September 26, 2017
The U.S. Treasury Department and the Internal Revenue Service (IRS) announced that they will formally adopt modernized regulations regarding the withholding and reporting of pari-mutuel proceeds. The changes go into full effect no later than Nov. 14, 2017 giving racing associations, tote companies, and advance deposit wagering (ADW) operators up to 45 days to implement these important changes; however, some may elect to start before that date.
Under the new regulations, the IRS will consider the inclusion of a bettor’s entire investment in a single pari-mutuel pool when determining the amount reported or withheld for tax purposes, as opposed to only the amount wagered on the correct result.
For example, the amount wagered by a Pick Six player who hits with one of 140 combinations on a $1-minimum wager now will be $140, which is the total amount bet into the Pick Six pool. This more accurate calculation will remove the significant reporting and withholding obligations on horseplayers and the unnecessary paperwork for the IRS that was a result of the prior rule. That rule used only the $1 bet on the single winning combination as the amount wagered, instead of the entire amount, e.g. $140.
NTRA's Alex Waldrop: “This day would never have come without the persistence of Thoroughbred racing’s friends in Congress, especially Rep. John Yarmuth of Kentucky, Rep. Pat Meehan of Pennsylvania, Senate Majority Leader Mitch McConnell and our many bipartisan supporters on Capitol Hill. We also are indebted to the industry stakeholders and thousands of customers of Thoroughbred racing who signed our petition or submitted public comments in favor of these changes.”
Two years ago BetPTC’s own Chris Larmey and Judy Wagner traveled to Washington D.C. on behalf of the NTRA to discuss this vital issue with the U.S. Treasury Department.
“This is a major victory for all pari-mutuel wagering customers,” said Judy Wagner, the Horseplayers’ Representative on the NTRA Board of Directors and 2001 Handicapper of the Year. “It would not have occurred without the leadership of the NTRA and the support of thousands of horseplayers who actively participated in the process to modernize these regulations.”
The amended regulations, advocated by the NTRA and its legislative team, define the 'amount of the wager' to include the entire amount wagered into a specific pari-mutuel pool by an individual – not just the winning base unit as is the case today – so long as all wagers made into a specific pool by an individual are made on a single totalisator ticket if the wager is placed onsite. The modernized regulations will have the same positive results for ADW customers and will not impact how those wagers are currently made.
Congratulations to all horseplayers nationwide! Below are some FAQs regarding this exciting news.
Q. How soon will this change apply to my BetPTC account?
A. Beginning the first day, Thursday September 28, 2017, BetPTC.com will be operating under the new favorable IRS guidelines for horseplayers. Customers will only see a W2G generated if the winning wager qualifies under the new IRS guidelines.
Customers who have winnings with Federal withholdings (that does not qualify under the new rules) will have the withheld funds refunded into their account by 10am ET the following morning. As soon as our Tote company updates their software, this change will be automated within your account.
Q. Under what circumstances will BetPTC generate a W2G and report it to the IRS?
A. The reporting thresholds remain the same at 300-to-1 and a $600 payout or more. What has changed is how the IRS calculates the 300-to-1. Prior to this, it was based on the unit of wager (e.g. $1.00); now, it’s based on the total amount wagered per transaction.
Q. When will there be automatic withholding?
A. The IRS thresholds remain the same at 300-to-1 and $5,000 payout or more; however, it’s the total amount bet per transaction that is used when calculating whether the payout was at least 300-to-1.
Assume you played $240 worth of trifecta tickets. If you win and the wager returns $5,123 you will not receive a W2G or be subject to automatic withholding because $5,123 is not 300 times more than $240 in wagers.
With the old regulations, you would have received a W2G and had taxes withheld from your account automatically as the winnings surpassed $5,000.
Q. Am I still responsible for paying income tax on gambling winnings?
A. Certain winnings are required to be reported, so please consult your tax preparer or accountant.