Any American adult would be wise to avoid tampering with the IRS at all costs. In the US, the Internal Revenue Service is in charge of ensuring that personal income taxes and other tax laws are followed.

Similarly, income taxes are levied in numerous US jurisdictions. State and local governments are included in this. They handle gambling winnings in a manner that is similar to that of the IRS.

Any winnings from gambling are considered taxable income to the IRS and these other organizations. You may be subject to severe penalties if you neglect to report and possibly pay taxes due on them.

The specifics of those penalties may vary significantly based on your circumstances. Let's just say that none of them are nice.

How to Prevent Issues With Winnings and Taxes From Gambling

Maintaining thorough records is the best course of action in any area pertaining to income taxes. That also holds true for winnings from gambling.

All of your winnings from gambling during the year should be considered taxable income. You will need to notify the IRS and/or other appropriate authorities about them, at the very least.

Depending on your circumstances, you might have to pay more taxes on those winnings. The next best course of action, after maintaining thorough records, is to seek the assistance of a skilled, knowledgeable tax expert.

These experts can assist you in making sure that any taxes you may owe on those winnings have been accurately reported and paid. The cost is justified just for the peace of mind.

Your personal and professional life may suffer greatly if you underreport, fail to pay, underreport, or fail to report at all. Doing things correctly the first time will save you money.

What May Occur If You Don't Properly Report Your Gambling Winnings

In this case, even the best-case scenario can be expensive. If you don't report and possibly pay taxes on your winnings from gambling, you will at least be penalized.

Additionally, any underpayment that is still owed to you will most likely be subject to interest charges from the IRS and the relevant governments. Until you pay off the remaining amount, that interest will keep coming in.

The IRS and/or other governments can obtain a judgment against you that will permit more forceful enforcement actions if your balance is large enough and/or unpaid for a sufficient period of time. This may entail taking assets against your balance, such as your house, savings, and cars.

The best course of action if you find yourself in such a situation is to hire legal counsel with experience in tax litigation. They might be able to negotiate better terms or a smaller settlement.