San Mateo, CA: IRS to Pursue Unreported Gambling Winnings: Potentially $1 Billion+ Income Tax Revenue
A recent report by the Treasury Inspector General for Tax Administration (TIGTA) has revealed that the IRS may be missing out on substantial tax revenue due to unreported gambling winnings. This gap, largely due to non-compliance and reporting issues, could mean over $1 billion in unpaid taxes from gambling income.
Key Findings in the TIGTA report:
1. Non-filers with Significant Gambling Winnings :
TIGTA reviewed Forms W-2G (which report gambling winnings) issued between 2018 and 2020. They found that approximately 148,900 individuals, each with $15,000 or more in gambling winnings, failed to file tax returns. These non-filers represented about $13.2 billion in reported gambling income. Among these, over 139,000 individuals were included in the IRS’s inventory of non-filers, but enforcement actions have been limited.
2. Potential Revenue Increase:
The IRS estimates that addressing high-income non-filers (those with total income exceeding $100,000) could generate an additional $1.4 billion in tax revenue. TIGTA’s findings indicate the significant impact that focused enforcement could have.
3. Missing Taxpayer Identification Numbers (TINs):
TIGTA also noted that hundreds of Forms W-2G lacked a TIN or Social Security Number, making it difficult for the IRS to track the income and assess tax liability accurately.
4. Sports Betting and Online Gambling :
As online gambling continues to grow, the IRS has limited measures to identify potential tax non-compliance in this area. TIGTA recommended expanding wager codes to cover sports betting and scanning the current landscape of online gambling for compliance risks.
IRS’s Response to the TIGTA report:
The IRS agreed to implement most recommendations, including enforcement actions against non-filers with significant gambling winnings.
As gambling activities increase, taxpayers should be aware of reporting obligations to avoid penalties and ensure compliance.
If you are being audited by the IRS for gambling-related tax issues, consider engaging a tax professional to help you navigate the journey.
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