No matter how small the payout, the IRS wants its share
As the date of the “Big Game” draws closer, the number of office and family block pools increases each year. With hopes of winning some extra cash, participants select and purchase squares in a contest grid which is randomly populated with axis numbers after all squares are sold. Purchase fees and prize amounts are set by the pool organizers, and cash prizes are generally awarded for matching scores at the end of each quarter.
If you’re lucky enough to win your office football pool this year, no matter how large or small the amount of your winnings, your victory comes with the obligation to report your winnings to the IRS. Whether it is just a few bucks from your office football pool or you hit it big on an on-line betting site or casino, your winnings are considered gambling income. The IRS considers all types (cash and non-cash prizes) and amounts of gambling winnings as taxable income.
If the amount you win is large enough (in most cases $600 or more), the organizer or entity who is paying you is required to issue you a Form W2-G (Certain Gambling Winning) which also alerts the IRS that you’ve won a substantial prize or jackpot. The payor may also be required to withhold a percentage of your gambling winnings for federal income tax if the winnings meet certain larger thresholds. Specific information and details relating to IRS thresholds for W2-G reporting and tax withholding can be found at https://www.irs.gov/instructions/iw2g.
It’s a common misconception that not receiving a tax form for your winnings means the income is not taxable. Many people are unaware that even if the amount of their winnings is not subject to withholding or W2-G reporting, they are still obligated to report their gambling wins on their tax returns.
While your chances of being audited for not reporting small wins might seem unlikely, failure to report all gambling winnings is a violation of the law, and not reporting it could become an issue if you are randomly selected for an audit or a jealous coworker makes an anonymous call to the IRS. Our advice to you: Never gamble with the IRS!
