation probably take their chances and don’t report it.  But what is a conscientious gambler to do?  Speak to your professional accountant.(Image of Drew Brees, Jan. 7th, 2010 by IAN RANSLEY DESIGN + ILLUSTRATION, on Flickr, Creative Commons License)

Read more: http://technorati.com/business/article/your-super-bowl-winnings-are-taxable/#ixzz1m0tyI8B3

First published at Technorati: http://technorati.com/business/article/your-super-bowl-winnings-are-taxable/

2 thoughts on “Your Super Bowl Winnings are Taxable and Your Losses Might be Deductible

  1. Taxation without representation was one of the major sticking points causing the Revolutionary war with England. In fact, if you’ll recall the Boston tea party when colonists dressed as Indians through tea into the bay you might better understand. If you don’t know this history, I suggest you go onto Wikipedia and look it up. The Boston tea party led to the Townshend Acts, to skirmishes in the streets, and eventually to the Revolutionary war. Okay so let’s talk about this shall we?

    • Thanks, “super tax rates.” Indeed, it’s especially ironic that a nation founded on the principle of minimal government interference and taxes ultimately transformed into what the US is today. At the beginning of the 20th Century, the US changed direction from being a libertarian backwater to becoming a world power. This movement was ignited by World War I, (the 16th amendment http://en.wikipedia.org/wiki/Sixteenth_Amendment_to_the_United_States_Constitution) and then became the status quo as a result of increased spending to fund the New Deal, World War II, the Great Society, the Cold War, etc.

      That said, you can’t have it both ways. For the US to return to becoming a low-tax libertarian backwater, it would need to reduce its military activities and its social welfare programs to a point that most so-called “Tea Party” members would probably feel uncomfortable.

      It’s especially ironic that, even though a tax on tea ultimately led to the founding of the US, we today pay taxes on tea and coffee. Even more ironic when the Mayor of New York proposes to outlaw large and sugary tea drinks all together.

      Thanks for the comment,

      Mark

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