The IRS Wants to Know if You Pick the NCAA Champ
Or if you have gambling winnings of any kind.
My money's on the University of Kentucky to win the NCAA men's basketball championship tonight. Well, not literally. I work from home, so I didn't fill out a bracket for an office pool. But I'm a Kentuckian, so I'm rooting for the home team.
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I hate to be a spoilsport, though, by telling you this: If you win money after tonight's championship game, the IRS wants a share.
Technically, all winnings from lotteries, raffles, casinos, horse races and even office pools are taxable. Some payers will provide a Form W-2G that shows winnings -- and you're supposed to report those winnings on line 21 of Form 1040 (you may not use Form 1040A or 1040EZ). However, I doubt the guy at your office who runs the tournament pool will be sending out such a form.
You also can deduct gambling losses up to the extent of winnings you report as taxable income. You must itemize to use this write-off, but the deduction is not subject the rule that trims miscellaneous expenses by 2% of your adjusted gross income -- so the losses are fully deductible. To deduct losses, you also must have receipts or records that show the amount of your winnings and losses.
If you do win big tonight, consider investing the money in something worthwhile. For ideas, see If I Had $1,000 ....