Taxes on App Betting in Michigan

You picked the Astros to win and made some $. Your lifelong hope for Lions to win has not fared you too well in the “win” column (gluten for punishment, most Michiganders are!) With the upcoming World Cup to finish the year, you could look at a whole new holiday list. Here is the reality of betting: gambling wins are subject to taxation however, so are losses. Make sure to take note and be a winner – a BIG WINNER. The mobile gambling taxes are no worries. For the rest of us, like me, who still root for the Tigers, I can write those hopeful bet losses off on my taxes. 

Mobile Gambling Taxes

Good News: gambling losses can be deducted to the extent of gambling income!

Mobile Gambling Taxes: an IRS Audit

IRS audits have declined in recent years. There is still a possibility you will win the audit lottery, though!

Here are some common practices we suggest to reduce “red flags” that may make you a candidate for an audit:

Mobile Gambling Taxes

  • Routine losses on your business. If you operate as a sole proprietor and report your earnings on Schedule C of your Form 1040, you are facing the battle of whether the IRS will consider your business a hobby or not. One clear way to prove your activity is a business is by making a profit. There may be a red flag to the IRS if you lose money for more than 3 years in a row. If the IRS determines your activity is a hobby, you are unable to deduct expenses over and above your income.
  • Failing to report income. As a taxpayer, you are required to report income from all sources, even if it wasn’t reported on Form 1099. At a minimum, if you receive a Form 1099, understand that the IRS has a copy on their records as well. Their computers will look to confirm that those earnings are reported, and in the event, they are not reported, you’ll hear about it.
  • Document your expenses. A common one is auto deduction. If your car isn’t used 100% for business, you can’t claim 100% of the cost of the car as a business deduction. Keeping contemporaneous records of the trips you take will give you the appropriate deduction you are entitled to. Inflating meals, travel, and other expenses could raise a red flag.