The 5 things that raise red flags with the IRS about online gambling
If you are an online gambler in the United States, the good news is that the U.S. government has not cracked down on online gambling yet. The bad news is that they’re probably going to do this pretty soon.
It’s only a matter of time before the IRS catches wind of the legal status of digital casino games, and they won’t be happy when they do. Imposing new taxes on brick-and-mortar casinos and anything that resembles one will no doubt upset them even more.
That means you should get used to reporting your winnings and losses as soon as possible so you don’t get caught up in their crosshairs when it’s easier said than done. Here are five red flags you should avoid if you want peace of mind with your online gambling accounts with the IRS:
You fail to report unpaid winnings
A lot of people get the idea that the more you make from gambling, the more you have to pay to the IRS. But the reality is that you’re only required to pay taxes on what you make. And you can’t really make any money off of online casino games because they’re pure entertainment.
So, you can’t win any cash until you’ve gambled it away. If you take money out of your online casino accounts without reporting it, the IRS will come knocking on your door. And they’re not the type of people you want to say “sorry” to. They’ll want their money back and then some.
Unlike other countries throughout the world, the US taxes their citizens if they profit from online gambling. In a lot of countries these winnings are tax-free. You need to know the tax laws and how they relate to online gambling. It is best that you know this before looking for a USA no verification withdrawal casino.
Ignorance of the law is no defense. The IRS will not be interested in you not being aware that you have to declare your winnings even if they are unpaid at the time. They may be lenient with you the first time, but you cannot rely on this.
You disclose winnings and losses late
The IRS isn’t stupid. They’ll know if you keep your winnings and pay taxes on them late, but they won’t know when you got them. Of course, most people wait until they can pay their tax bills in full, and then pay them in full.
But there’s nothing like a big fat IRS bill to make you think twice about how you’re handling your finances and your tax reporting. If you don’t disclose your winnings and losses when you should, the IRS will assume the worst about the source of your money.
And if your gambling income is high enough, they’ll audit you, which can cause a lot of headaches. It is always a good idea to report your gambling activities on time to the IRS. Failure to do this can result in a lot of problems for you further down the road.
You play “practice games”
Sometimes you’ll start out with an online casino account to learn how it works. But that doesn’t mean you’re allowed to keep playing “practice” games to learn how to play poker, blackjack, and roulette. Gambling is gambling, and if you make a profit off of it, you have to pay taxes on it.
You can’t pretend that you’re experimenting with new games if you’re actually learning how to play poker with real chips. If you’re doing this, the IRS will know and will audit you to make sure you’re reporting all of your winnings and losses correctly.
The IRS can easily gain access to your online gambling accounts. It is foolish to believe that you can hide your activities. All transactions are recorded in online casinos and they will be easily visible so you need to be honest.
You don’t report gambling with your employer
High-wage earners like professional sports players and high-rolling casino owners have the luxury of reporting their winnings and losses directly to their employers. If you don’t take this route and report your gambling income to your employer, the IRS will audit you and may even levy an excise tax on your pay.
This is because you didn’t report all of your income, even though it was a legitimate business expense. Discuss this with your employer to find the best resolution. It is in your interest to declare all of your income to the IRS wherever it comes from.
You pay with cash instead of a credit card
If you’re not reporting your winnings and losses or if you’re reporting them late, you’ll need to use cash to make deposits and withdrawals. Locking up money in a casino’s cashier’s cage is one of the best ways to keep the IRS off your trail, but it’s not a good idea if you’re a legitimate gambler.
When a player is caught using cash instead of a credit card, the casino will never see the money again. Credit card deposits and withdrawals are reported to the IRS with a record of the transaction, which means casinos will know where you’re gambling and with whom.
It’s no secret that the IRS is looking for people to tax more than ever before in history. So, it’s more important than ever to keep them away from your online gambling accounts. Be honest about your winnings with the tax people as this will be better for you in the long run.