Have you recently gotten into sports betting and had success? If so, one thing you need to know about is how your winnings relate to your taxes. Here are a few things to know about making sure you are doing things properly when it comes to your taxes.
Know When To Pay Taxes
Paying taxes is something that is legally required of you any time you make money. Even if you do not receive a tax form in the mail from the entity you made money from, the IRS still requires that you report your earnings and pay taxes on them. As for whether people actually do this or not is an entirely different matter, but be aware that paying taxes on your earnings is always a legal requirement.
Know When You'll Receive A Tax Form
If you are participating in sports betting in person somewhere, be aware that you will receive a W2-G form if you earn more than $600. This is the form that is used to report to the government about how much money you won, which means that you are responsible for paying taxes on it later. Your earnings from a single entity are not limited to a single event of winning $600 either, since it can be a total net profit of $600 over the entire calendar year.
Online sports betting is a bit different, where you still have that same $600 threshold, but you will receive a 1000-MISC form. Once again, you must meet the same net profit limits of $600 through the year to receive the form.
Know To Withhold Money For Taxes
A common problem people run into is not withholding enough money from their gambling winnings, and then being in for a shock when they are hit with the tax bill on April 15th of the following year. The best thing that you can do is set aside the money that you owe for taxes from your winnings. The amount you pay is based on your tax bracket, and since this is additional income, it will be taxed at the higher end. If you are in a 24% federal tax bracket and a 4% state tax bracket, then plan on withholding 28% of your winnings for taxes.
Also, keep in mind that if you end up owing the government too much money in taxes from sports betting, you may be hit with an underpayment penalty at the end of the year. Consider paying taxes on your income quarterly to prevent this from happening.
To learn more about taxes on your winning, contact a gambling tax consulting service, like DraftKings Gambling Tax Consulting Services.