FOR IMMEDIATE RELEASE
March Madness Office Pool? Uncle Sam Wants a Piece of the Action
TTK & Associates Says Winnings are Taxable, Even if Not Quite Legal
EGG HARBOR TOWNSHIP, N.J., March 7, 2012 – If you work in an office, chances are you’re going to be asked to participate in a March Madness basketball pool. The NCAA’s premier basketball tournament accounts for approximately $2.5 billion dollars changing hands, only 3 percent of which goes through legal gambling outlets such as casino sports books.
So-called bracket pools are fun, build camaraderie, and give employees a shared experience to talk about for a couple of weeks. And a lucky person or two may take home a large pot of cash for a $5, $10 or $20 investment.
While most people – even those who don’t know the difference between Michigan and Michigan State, or a Hoosier from a Husker – are happy to kick in a few bucks to choose their brackets, there are some things you should know about these generally harmless pools, according to Emily K. Vu, president of TTK & Associates, an accounting firm with offices in South Jersey.
“Basketball pools are fun, but like any other form of gambling, the winner is responsible for reporting the winnings on his or her tax return,” Vu states. “Just as you can deduct gambling losses if you keep a record and you itemize.”
Gambling income includes winnings from lotteries, raffles, horse races, casinos…and office pools. It also includes fair market value of non-cash prizes like cars and trips. It must be reported on Form 1040, while losses should be accounted for on your Schedule A, Vu says. And you can only deduct losses that don’t exceed the amount of your winnings.
This begs the question, “Are these pools even legal?” Generally speaking, they are not, but law enforcement has better things to do than crack down on a friendly wager if the stakes are low. Also, if it’s a “winner take all” format, and the organizer isn’t getting a cut of the bets, there’s usually nothing to worry about. Some states permit such pools.
But even winnings from illegal gambling are taxable.
“It’s difficult for the IRS to collect, certainly, especially since most people don’t even know these winnings are taxable,” Vu says. “But one of the main reasons people report gambling winnings is so they can deduct their gambling losses, since the two usually go hand-in-hand.”
Vu offers some more practical advice for employees running or betting in an office pool:
“Make sure the pool is sanctioned by your employer. And you don’t want to be seen spending too much work time on it, or raiding the supply cabinet for paper to print 500 flyers.”
About TTK & Associates
TTK & Associates was founded by Emily K. Vu and provides a full range of accounting services that includes bookkeeping, payroll, tax planning, and tax preparation. TTK specializes in assisting individuals and business owners with tax audits and back tax problems. Its tax professionals will work with the client to resolve tax issues and fight for their right to fair treatment. For more information on TTK & Associates, call 609-484-0005 or visit www.ttkassociates.com.