KANSAS CITY, Kan. (WDAF) – The Kansas Lottery says it’s seen a lot of interest in the first week of sports betting in the state. That means there are plenty of people on both sides of the state line winning bets who likely aren’t thinking very much about the tax implications of those wagers.
WDAF-TV found many people don’t know or don’t really care that they probably owe some taxes when they get lucky betting on sports, even if they don’t win all that much.
“I had a friend that was doing it and said he was making pretty good money at it and so I thought I’d just join in the fun,” said Doug Nuehring, who has been betting on sports in Iowa where it’s been legal since early 2020.
His system of following recommendations from professional betters is treating him pretty well so far. But he admits he doesn’t plan on playing income tax on the money he earns.
“I have a buddy who’s a [Certified Public Accountant] and he says as long as the gambling place doesn’t send you whatever the form is for the taxes, they’re also not sending the same form to the state or federal government, so you should be fine,” said Nuehring.
He’s referring to the paperwork generated when players win more than $600, at which point those winnings get reported to the IRS. Casinos often handle that responsibility in person, but when gamblers are using their phones, similar oversight can be a logistical challenge.
Whether gamblers get the documents or not, Five Star Tax and Business Solutions CEO Marquita Miller Joshua says she doesn’t recommend Nuehring’s approach.
“No matter what the amount that you win, if you win $200, technically you’re supposed to report that as other income,” said Miller Jones.
She said smaller amounts might fly under the radar, but if players get caught, the penalties and interest they’d owe isn’t worth the risk.
“If a taxpayer gets audited and the auditor sees those extra dollars, and it wasn’t reported, yikes,” said Miller Jones.
Depending on how much a player wins, 24 percent for federal income taxes might already be withheld when they cash out. But, if they make less than $90,000 a year, that 24 percent is too high and the player is entitled to get some of that money back from the federal government.
Still though, state income taxes would have to be paid.
“When the tax professionals ask you if you have any other income, you really want to think about that question,” said Miller Jones.
Even Nuehring says he thinks he’s been getting away with it because sports betting is relatively new and still pretty discreet, at least for now.
“It’s just a matter of time before they know how much money are winning, and they want their money,” Nuehring said.
All four mobile sportsbooks operating in Kansas have sections of their websites dedicated to explaining tax implications of winning.