Study Reveals IRS Faces $1.5B Tax Loss Due to Unreported Gambling Winnings

A fresh study shows that many gamblers not reporting their winnings has led to the IRS missing out on almost $1.5 billion in taxes from 2018 to 2020. 

TIGTA Report Reveals Major Tax Shortfall as Thousands Fail to Report Gambling Winnings

The Treasury Inspector General for Tax Administration (TIGTA) found that thousands of people did not declare big gambling wins, which means a lot of tax money was not collected.

The report looked at over 48 million tax forms given to US taxpayers from 2018 to 2020 adding up to about $156 billion. Out of these 150,000 people who each won more than $15,000 from gambling did not file tax returns on their winnings. The total amount they won was estimated at $13.2 billion, and the IRS missed out on getting around $1.4 billion in taxes.

The IRS could not keep tabs on gambling winnings, which played a part in this shortage. The report showed that a lot of the tax forms for “Certain Gambling Winnings,” did not have important taxpayer ID numbers. This made it hard for the IRS to check if people were paying their taxes. What is more, about two-thirds of the people they spotted never got notices saying they owed money. This meant their winnings were not reported or taxed.

IRS Seeks to Curb Untaxed Gambling Winnings Amid Sports Betting Surge

The results follow the 2018 Supreme Court ruling that made sports betting legal across the US. This decision has caused a boom in the sports betting industry bringing in billions for operators. At the same time, it has led to a big rise in untaxed gambling winnings. Reports show operators made over $11 billion in 2023 alone. Yet, the IRS is still trying to figure out how to collect taxes on individual winnings.

After reviewing the report, TIGTA suggested several ways for the IRS to help reduce the number of unreported gambling winnings. These ideas included making enforcement stricter for people who do not file and upgrading systems to track down those who have not reported their gambling income. The IRS agreed at least somewhat, with four out of five suggestions TIGTA made. This hints at a possible crackdown on people who did not report their winnings.

Also, the report urged broadening IRS rules to include more detailed instructions for sports betting, as the agency does not have a thorough system to keep tabs on online sportsbooks. If put into action, these updates could help the IRS get back a big chunk of the billions in uncollected tax money, while also making sure those who profit from legal gambling winnings follow the rules better.