Won Your Super Bowl Pool? Pay Up...to the IRS
We all know the real office chatter the day after the Super Bowl isn't so much about the Green Bay Packers 
holding off the Pittsburgh Steelers. It's about who won the office pool.
The single biggest betting day of the year -- by one estimate, about $5 billion was laid down on legal and illegal Super Bowl bets last year -- has plenty of office representation. According to the Society of Human Resource Management, two-thirds of businesses say they have Super Bowl office pools, making it the top office betting team-building event of the year.
And those office pool bets aren't always a social $5-$20 per box set up; rumors abound that some offices ran $1,000-per-grid-box pools that delivered a $50,000 windfall to the overall game winner. That's the median national income! And it's more than the $42,000 loser's check (pre-tax) handed over to each losing Pittsburgh Steeler. (The per-player winner's share for the Green Bay Packers was $83,000.)
Wet Rag Alert...Winnings are Taxable Income
Note to all you gloating Super Bowl pool winners: you do know that technically, legally, and um, ethically, all gambling winnings are supposed to be reported to the IRS on line 21 of your 1040 tax return. Right?
Now if you had been betting in Vegas -- less than $100 million or so in legal Super Bowl bets runs through the Strip -- or some other legal establishment and won more than $5,000, you would have automatically had 25 percent of your winnings withheld. You would also have been handed IRS form W-2G, which reports your winnings to the government. But something tells me there's no company payroll department churning out that form for the Super Bowl office pool winners.
For what it's worth, unreported gambling income could be some serious revenue for our deficit-addled federal coffers. By one estimate, as much as $380 billion was illegally bet back in 1999. If we adjust that for inflation, we're close to $500 billion in unreported bets. If all that was legally reported and we assume a 25 percent tax rate, well, that's a nice $100 billion in revenue. That's more than the latest budget cuts being proposed by Republicans to trim FY 2011 spending.
In any case, here are some tips on how to handle your Super Bowl pool windfall:
- Report the winnings as income on your federal 1040, and your state tax return as well. This is totally a Girl Scout/Boy Scout test as the IRS doesn't exactly have an easy tracking mechanism for cash bets.
- Team-build/ratchet down the envy. If you won big in this year's pool, buy everyone in the office a round of drinks. Maybe you can "host" the box-picking ritual for next month's NCAA Final Four pool (the second most popular office pool event of the year.)
- Plunk it in the kid's 529 college savings plan. Come on, you can wish all you want, but what are the chances your little athlete today will grow into a Rodgers or a Roethlisberger and get a free ride. (And for what it's worth, Rodgers started at a junior college before landing at Cal.)
- Contribute to a Roth IRA. If your income -- reported income, that is -- is under $107,000 ($169,000 for joint filers), you can invest the full $5,000 in a Roth IRA this year. (Over age 50 you can invest $6,000.) Over those income limits, you can make a non-deductible contribution to a Traditional IRA and then consider converting it to a Roth IRA.
Photo courtesy Flickr user GoSub
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