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"10 Most Expensive Tax Mistakes That Cost You Thousands"
On May 14, the Supreme Court struck down the Professional and Amateur Sports Betting Act that had made Las Vegas the only state where bettors could gamble on college and professional sports. (Sorry, wrestling fans, no betting for you. Spoiler alert — the matches are fixed.) Imagine how much louder your neighborhood sports pub will get when the obnoxious drunk at the end of the bar who won't stop jabbering about his fantasy team is actually putting his money where his mouth is!
Dozens of states are expected to legalize betting within the next few years. Naturally, there will be winners and losers. The American Gaming Association estimated that legal sports betting will generate up to $26.6 billion of economic activity and 152,000 jobs. Walmart and Target will make millions from fans converting their winnings into giant TVs. Even a few old-school backroom bookies will manage to hang on — they can offer credit, so they don't have to start kneecapping until some poor loser fails to pay.
But there's one group we can count on to win big no matter who else loses, and that's the federal, state, and local tax collectors sharing the juice from the new action.
Gambling winnings are taxable just like any other income. The IRS doesn't care who wins or loses; they just want their share. Winnings are taxable as ordinary income — you don't pay any more if your favorite quarterback connects with a Hail Mary than you do for hitting blackjack at the casino. The biggest winners can even find their good luck pushing them into higher tax brackets.
Gambling losses are deductible, but only if you itemize (which eliminates about 90% of taxpayers), and only up to whatever amount of actual winnings you report. That means that if at the end of the year, you're in the black, you'll owe tax on your winnings — but if you're in the red, there's no deduction for your loss. That gives Uncle Sam the perfect "heads I win, tails I don't lose" proposition. (Odds are good that whoever said the only way to win at gambling is to be the house never saw how the IRS rigged the game!)
Of course, the IRS won't be the only tax collector profiting from this cash explosion. State treasuries, which generally start with federal adjusted gross income or taxable income for their own collections, will also share the bounty. State and local governments may impose their taxes directly on gambling activities as well. And they'll collect even more in sales and liquor taxes from bettors flocking to sports books and other venues.
There's one more quasi-tax worth considering here. Sports leagues like the NFL and NBA are pushing to collect an "integrity fee" equal to 1% of the total amount bet. (Sports books generally collect a 10% commission on winning bets, so 1% of the amount bet equals about 20% of their gross revenue.) The leagues say this compensates them for their intellectual property rights in statistics used in betting. But critics say the integrity fee is more like just a simple shakedown: "Nice place you got here . . . it would be a shame if anything happened to it!"
Here's a proposition I bet you'll like. Bring me your taxes and challenge me to help you pay less. You literally can't lose. Call me today and see how much you're losing — you can't win if you don't play! Wanna Play?
John Leidy, EA
DIY Books Coach
It was the third day of the very first income tax course when I realized that it will become my mission to help people understand their taxes better to be able to make better decisions and STOP wasting money on taxes they should not have to pay.