There are a few things you can reliably count on this time of year: The winds are a little less biti...

1. 9 Tournament & Tax Tips On The Road To The Final Four
There are a few things you can reliably count on this time of year: The winds are a little less biting.
The daffodils are finally making an appearance (except in the northeast - sorry, Boston). Tax
professionals have that "tell me it's almost over" look as we enter the home stretch for individual
returns. And in many parts of the country, especially ACC country, where I come from, just about
everything stands still for March Madness.
Whether you're playing for real money in Vegas - or just play along with your friends - here are a few
tips to keep in mind as March Madness heads down the final stretch:
Enter the office pool. I'm not a betting girl. And I'm not telling you to bet. But if you're going to bet
on sports, your office pool may be the way to go. Why? Because the folks that tend to enter are
generally those that play the odds occasionally as opposed to your hard core gamblers. And they
tend to be folks that will bet on their sentimental favorites or their gut as opposed to a well thought
out analysis. Yes, Nate Silver could be your office mate but chances are he's not. That makes your
odds of winning - even if you're not a rabid basketball fan - not so very different from everyone
else's.

2. Keep good records. It doesn't always cost money to enter your office pool since sometimes you're
just playing for fun - and possibly lots of bragging. But sometimes you do play for money. And if you
play and you win, chances are that your office mates will pony up their cash but they won't be
scrambling to provide you with a federal form W-2G, Certain Gambling Winnings (downloads as a
pdf).
A form W-2G is used for tournaments and wagers when the winnings, after the cost of playing, are
$600 or more and at least 300 times the amount of the wager; it will also be issued if winnings are
subject to federal income tax withholding: this includes backup withholding and well as regular
gambling withholding. "Regular" gambling withholding is a flat 25% rate if your winnings from a
gambling pool minus the cost of your wager are more than $5,000. Remember that gambling
winnings don't just include cash - it also includes noncash payments like watches, electronics,
vouchers and whatever else your fellow gamblers offer up.
Even if you don't receive a form W-2G, your gambling winnings are reportable as income. For casual
gamblers, you would include that income on line 21 of your 1040. You'll want to be sure and
document the exact amount of your winnings for tax purposes - especially after you've bragged all
over Twitter.
Do your homework - but it only helps if you win. I've already stressed that your gambling winnings
are taxable. But what about offsets? Can you deduct the cost of becoming a winner? What about
premium channels, data and related costs to pick the right teams?
If you enter office pools and similar contests as a hobby, the IRS has consistently ruled that related
expenses - no matter how integral - are personal in nature and not deductible. In that regard,
gambling for sport is treated differently from all other hobbies. The only offset you can take - after
deducting the cost of your winning wager - is the total of your gambling losses for the year. Those
losses are claimed as miscellaneous itemized deductions reportable on a Schedule A. Excess
gambling losses are lost forever: not only can you not deduct more losses than winnings in any tax
year, you can't carry excess deductions forward or backwards.
If, however, gambling is your business, you would report your winnings and your related expenses
on a Schedule C. If that's the case, your expenses aren't limited by your income and are fully
deductible. This hasn't always been the case: the IRS has traditionally taken the position that section
§165(d) of the Tax Code which allows gambling losses "only to the extent of the gains from such
transactions" is the only deduction allowable to gamblers. Many professional gamblers disagreed,
taking the position instead that §162(a) of the Tax Code which allows for business expenses should
apply.
Today, the IRS tends to agree that business expenses for professional gamblers are deductible so
long as they meet the "ordinary and necessary" tests. Beer and nachos, while they may feel
necessary, aren't deductible. But premium content and insider tools might be. Might. It's all facts
and circumstances dependent - consult with your tax professional for the specifics.
It's anybody's game. I know. Statistically, the favorites tend to win. But that's not always the case.
This year, Villanova, a heavy favorite, bowed out early. And Michigan State cracked the Final Four,
beating out Louisville, creating a little havoc in the brackets. Neither of those hold a candle to my all
time favorite upset: when Jimmy V's NCSU team made an amazing dunk at the buzzer to edge out
Houston (yes, with Hakeem Olajuwon and Clyde Drexler) in the 1983 finals. All are a good reminder
that, in the end, the winner isn't who wins the most during the season. It's who wins when it matters
the most.

3. Michigan State head coach Tom Izzo, center front, celebrates with his team after the regional final
against Louisville in the NCAA men's college basketball tournament Sunday, March 29, 2015, in
Syracuse, N.Y. Michigan State won the game 76-70. (AP Photo/Seth Wenig)
It's not about winning or losing but how you watch the game. A lot of what happens in the
tournament doesn't have to do with winning or losing. Remember that statistically, most of us don't
stand a chance. Of the 68 teams who made it into the tournament, only one of them is going to take
home the trophy. But that isn't what the madness is about, is it? It's about how it makes us feel.
Last year, an estimated 50 million Americans participated in March Madness office pools. A 2012
MSN survey indicated that a whopping 86% of respondents planned to spend some of their workday
updating brackets, checking scores and following games. According to the same survey, 56% of
workers planned to devote at least one hour of their workday to the tournament.
Since most employees plan to engage in a little tournament banter, if you're the employer, why not
engage the whole office and make it fun? It's relatively cheap and easy to put a television in the
break room and provide some game time snacks for employees. So long as those snacks aren't
extravagant, that entertainment is free for the employer and tax free to the employees. It's
considered de minimis, which is a fancy way of saying "of little consequence." Under the Tax Code,
de minimis fringe benefits are among those that are excluded from federal income tax withholding,
Social Security tax, Medicare tax, or federal unemployment (FUTA) tax. They're not even reported
on a form W-2. Also excluded? Meals on the premises. Since traditionally many employees head to a
bar at lunch during the workday to watch the games, why not provide an incentive to keep them at
the office - and sober? So long as meals are for the convenience of the employer, they, too, qualify as
an excluded benefit. A game day spread is a great office perk - complete with tax benefits.
It's okay to be trendy. I know we all want to be the one to make that pick, that surprise pick that
nobody saw coming. It's fun, isn't it? When a Cinderella team wins? But while Cinderella make may
it to the dance, she rarely dances into the Final Four. Sometimes favorites are favorites because it

4. makes sense. This year, based on a number of predictions from various sports sites including ESPN,
it looks like Kentucky is the clear favorite to win it all (Silver's site now gives them a 55% chance of
taking home the whole thing). Also a favorite? Wisconsin (who doesn't have a crush on Nigel Hayes
by now?). Those are the safe picks - and for good reason.
Have a back-up plan. Playing the odds is fun. But unless you're Nate Silver, it's not your best long-
term investment strategy. In one survey, a third of people indicated that they believed their March
Madness bet would offer a better return than their 401(k) plan. That math, as you can imagine, is a
little bit skewed... During your lifetime, investing just $10 per year, the same as the average March
Madness bet, with a 50% employee match (and assuming a 7% return) would yield $3,107 at
retirement. That's about $3,107 more than most taxpayers will actually make playing the odds and
it's tax deferred. As opposed to gambling winnings, which are immediately taxable, with a 401(k),
you pay federal income tax on the money at the time of your withdrawal - which could be decades
later.
And one more because it's important:
This might be one time that you don't want to follow your heart. I always vote my favorites. That's
also why I never win. The French and German interns in my office consistently have a higher
winning percentage than I do. I'm convinced it's because they vote on statistics and not sentiment.
No matter how much I wanted Coastal Carolina to make it to the finals, statistically, I knew that
wasn't very likely. And we all wanted Georgia State's R.J. Hunter to bring home the trophy for his
dad (and Coach). Who could vote against that guy? Statisticians. And those folks who will ultimately
win their brackets. Not those of us sniffling into our sleeves and watching this Vine of Coach Hunter
reacting to his son's shot. Even if it does make a great story.
Understand that it's just a game. Unless it's not. Picking brackets is fun for me. Because it's a game,
nothing more. I don't have a compulsion to gamble. If you feel that you have a problem with
pathological gambling, you should seek help. Many support groups are free but if you do have to pay
up, you might be able to deduct the expense on your federal income tax return as a medical expense
itemized on a Schedule A. Not all programs will qualify but generally, inpatient treatment at a
therapeutic center for gambling addiction should meet the definition of a qualified medical expense.
If you're not sure if your program qualifies, ask your tax professional for more information.
With just a few more games left in the tournament, I hope you're enjoying the season. I know that I
sure am. Go Devils.
Want more taxgirl goodness? Pick your poison: follow me on twitter, hang out on Facebook and
Google, play on Pinterest or check out my YouTube channel. For cases and tax related docs, visit
Scribd.
http://www.forbes.com/sites/kellyphillipserb/2015/03/29/9-tournament-tax-tips-on-the-road-to-the-fin
al-four/