Technically, you’re supposed to report all of your gambling winnings to the IRS, according to Daszkal.
Recreational gamblers, like most participating in an office pool, are required to report gambling winnings as “other income” — Line 21 — on Form 1040.
Of course, losses from gambling activities can be used to offset winnings in most cases, says Cabot.
But, he notes, you’ll need to keep good records.
“If you itemize your deductions, you can deduct gambling losses that you had during the year, but only up to the extent of your winnings. That’s what the law is,” says Daszkal.
Gambling losses can be claimed on Schedule A under “other miscellaneous deductions.”
What happens if you don’t report?
“The consequences are that you pay the taxes, you pay interest and you pay penalties,” says E. Martin Davidoff, tax attorney and CPA at E. Martin Davidoff & Associates.
He says that for the normal office pool, you’re talking interest and a 20 percent penalty on the tax for inaccuracy, if there’s an IRS audit.
But Daszkal notes that the IRS doesn’t seem to be very aggressive about this.
Still, he warns that it’s important to be cautious when it comes to workplace gambling and dealing with the IRS.