While the broad legalization of sports betting has meant big wins for plenty of fans, the biggest losers could soon be coming for their share of the pie.
Of course, that’s not the operators, who are reported to have made more than $11 billion in 2023, but rather, the IRS, who according to a new report left roughly $1.4 billion on the table between 2018 and 2020, as cited by Bloomberg.
A review of roughly 48 million tax forms between 2018-2020 - totaling roughly $156 billion issued to taxpayers - found roughly 150,000 people that had won $15,000, but failed to file a tax return on those earnings, according to the report.
As such, the report concluded that the aforementioned $1.4 billion could be in the cards to increase tax revenue by addressing the “nonfilers’ winnings.”
The review, conducted by the Treasury Inspector General for Tax Administration (TIGTA), flagged the IRS was at least partially to blame, with a lack of processes in place to help catch tax noncompliance from entities such as online sportsbooks that accept bets. Notably, the report explained that hundreds of forms lacked taxpayer identification numbers.
Beyond the inability to accurately and effectively monitor noncompliance, the report also found that as much as two-thirds of the individuals identified, who’s combined winnings were estimated to account for more than $7 billion, never received so much as a delinquency notice.
What is the IRS’ next steps?
Following the report, a number of recommendations were provided to the IRS in an effort to help crack down on the enormous unrealized tax dollars left on the table.
Reportedly, the TITGA presented the IRS with five recommendations, with the IRS presenting at least partial agreement on four of them - perhaps most notably and most self-evidently that the agency should begin taking measures to appropriately enforce and take action on nonfilers.
