Heavy hitters–they’re everywhere, and they’re who horsemen and the horse racing industry really depend upon to keep purses funded and business running. Bottom line: Our sport needs to take alot better care of our best players, so they’re not lured away from the track by other forms of gambling that may be financially more attractive to them when it comes to tax time each year.
So when the Internal Revenue Service announced recently that it was thinking about adding pari-mutuel wagering to new rules that would modernize how it taxes winnings on other forms of gambling like slot machines and Keno, the National Thoroughbred Racing Association swung into action.
- Click HERE to send your email supporting modernized gambling rules to the IRS!! DEADLINE IS JUNE 2!!
Hard to believe, but the way the IRS taxes gambling winnings hasn’t changed since 1977. Back then, most wagers were “straight,” meaning they were “win,” “place” or “show.” Today, however, that’s all changed with the advent of exotic wagers, in which bettors can “key,” “wheel.” Bets like Trifectas, Superfectas and Rainbow Six wagers require a bigger up-front investment–a risk that serious players are willing to take for a bigger win.
Let’s take a look at the problem:
Say you make a $1 Exacta box on three horses. There are six possible combinations, with each bet costing $1 for a $6 total wager, right? In principle, the IRS would treat your original investment on a winning ticket as only $1–not the full $6 you invested to make the bet.
But the IRS isn’t concerned with chump change. When it comes to payoffs for big players, the feds maintain a certain threshold (300 to 1) at which the racetrack must take withholding from the payoff before the winner even receives his or her money. So if the bet in question came from an exotic wager, the winner’s original investment in the ticket is not taken into account. Just the cost of the single wager it took to produce that winner. Hardly seems fair, right? Plus, it means the racetrack has to do extra paperwork.
But YOUR help is needed as well. Click HERE to send your own email to the IRS–but you must send your email no later than June 2, 2015! Over 2,500 people have already participated! See the suggestion below for your own email to the IRS . . . your action today could mean bigger purses in the future!
Today approximately 30 million Americans wager on pari-mutuel horse racing each year. Due to the growing popularity of exotic wagering across all fan groups, virtually any horseplayer may find himself or herself standing in the “IRS line” at a racetrack. Every one of horse racing’s 1,200+ wagering service sites must calculate, track, withhold and forward to the Service any federal tax due on winnings of more than $5,000. This process requires the expenditure of thousands of man-hours processing withholding obligations and producing Forms W-2G.
In addition to the time spent processing withholding and reporting, the current withholding rules reduce revenues and economic benefits generated by the racetrack. Statistics show that each pari-mutuel dollar returned to the bettor in the form of winnings is re-bet seven times throughout the course of a day. Tax withholding reduces the amount of re-betting, which not only has an effect on the bettor and the track, but also serves to reduce the collection of additional tax revenues that are paid by each racetrack operator on its net revenues.
Read some of the letters to the IRS sent by horse racing entities nationwide here: http://www.ntra.com/en/legislative/background-on-effort-to-clarify-pari-mutuel-withholding-and-reporting/
Read the NTRA press release on the issue as published by the Paulick Report: http://www.paulickreport.com/horseplayers-category/u-s-treasury-irs-to-consider-clarification-of-pari-mutuel-reportingwitholding/
Stumped on what to tell the IRS in your email? Here’s some suggested text to send:
Subject: Rulemaking on REG–132253–11 relating to pari-mutuel wagering
In regard to current IRS rulemaking underway for REG–132253–11, I am writing to share my opinion that current regulations relating to pari-mutuel reporting and withholding need to be updated for the following reasons:
- In the absence of a specific regulation concerning the definition of the “amount of the wager,” the horse racing industry is forced to rely on the Instructions for Forms W-2G and 5754. The guidance provided by these Instructions does not reflect today’s wagering strategies in which the vast majority of wagers are multi-horse and multi-race exotic bet types but instead reflects a bygone era when almost all wagers were straight win, place or show bets that had virtually no chance of exceeding the 300:1 ratio of wagering proceeds to “the amount of the wager;”
- The Instructions on these Forms assume that a bettor has won more than he or she has actually won based on a calculation of “the amount of the wager” that ignores the actual investment in a single pari-mutuel pool;
- Due to this outdated and unfair method of calculating the “amount of the wager,” excessive withholding and reporting are taking bettors’ winnings out of circulation – money that otherwise would be repeatedly re-bet;
- Undue withholding and reporting of winnings and the resulting lack of re-betting, depresses pari-mutuel wagering and the benefits that wagering supplies to all stakeholders including federal and state governments, which derive significant tax revenue from pari-mutuel wagering, as well as the nationwide agri-business that pari-mutuel wagering supports;
- An update to the regulations to reflect today’s pari-mutuel wagering strategies will result in more accurate reporting and withholding by taxpayers and is consistent with IRC Section 3402(q) and basic tax policy; and
- Modernization will reduce burdensome and needless paperwork system-wide.