As the NFL season is set to begin on Thursday night and with the first official week of college football in the books, the IRS Criminal Investigation unit has a message for sports bettors: Bet safe. Bet legal.
IRS-CI is using the start of the football season to warn bettors that it’s currently investigating a variety of offenses tied to illegal gambling and to encourage taxpayers to protect themselves when making wagers.
Each fiscal year, IRS-CI initiates more than 30 illegal gambling cases, earning a 92% conviction rate for prosecuted cases. Over the past five fiscal years, 96 defendants have been convicted of crimes tied to illegal gambling, receiving sentences averaging between five and 33 months in federal prison.
For example, 10 men pleaded guilty in February to managing a multimillion-dollar sport betting operation known as “Red44.” Bookmaking and betting activities took place online via an offshore server located in Costa Rica. Their organization accepted an estimated $2 billion in wagers during its existence. As part of plea agreements, the defendants agreed to pay more than $19.7 million in excise tax restitution to the IRS from acceptance of wagers from sports betters across the U.S. and to satisfy any income tax obligations that remain outstanding.
“Over the last few years, we’ve seen a number of online crypto casinos offering options for sports betting,” IRS-CI Chief Guy Ficco said in a statement on Sept. 2. “Many are based offshore and don’t follow know-your-customer protocols, specifically to attract anonymous users who may be involved in illicit activity. If you want to gamble, do it safely and legally.”
When placing bets, IRS-CI stresses that taxpayers:
- Use state-licensed gambling operations and platforms that are legal in their jurisdiction.
- Steer clear of offshore and crypto-based gambling platforms that attract anonymous users by avoiding know-your-customer protocols.
- Make sure to report all gambling winnings as taxable income to avoid civil and criminal penalties from the IRS.
- Never accept payment to place bets on behalf of someone else or gamble to obscure the source of funds. You could find yourself in the middle of a money laundering scheme.
“Sports enthusiasts who are unsure about their tax obligations or have questions about reporting gambling income are encouraged to consult tax professionals or visit the official IRS website for guidance,” IRS-CI said in a media release. “Ignorance of the tax law does not exempt individuals from their responsibilities.”
For more information on reporting gambling income and other tax-related inquiries, visit the IRS’s Gambling Income and Losses Page.
Photo credit: Stefani Reynolds/AFP via Getty Images/TNS
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