The IRS Will Win Your Office’s March Madness Bracket
March 28, 2014
Earlier this week, the last contender for the $1 billion prize offered by Warren Buffet and Quicken Loans for the perfect March Madness bracket was eliminated. Considering the odds of winning per the contest’s own fine print were 1 in 9.2 quintillion (a trillion multiplied by a million) this comes as no shock to anyone.
But the battle wages on for millions of others who’ve placed friendly bets in pools that carry much better odds, though of course for much smaller amounts of money. Everyone from the overly-excited guy in the office next door to the President has been excitedly cheering for their teams. Yet we’re willing to wager that few (if any) of them have been thinking about how winning would impact their taxes. Of course, here at Talley and Company, you know we do just that. That’s because whether there’s $1 billion at stake or $100, March Madness bets are classified as gambling, and gambling is taxable.
Like with any day at the track, outing to a casino or purchase of a lottery ticket, cash and non-cash winnings from March Madness bets are taxable. All winnings should be reported on Form 1040 as “Other Income” (line 21). In addition, you may be required to pay an estimated tax on your gambling winnings.
Special paperwork comes into play only if your winnings are over $600 or 300 times the wager (lucky you, if that’s the case). Gambling winnings in excess of $5,000 could also be subject to a tax withholding requirement before the winning payout is made to the recipient. If luck wasn’t on your side, take heart-some gambling losses can also be deductible if you itemize and keep good records.
If you enjoy the entertainment of a game like Keno periodically in the year or, in the rare instance that you make a living as a professional gambler, detailed win-loss records are a must.
As for the Buffett/Quicken contest? Not all is lost. While the $1 billion prize is off the table, the contest will still award $100,000 to 20 eligible contestants with the top-performing brackets. To be eligible, you must have…well…entered the contest. Unfortunately, the gentleman who made it furthest along in the battle for the perfect bracket never did. To him we say, better luck next year. To you, we say, don’t forget about your taxes, and Talley & Company is here to help answer any questions you may have.