Sports bettors booking some nice winnings during football season or seeing major daily fantasy dollar signs may want to beware – the taxman may be watching.
A new report estimates that the federal government has missed out on $1.5 billion in income from sports bettors since the Supreme Court overturned the virtual ban on wagering outside of Nevada in 2018. That now may be changing as the IRS is looking to recoup some of those potential funds.
“148,908 individuals who were issued Forms W-2G with a total amount of more than $15,000 per individual in gambling winnings… did not file a tax return,” the Treasury Inspector General for Tax Administration noted in the new report. “These non-filers were associated with approximately $13.2 billion in total gambling winnings.”
Enforcement Actions May Be Coming
The Inspector General put part of the blame on the IRS, which never notified about two-thirds of those who didn’t file. The report also noted that the tax revenue bureau has few processes in place to identify potential tax noncompliance by sports wagering operators.
Some recommendations included to begin enforcement actions for 2018-20 and also to review those who didn’t file and weren’t flagged in those years by the IRS’s non-filer system. The Inspector General’s recommendations include:
- Analyzing Tax Identification Numbers to determine what operators may be noncompliant.
- Expanding the wager codes for filers to specifically include sports betting.
- Conduct a scan of the current and potential future conditions of the sports betting and online gambling industries.
“The IRS agreed with three recommendations and plans to begin enforcement action, if appropriate, and scan the conditions of the sports betting and online gambling industries,” the report said. “However, the IRS disagreed with analyzing Forms W-2G with missing TINs to determine what forms of wagering and/or gambling institutions may be noncompliant. Lastly, the IRS partially agreed to explore the potential productivity and feasibility of expanding the wager codes.”
In related news, a recent report noted that the legalization of online gaming and sports betting has led to massive taxes flowing into states.