How To Report Illegal Gambling In Nj
The Division of Gaming Enforcement (DGE) is serious about cracking down on illegal online gambling websites in New Jersey. In a letter obtained by Online Poker Report, the agency warns affiliates about the consequences of marketing to customers in its state. It’s fair to presume that operators using these affiliates are receiving similar letters. How to Submit Your Report. Call Us: 24 Hour Tips Line (609) 588-5001. To report suspected tax fraud, please fill out the Citizen Complaint Form. Department of the Treasury Office of Criminal Investigation PO Box 284 Trenton, N.J. You can report online gambling to the FBI. Live gambling that violates state law should be reported to the appropriate state authority – typically a gaming commission or illegal gambling task force within state law enforcement.
Sports betting in New Jersey is not exactly off to a smooth start for Caesars Entertainment and its Atlantic Citycasinos.
Documents acquired via a public records request shed some light on exactly what unfolded behind the scenes at Caesars and the illegal sports bets it accepted in September.
NJ Deputy Attorney General Jennifer K. Russo-Bellessent a letter to Caesars Entertainment dated Nov. 20, 2018.
It reveals details behind last month’s $2,000 fine handed out by the New Jersey Division of Gaming Enforcement.
A big no-no: NJ sports betting on Rutgers
According to the letter, the Sept. 10, 2018, football game between Rutgers and Kansas triggered the illegal sports betting alarms. The DGE interviewed Vicki Guveiyian, Caesars Interactive Entertainment’s (CIE) director of gaming technology and innovation, on Sept. 18.
Here is a snippet of the details from the letter:
“While CIE’s Las Vegas Trading Team noticed the game had been incorrectly loaded and removed it from availability within an hour of its posting; CIE’s New Jersey Trading Team did not.
“It was not until the division notified CIE’s New Jersey Trading Team on Sept. 14, 2018, four days later, that CIE voided the bet.”
The patron who placed the $10 wager was refunded the wager amount and credited an additional $10 as a “goodwill gesture,” according to the document.
A second illegal listing on Monmouth-Princeton game
But that’s not all.
It seems, according to Guveiyian, that CIE’s Las Vegas Trading Team “had failed to send out notifications when it discovered the illegal listing because it was unaware of New Jersey’s compliance standards.”
On Sept. 14, according to the letter, Jeff Davis, CIE’s manager of hub operations, sent out an internal memorandum to his staff reiterating “it was illegal to offer New Jersey collegiate games for sports betting.”
But another incident followed eight days later.
Caesars offered wagering on the Monmouth-Princeton football game on its SG OpenBet Platform, aka the Caesars Sportsbook app.
Within that one game were two separate prohibited events: The game involved two New Jersey colleges and it was played inside New Jersey.
The wager window was open for 90 minutes before it was disabled. But in this instance, Caesars did not accept any wagers, according to the report. Additionally, Guveiyian notified the DGE.
A rare illegal bet in a young sports betting market
For the most part, despite a few hiccups, it’s smooth sailing with sports betting in New Jersey. This includes NJ online gambling sites such as DraftKings Sportsbook.
While FanDuel Sportsbook had a few growing pains in the early days of its sportsbook, the overall feeling is that things are working as they should.
To date, seven out of the nine Atlantic City casinos have operational retail sportsbooks. Caesars is one of the two properties without one (Hard Rock Atlantic City, for now, is the other).
Caesars customers use the sportsbook at the connected Bally’s Wild Wild West casino, its sister property. Meanwhile, Caesars also accepts bets at its sportsbook app. And it has an online partnership with 888 Sport NJ, too.
The bigger picture is that to date, only one other casino has been hit with a NJ sports betting fine. Golden Nuggetwas the other.
The Marina District property was flagged by the DGE around the same time for accepting 10 illegal bets from unknown individuals on “various New Jersey college football games in September.”
Golden Nugget was slapped with a $390 fine.
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DGE keeping an eye on Caesars
Caesars sports betting continues under the watchful eye of the DGE.
No additional penalties or fines outside of the two incidents have come to light. But at the same time, additional compliance measures are now in place.
More details from the letter:
“Caesars shall immediately ensure that proper training and procedural controls are implemented to prevent any further prohibited events from being displayed, especially those involving New Jersey college teams or any NCAA events played in New Jersey.”
And at this point, there is no room for error. The DGE is watching.
“… permitted wagering on prohibited sports events may result in more formal regulatory action.”
Part of the fun of gambling is the suspense.
It wouldn’t be as exciting if you knew the outcome of your wagers ahead of time.
Another plus is that many types of gambling are legal in New Jersey. Casino gambling, horse racing, the state lottery, bingo and most recently, sports betting.
Gambling is even more fun when you win.
And, when you gamble at authorized NJ betting sites, you will be paid.
What you may not have given much thought to, though, is that NJ gambling winnings are taxable. Winnings obtained from illegal gambling applies here as well.
In this article, we will tell you everything you need to know about the federal and New Jersey state laws concerning gambling winnings and taxes.
Are NJ gambling winnings taxable?
According to the IRS, gambling winnings in any state, including New Jersey, “are fully taxable and you must report the income on your tax return. Gambling income includes but isn’t limited to winnings from lotteries, raffles, horse races, and casinos. It includes cash winnings and the fair market value of prizes, such as cars and trips.”
The IRS doesn’t mention sports betting, but winnings therefrom also count as gambling winnings and are, thus, taxable.
How much are NJ gambling winnings taxed?
Whether you’re a New Jersey resident doesn’t have any bearing on your liability to pay federal and state taxes on your winnings.
So, this includes the total of your winnings, if any, that is withheld for state taxes.
However, the type of gambling and, whether the winnings are from a retail or online site, does matter.
Taxes on NJ state lottery winnings
Prior to 2009, NJ state lottery winnings were not taxable.
However, effective January 2009, New Jersey Lottery winnings in excess of $10,000 became subject to the state gross income tax.
The percentages withheld from the state lottery payouts of more than $10,000 are as follows.
If the payee provides a valid Taxpayer Identification Number (TIN):
- 5% of payouts of $10,001 to $500,000.
- 8% of payouts more than $500,000.
If the payee does not provide a valid TIN:
- All payouts of more than $10,000 are taxed at 8%.
Rules on shared and multiple lottery wins
If two or more people win a given lottery prize and split the proceeds, as long as the total prize exceeds $10,000, it is taxed.
Each recipient must, therefore, assume liability for his or her share of the taxes even if the individual’s share does not exceed $10,000.
Furthermore, if a person wins the NJ Lottery more than once in the same year, each win is considered separately in determining whether or not it is taxed.
For example, a person who wins the lottery twice in one year, once for $6,000 and once for $5,000, would not have to pay any state tax on those winnings.
However, a person with a single state lottery win of $11,000 would have 5% of that amount withheld for state taxes.
Federal and state taxes on other NJ gambling winnings
The state lottery is one form of gambling in New Jersey for which winnings are taxable.
In fact, gambling operators must report individual wins over a certain amount for some types of gambling to the IRS.
Federal tax form W2-G
All New Jersey-licensed gambling establishments, including casinos and racetracks, are required by federal law to report certain gambling winnings to the IRS on Form W2-G.
However, the minimum win for this to happen varies, depending on the type of gambling, as indicated below:
- Horse Racing: Winnings exceeding $600 on a $2 wager or 300x any larger amount wagered.
- Slot Machines and Bingo: Winnings (not reduced by the amount wagered) that exceed $1,200.
- Keno: Winnings (reduced by the amount wagered) that exceed $1,500.
- Poker Tournaments: Winnings (reduced by the amount of the buy-in) that are more than $5,000.
Amount withheld from winnings for federal and state taxes
In every such instance, the gambling establishment must file Form W2-G to report the win to the IRS and send a copy of the form to the payee.
Since winners need this info to prepare their tax returns, they will usually receive a copy of Form W2-G in January of the following year.
Typically, the gambling facility, where the win occurred, will withhold a certain amount of the gambler’s winnings for federal and state taxes.
Before 2018, the standard withholding amount for federal taxes was 25% for those who provided a valid TIN and 28% for those who didn’t.
However, starting in 2018, the withholding rate for federal taxes is now a uniform 24%.
The amount withheld for state taxes varies from state to state.
In New Jersey, it is only 3%. That is the tax rate regardless of whether you live in New Jersey or not as long as the reportable winning took place in New Jersey.
The winner’s responsibility
The gambling facility must file Form W2-G and withhold the appropriate tax from your winnings if it meets the specified criteria.
But whether it does so or not, you still need to report your net gambling winnings as income when you file your tax return.
Obviously, gamblers who win big will find it disappointing, in most instances, to have to fork over a sizable chunk to the government.
But here’s some other news that may help you.
Ultimately, the amount of tax you owe on your gambling winnings will depend on your taxable income bracket. And, if you itemize your deductions, the extent to which you could offset those winnings with documentable gambling losses.
How gambling losses can help offset winnings
You can deduct your gambling losses, but only to the extent of your winnings.
If you lost more money gambling than you won that year, you could only deduct losses up to the amount reported as winnings. You cannot report any amount above that.
In other words, you can’t report your gambling income as a negative amount.
However, you can combine your losses from different types of gambling.
For example, if you won a big jackpot on a slots machine, but lost money on other casino games, poker and sports betting, then those losses count.
On the flip side, due to the recent substantial increase in the allotted amount you can take on your tax return as a standard deduction, itemizing your deductions may not be more beneficial tax-wise after all.
Seeking the advice and services of a professional accountant could be a worthwhile investment.
Which tax forms should you use to report gambling wins and losses?
If you are a casual gambler and received Form W-2G, be sure to include the winnings on that form. Also, include any tax withheld and any other gambling winnings you are reporting for the year on Form 1040 as “Other Income.”
Then, if you itemize your deductions, enter any offsetting gambling losses on line 28 of Schedule A (Other Miscellaneous Deductions.)
If it turns out that you paid more in taxes than you should have on your gambling winnings, you will receive a refund.
However, if too little money was withheld or you have other gambling winnings to report, you could owe more money in taxes.
In fact, casinos are not required to issue a W2-G and withhold taxes for winnings at table games (blackjack, roulette, baccarat and craps).
However, casinos expect players to keep track of such wins and include them on their tax returns.
The same applies to winnings from sports bets. You may be able to offset those wins, at least in part, with your gambling losses and other related expenses.
What happens if you receive a W-2G but don’t report the income on your tax return?
If you receive Form W-2G, whether money was withheld from your winnings or not, ignoring it is a mistake.
You need to file a tax return and show this income on the appropriate forms. If you don’t, the IRS will likely send you Form CP2000, which is a notice of underreported income.
You will be assessed additional taxes, penalties and interest on your unreported or underreported gambling winnings.
NJ taxes on sports betting winnings
If you win money from sports betting, you must pay taxes on those winnings as you would on other forms of gambling.
Furthermore, if you win more than $5,000 from betting during the calendar year, the NJ casino or racetrack is required to file a W-2G with the IRS.
In fact, for anyone betting anonymously at a retail sportsbook, keeping accurate tabs on wins for a year seems impossible.
Of course, any betting that you do online or through a mobile app is tracked within your registered betting account. As a result, the gambling operator would have an accurate record of every transaction.
Sports betting winnings are subject to the same 24% federal tax rate as other gambling winnings.
The winners are also responsible for paying the applicable local taxes.
The current NJ tax rate is 8.5% for retail sportsbook wins and 13% for wins at online sportsbooks or on mobile apps.
Whether or not the place where the winning occurs reports it to the IRS, keep in mind, these winnings are taxable income. Therefore, it is a gambler’s responsibility to report them and pay any associated taxes.
As with any type of gambling winnings, if you itemize your deductions on your tax return, you can deduct your documentable losses. However, your reported losses cannot exceed your reported winnings.
Taxpaying rules for professional gamblers
If gambling is the way you earn your living, different rules and guidelines apply in determining your tax liability.
So, if you are a professional poker player, blackjack player or sports bettor, proceeds from gambling are considered regular earned income from self-employment and taxed accordingly.
When filing your tax return, you must complete Schedule C, not Schedule A.
Here, you would name gambling as your business and deduct any gambling losses and other gambling-related costs as business expenses.
For example, you can deduct the cost of travel to a gambling facility, including the expenses associated with attending out-of-town gambling seminars and conferences. Also, you can deduct the costs for tournaments and handicapping contests.
You can also deduct the fees you paid for professional services, part of your internet bill and the cost of any materials purchased to help make you a better gambler.
How To Report Illegal Gambling In Nj Unemployment
Accurate record-keeping for all gamblers is a must
Regardless of the type of gambling and whether it is a profession or recreational activity, there are benefits to keeping a betting diary.
Every time you gamble, record the date, place, type of bets made, and amount won or lost. This information will help you identify the types of situations that are the most profitable for you as well as others you should avoid.
Also, if you are over-betting your bankroll and need to cut down, your records will show you that as well.
Furthermore, no one wins 100% of the time.
How To Report Illegal Gambling In Nj Today
If you have reportable gambling winnings, you may be able to reduce your tax liability if you show that you have incurred significant losses.
Besides a gambling diary, other types of acceptable documentation include:
- Receipts
- Betting tickets
- Win-loss statements from gambling establishments