The first thing to realize is that any winnings are taxable and bettors should include it on a tax return. “Just because a taxpayer doesn’t receive a tax form, (it) does not make the winnings tax-free,” he said. “Taxpayers still have a responsibility to report their prize on their tax return as ‘other income.’”. Tennessee’s fledgling sports betting industry which is exclusively online saw $312.3 million in gross wagers in its first two months of operation (November and December of 2020). This brought in $5.4 million in privilege taxes and both January and February will likely see similar tax. Form 1099-MISC, Miscellaneous Income A common practice for a DFS site is to issue a Form 1099-MISC to a player if the player won $600 or more on the site during the year. The amount of winnings should appear in Box 3, “Other income.” A copy of the form is also sent to the IRS.
DETROIT — Whether or not sports are being played is one question, but there is definitely sports wagering now in all three Detroit casinos.
One day after their crosstown competitors, MotorCity Casino opened its FanDuel Sportsbook in Michigan on Thursday morning with Barry Sanders as its featured guest.
MotorCity was the third Detroit casino to open its sportsbook after MGM Grand Detroit and Greektown Casino-Hotel opened theirs on Wednesday. This was one day after the Michigan Gaming Control Board approved rules to make Michigan the 16th state with legal sports wagering.
Brutal timing
It’s a cruel coincidence for those who pushed for an opening by the NCAA Tournament, as March Madness was canceled just hours after the opening of the sportsbook.
“Our timing was not very good, was it?” said Bruce Dall, president of MotorCity Casino, after answering a few questions about the coronavirus. “All we can do is kind of monitor the situation and adjust accordingly.”
The two-story sportsbook has six betting windows, 67 televisions and 54 self-serve IGT PlaySports betting kiosks. Dall said construction of the nearly 9,000-square-foot sportsbook cost just over $3 million and started in late January.
He said concerns about the virus had not yet slowed traffic at the casino, which is owned by Marian Ilitch, the widow of former Tigers and Red Wings owner Mike and mother of Christopher, who now runs the teams.
The FanDuel partnership allows bettors to wager on those teams, Dall said, adding FanDuel was chosen from 22 partnership offers.
Barry bets on the Tigers at FanDuel Sportsbook
Sanders chose to bet on one of the Ilitch-owned teams, wagering $20 on the Tigers to win the World Series.
The Lions legend did a ceremonial ribbon cutting, a meet and greet with fans, and made four other $20 bets on college basketball conference tournament games before news trickled in later about their cancellations: Michigan to beat Rutgers in the Big Ten, Duke over North Carolina State in the Atlantic Coast Conference, and Texas over Texas Tech in the Big 12, along with the over in that game.
“Those were important,” said Sanders, who notably did not bet on his former team. “So many entities came together, from the legislature to the sports and the fans demanding it, so obviously it’s a big deal.”
He was then asked if he really thought the lowly Tigers (+50000) were a good bet, responding that “we’ve got a chance.”
Fans, bettors excited for Michigan sports betting launch
Sanders’ presence drew fans such as Greg Thomas of St. Clair Shores, who wore his No. 20 Honolulu Blue jersey along with a Lions’ jacket.
“He is my all-time favorite. When I found out Barry was going to be here, I had to make it,” Thomas said. “Fans have been waiting a long time for it, but I wish they would’ve gotten horses as well. But I voted with this, voted for this stuff. Make it a Little Vegas; you know what I mean?”
Fans can place bets on all major US and college sports, though international club soccer wagers are not yet allowed. Horse racing bets are not available in the Detroit casinos.
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Republican state representatives Michael Webber, of Rochester Hills, and Matt Hall, of Marshall, were also on hand for the opening.
News broke later in the day about the cancellation of the Big Ten Tournament in Indianapolis, though at the time of the opening, the NBA had already suspended play.
“It certainly will take a hit,” said Webber, who placed a bet on his alma mater Michigan State to win the NCAA Tournament. “I think eventually there will be a return to normalcy. I think people will really enjoy their ability to wager on sporting events; you don’t have to go to Vegas or Atlantic City, you can do it right here in Detroit or a tribal casino throughout the state.”
Michigan’s tribal casinos are formalizing plans to open their own sports betting facilities throughout the year.
Across town, MGM Grand Detroit opened its BetMGM Sportsbook on Wednesday with Sanders’ old teammate Lomas Brown among the celebrities on hand. The Greektown Sportsbook had former Lions star Lem Barney among its attendees for the opening of its temporary facility. The permanent sportsbook is scheduled to open by football season and will have Barstool Sports branding as Greektown owners Penn National Gaming have partnered with the brand.
Tax Day is right around the corner, and sports wagering winnings should be part of a bettor’s annual filing.
Nathan Rigley, a lead tax research analyst at H&R Block, spoke with TheLines.com to offer advice for bettors making preparations for 2018 and beyond.
The first thing to realize is that any winnings are taxable and bettors should include it on a tax return.
“Just because a taxpayer doesn’t receive a tax form, (it) does not make the winnings tax-free,” he said. “Taxpayers still have a responsibility to report their prize on their tax return as ‘other income.’”
Don’t neglect to report it
Don’t be caught unaware. No matter the amount, gambling winnings are taxable. Those winning a substantial amount are likely to receive a tax form, and the IRS will also receive that form.
Those winnings will usually be reported via form W-2G or 1099-Misc. The IRS will then compare the information to the taxpayer’s return. Not reporting can be costly, triggering penalties and interest.
“Failing to report the prize as income is the surest way to get audited,” Rigley said.
That could certainly be uncomfortable and cause the type of scrutiny most bettors would like to avoid.
Record keeping 101
Serious bettors must not only be savvy with betting lines, but also with record keeping. The IRS advises gamblers to keep an accurate diary or record to substantiate wins and losses on a tax return.
Plan to keep track. A little extra work can pay big dividends in the long run. Rigley recommends bettors include the following in their records:
- The date and type of each wager.
- The name and location of the bet.
- The names of other people with the bettor at the betting establishment.
- The amount won or lost.
Bettors should also keep verifiable documentation of losses, which include:
- Wagering tickets
- Canceled checks
- Credit card records
Mobile wagering makes keeping track of wagers much easier. Players should have easy access to bets made throughout the year. That helps in reporting overall wagering income.
Track those wins and losses
Bettors should keep track of their winnings, but also their losses. If they won big and show a profit for the year, they can offset winnings with losses to help lower a tax burden.
Only winners can deduct losses, and the full amount of winnings and losses must be reported when filing. However, Rigley notes that gamblers may deduct losses, but only by as much as they report in winnings.
For example, suppose a taxpayer entered two betting pools: One at the office and one among friends. Both had a $10 entry fee, and the player won $100 from the office pool. The bettor should report $90 in winnings, deducting the $10 fee.
For itemizing, the entry fee from the losing pool and other gambling losses could be taken as an itemized deduction. That would be capped, however, at a maximum of the amount won being reported, in this case, $90.
Do the new tax laws have any impact?
Taxpayers will notice some changes when filing this year. The Tax Cuts and Jobs Act changed many aspects regarding itemized deductions. That includes the elimination of some deductions that were subject to a 2% floor of adjusted gross income.
“This has been impactful for many taxpayers,” Rigley said. “Luckily, the deduction for gambling losses, though a miscellaneous deduction, was not subject to this floor.”
This is advantageous to gamblers. They can continue to claim gambling losses as an itemized deduction to the extent of their gambling income.
Sports betting as a full-time job
The majority of bettors may fall into the recreational or hobby group. But those who bet professionally as their sole means of earning a living have different benefits and requirements.
These bettors would need to file as a business with a Schedule C form.
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Filing as a business allows deducting expenses, but also subjects them to self-employment tax and possibly quarterly estimated payments. It’s as if that bettor runs his or her business and files accordingly.
The new tax laws have had some changes on this aspect, however. Bettors can no longer deduct non-wagering business expenses in excess of net wagering income. Thus, reporting a loss as a gambler isn’t possible.
Planning for next year
The new sports betting landscape has brought many more into the wagering ecosystem. Players new to betting may want to start planning for filing their 2019 taxes.
Rigley strongly advises maintaining detailed gambling records.
“The foundation of any tax return is one’s records,” he said. “In order to ensure the best outcome on the tax return, you have to make sure you can back up anything reported on your return, including the reporting of inherently personal activities like gambling.”
And if you do make a nice score, Rigley suggests making that first check to the tax man.
Set aside an estimated payment on taxes you’ll owe on those winnings.
“This is essentially a deposit toward your tax liability,” he said. “The reason we suggest this is that it helps to avoid any underpayment penalties for failing to deposit enough taxes throughout the year. And, psychologically, it seems easier to write that check when the income is new rather than be hit with the balance due down the road when the return is filed.”
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Here’s hoping that big win comes, though bettors should plan on paying Uncle Sam.