GAMBLING WINNINGS: Owing taxes is a sure bet

 

GAMBLING WINNINGS: Owing taxes is a sure bet

Jonny Xavier is a typical twenty-year-old dude who lives with his parents in Long Island, NY. Living at home provides him with the ability to save money so that one day he will be a homeowner. He is working full-time at the Amazon fulfillment center where he oversees picking and packaging orders before they are sent out for delivery across the island. Jonny also works for extra money on the weekends with Amazon Flex, which allows him to use his own car to make deliveries of Amazon packages. With consistent work ethic and diligence, there is little doubt that one day Jonny will have enough money saved to purchase a home and start a family of his own.

Life cannot be all work and no play. Jonny was an all-state football player in high school and still has a passion for sports. He missed the “high” of playing in big games; however, he has recently experienced a similar feeling when his buddies introduced him to online sports betting. DraftKings and FanDuel are the most prominent online sports books in New York. For Jonny, DraftKings is where he finds his best luck, even though the online forum has proven to be no different than a casino where the “house” always wins. Even so, the first time he tried online
sports betting he had tremendously good fortune. If one can even imagine, Jonny placed a six- leg parlay on a Monday Night Football game between his favorite team the New York Giants and the New England Patriots. According to betting instructions, if the game has six scores between the two teams, and Jonny can pick the exact six players who will score in the game, he will hit on his parlay and win himself $250,000 on his $250 ante. Being the die-hard Giants fan that he is, Jonny predicts there will be six scores and that his team will have all of them. The bet is in, and Jonny has butterflies in his stomach before kick-off.

Three hours later Jonny and his friends are having one of the most exhilarating nights of their young lives. Unbelievably, he has clairvoyantly picked the exact players who combined on the six New York Giants scores. Specifically, there were five touchdowns and one field goal that made Jonny’s dreams come true and gave the Giants a 38-0 win over the Patriots. While his friends won on some smaller bets, Jonny pulled off a remarkable feat in completing his parlay, thus being the winner of $250,000. The payment was given to Jonny through a check disbursement from DraftKings in the amount of $190,000. There was an automatic federal tax withholding of 24% which equaled $60,000 in Federal Taxes. Jonny knows exactly what he will do with his winnings. Now he will be able to pay for a four-year degree from college and better his chances of earning potential over the course of his life. He has never been more certain that he will become a homeowner.

Being at the ripe age of twenty years old, Jonny has very little experience when it comes to filing his taxes. In January of the following year, he received his W-2 from the fulfillment center and was also sent a 1099 Form to submit as an independent contractor because of his work role with Amazon Flex. The year finished with a bang and Jonny had much to celebrate and look forward to in the new year to come. X’s and O’s come naturally to Jon Xavier; alternatively, when it comes to taxes, Jonny is somewhat naive and underestimating. From his perspective, he has
already paid his taxes when they withheld 24% of his $250,000 winning check. He remembers the total amount he received was $190,000. Sixty thousand dollars were taken right off the top, but he paid his dues and finds no reason to list his gambling winnings on last year’s tax return. He had received a W-2G from DraftKings in the mail but thought nothing of it and threw it away. He used his W-2 from Amazon, along with the 1099 Form and submitted his taxes using Turbo Tax software.

When the Fourth of July came around that year Jonny was driving a brand-new Mercedes Benz, He could not resist the urge for a brand-new car, so he splurged on the $75,000 “Benz”. The rest of the money from his winnings was spent on a four-year degree from Stony Brook College on Long Island. Stony Brook offered Jonny a four-year degree for $80,000 if he paid up front. It was a discount of almost $40,000. Accordingly, Mr. & Mrs. Xavier recommended to their son that was a good deal and Jonny took the advice. He was on top of the world, driving around in his dream car while waiting to attend college in the fall. He surely was a lucky guy.

However, as they say, “All good things must come to an end.” Jonny was very troubled when he received a notice from the New York State Tax & Finance Department stating that he owed taxes in the amount of $27,500. He was in shock! How could this be? Jonny showed it to his parents immediately to make sense of this huge tax bill. Mr. Xavier took a closer look at the notice and realized it was from the unreported gambling winnings last year. The New York State Department of Tax & Finance received the same W-2G from DraftKings and cross-referenced
that with Jonny Xavier’s tax return. They knew he did not pay taxes for the State of New York. Furthermore, New York has one of the highest gambling tax rates in the country at 10.9%. This was a huge problem for Jonny, and he worried what might happen to him now. Will they take his car?

Always looking out for the best interest of her son, Mrs. Xavier knew there was a place her family could go for legal advice on this matter. The Law Office of Ronald D. Weiss, P.C. has helped many people navigate the rough waters dealing with The New York State of Taxation & Finance. Jonny was able to tell his story during a free consultation with experienced staff and attorneys, who specialize in IRS taxes alongside New York State taxes. Upon leaving The Law Office of Ronald D. Weiss, P.C., Jonny felt like a weight had been lifted off his shoulders. He was very optimistic that for a very reasonable fee he could utilize the firm to find a resolution to this matter. Ultimately, The Law Office of Ronald D. Weiss, P.C. was able to negotiate with the NYS Department of Taxation and place Jonny into an Installment Agreement. Under the agreement, he will make affordable monthly payments until his tax bill is paid. Jonny is grateful for the team at Ronald Weiss and has learned two major lessons. First, he learned to report all income on his tax returns or there can be real consequences. Secondly, if he or any of his friends experience this type of issue in the future, they know that The Law Office of Ronald D. Weiss, P.C. will be diligent advocates for their clients and fight for the best possible resolution to their specific tax matters.