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