The Super Bowl means a lot more than football, parties and cutting-edge TV commercials.
It’s also a big day for betting and gambling, which means income taxes can’t be far behind.
Nobody knows for sure how much money will be wagered on the game, but it’s safe to say this is probably the biggest gambling day of the year.
Bettors are wagering on more than just the winning team, the point spread and total points scored. They likely are putting down money on things as trivial as which color of Gatorade gets poured on the head of the winning coach.
A couple of years ago, USA Today estimated more than $8 billion would be bet on that year’s Super Bowl, with perhaps 1 percent wagered legally in Nevada and the rest illegally in office pools, informal bets and online sites.
Regardless of the gambling venue, bettors are required to report winnings on income-tax returns. How seriously people take this responsibility is anyone’s guess.
“A lot of people just don’t know,” said Sue Taylor, Phoenix district manager for H&R Block.
She cites a recent H&R Block survey that indicated one-third of respondents didn’t realize gambling winnings are taxable.
Tax researcher CCH cites unreported gambling winnings as the most prominent of 10 behaviors that can cross the line from tax avoidance to outright evasion.
Simply put, if you receive money, prizes or awards like a trip or new car from a lottery, a local raffle, a casino or sports betting, you are supposed to report the winnings as income on Schedule A of your federal-tax return. You could be subject to estimated tax payments on your winnings as well.
“If you win an informal office pool, you technically are supposed to report it,” said John W. Roth, a senior federal-tax analyst at CCH.
“But I think (the IRS) is more concerned about Internet betting, which is easier to track through credit cards.”
The most likely time a gambling situation could come to the IRS’ attention, he adds, is during an audit.
Gambling losses are deductible, but only to the extent you use them to reduce winnings. In other words, you can’t deduct net losses. And if you are deducting losses, the IRS requires an accurate log of your betting.
“The larger gamblers do keep track,” said Taylor, adding that a lot of casinos furnish tracking cards on request.
• In case you’re wondering, CCH lists not paying taxes on wages, tips or other income such as jobless benefits as the No. 2 evasive behavior.
“Whether income is from working, investments or unemployment benefits, it’s all income in the eyes of the IRS, and you have to report it,” said Mark Luscombe, a principal federal-tax analyst at CCH, which is based in suburban Chicago.
CCH also reports inappropriately reporting children’s investment income as a problem, along with not paying the nanny tax and not reporting annual gifts of more than $12,000 ($13,000 in 2009) to any single recipient.
Also on CCH’s evasion list: Claiming charitable deductions for more than the items are worth, exaggerating expense deductions, not filing a tax return, filing an incomplete tax return and claiming an economic-stimulus tax rebate for more than you’re qualified.
Actually, rebate payments ended in 2008, but you can claim a rebate credit during the current tax season, if you’re entitled to one.
• For what it’s worth, the “Super Bowl indicator” is flashing a buy signal for stocks in 2009, and the result of today’s game doesn’t even matter.
Both of this year’s finalists, Pittsburgh and Arizona, are teams with roots in the old National Football League. When old-NFL teams win, the theory goes, the market rallies.
While there’s no economic rationale for it, the indicator has worked well, correctly predicting stock-market behavior in 33 of the 42 years since the first Super Bowl in 1967.
One reason the indicator seems to work is that the stock market rises about two years out of three on average. Similarly, old-NFL teams outnumber teams rooted in the old American Football League (although expansion teams have watered down this raw advantage).
Don’t bet the ranch on this indicator. Last year, the old-NFL New York Giants won the Super Bowl, pointing to a good year for stocks.
Instead, the market suffered its most lopsided loss since the Depression.