Study Shows IRS Loses $1.5B Annually Due to Unreported Gambling Winnings

It’s no secret that the world of gambling is rife with twists and turns, but a recent study reveals a surprising new development: the IRS has missed out on an astonishing $1.5 billion in taxes due to unreported gambling winnings between 2018 and 2020. The Treasury Inspector General for Tax Administration (TIGTA) found that thousands of gamblers failed to declare significant wins, leaving a considerable gap in the tax revenue that should have been collected. More specifically, the report reviewed over 48 million tax forms from this period, adding up to around $156 billion. Among these forms, around 150,000 individuals, each with winnings exceeding $15,000, neglected to report their gambling income, amounting to approximately $13.2 billion in untaxed winnings. The lost tax revenue from these unreported amounts is a staggering $1.4 billion.

One critical challenge the IRS faces in capturing these taxes is its inability to effectively monitor gambling winnings. The TIGTA report highlighted a significant issue: many tax forms for “Certain Gambling Winnings” didn’t include crucial taxpayer ID numbers, making it difficult for the IRS to verify whether the taxpayers met their obligations. Additionally, two-thirds of the individuals identified in the study never received notices alert

One critical challenge the IRS faces in capturing these taxes is its inability to effectively monitor gambling winnings. The TIGTA report highlighted a significant issue: many tax forms for “Certain Gambling Winnings” didn’t include crucial taxpayer ID numbers, making it difficult for the IRS to verify whether the taxpayers met their obligations. Additionally, two-thirds of the individuals identified in the study never received notices alerting them to their unpaid taxes, allowing their winnings to slip through the cracks unreported and untaxed. This problem has been exacerbated by the 2018 Supreme Court ruling that legalized sports betting across the US, which has spurred massive industry growth and a parallel rise in untaxed gambling winnings. Reports reveal that operators earned over $11 billion in 2023 alone, yet the IRS is still grappling with how to efficiently collect taxes on individual gains.