The survey also revealed that 48% of taxpayers falsely believe that cash winnings from slot machine bets are only taxable if betting is legal in their state, when in fact, all income must be reported. Although it may seem counterintuitive, reporting profits from an illegal activity to the government is required by law. But we’re not here to give you advice about slot jackpots and taxes, but we do want to make sure you’re informed.
After all, incorrect reporting or failure to report earnings can result in penalties, state fines, or an IRS audit. And according to IRS reporting rules, earnings from jackpots or gambling are fully taxable and must be reported on both federal and state income tax returns as “other income” on Form 1040. This category includes money won from casinos, game shows, raffles, state lotteries, and international gambling in foreign countries.
Mark Steber, Chief Tax Information Officer for Jackson Hewitt, emphasized the importance of consulting a professional when reporting gambling and taxes. Reporting additional sources of income like cash winnings from gambling accurately may require the help of a tax professional. As gambling becomes legal in more areas, and thus more accessible, it’s essential for taxpayers to understand federal and state tax laws.
So, now that you’re aware of the implications surrounding slot jackpots and taxes, it’s up to you to decide what to do with the information.
