An IRS special agent warned New Yorkers to be wary of a simple mistake in sports betting that could lead to fraud charges and jail time.
For New Jersey bettors, the risks are even greater, considering online gambling in the state extends beyond sports betting to NJ online casinos, too.
How do you avoid fraud charges? Report your winnings.
“We just want to get the message out there that people should be aware that they should be reporting their winnings,” Tom Fattorusso, Special Agent in Charge of IRS Criminal Investigations for New York’s field office, told WKBW-TV in Buffalo.
“It doesn’t matter how much or how little you’re winning, you should always ask a tax professional how it should be reported, just in case. It is income.”
What’s the penalty for tax fraud related to online gambling?
Failure to report online gambling winnings could lead to financial penalties or, at worst, criminal fraud investigations. The average sentence for such a conviction is 23 months in prison.
According to WKBW-TV in Buffalo, over the past two years, IRS Criminal Investigations looked into more than 100 illegal sports gambling situations nationwide.
The cases amounted to over $178 million, and 89 of the cases led to criminal convictions, with a 96% conviction rate.
How do online gambling taxes work in New Jersey?
Winnings through online gaming – whether online casinos or online sports betting – are taxable.
According to the IRS, your winnings in any state, including New Jersey, “are fully taxable and you must report the income on your tax return.
“Gambling income includes but isn’t limited to winnings from lotteries, raffles, horse races, and casinos. It includes cash winnings and the fair market value of prizes, such as cars and trips.”
For additional questions or for more specifics, PlayNJ offers a guide to New Jersey gambling taxes.
How do NJ online casinos compare to sports betting?
You’ve heard sports betting is generating millions in cash? Online casinos produce even more.
In New Jersey, since online casinos launched, the state has seen over $6.7 billion in total revenue, which translated to $997 million in state tax revenue. And that’s just from the gaming operators and casinos themselves.
Compare that to sportsbooks in New Jersey, which have pulled in a little under $3 billion since launch. That’s just a third of the value of online casinos.
While these numbers don’t have a direct effect on your gaming and tax responsibilities, it’s an example of how important it is to be aware of your casino and sportsbook winnings.