It is especially important to keep records if you are deducting sports betting losses on your tax return.
Even if the activity is illegal, you are still required to report the income from that activity.
Most taxpayers can only deduct their sports betting losses to the extent of their sports betting and gambling winnings.
For example, if you have $10,000 of winnings and $5,000 of losses, you can deduct $5,000 of losses.
However, if you have $5,000 of winnings and $10,000 of losses, you can only deduct $5,000 of losses.
If you do not include that tax form on your return, the IRS is likely to take notice.
Your state of residency is likely to offer a credit or deduction for the taxes that you paid to the state where you are a nonresident, which allows you to avoid paying taxes on the winnings to two states.
If that happens, contact the sportsbook or gambling company and request a corrected tax form with the appropriate amount of winnings.
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