IRS to Focus on Sports, Gambling, Lending Practices and Trusts in 2021

The Internal Revenue Service (IRS) has signaled its intent to target tax evasion and tax fraud in a number of specific areas in 2021. Among others, this includes sports, gambling, lending practices and trusts. Here, Boston tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, highlights some of the key issues that can lead to problems for taxpayers in Massachusetts if they do not manage their federal income tax reporting and payment obligations appropriately.

Sports Wagering and Gambling

It is no secret that many people in Boston bet on NFL, NBA, and other sporting events. While efforts to legalize sports betting in Massachusetts are underway, it is currently unlawful to bet on sports in the Commonwealth.

For individuals who bet on sports, this presents a challenge. The IRS requires payment of both excise and income taxes on sports wagering. As the IRS states, “Sports wagering, like wagering in general, is subject to federal excise taxes, regardless of whether the activity is allowed by the state.” With regard to income tax, the IRS makes clear that U.S. taxpayers “must report all gambling winnings as ‘Other Income’ on Form 1040 or Form 1040-SR.”

The same general principles apply to other types of gambling in Massachusetts’ casinos. If you win money gambling, you must pay a portion of your winnings to the IRS. Our Boston tax lawyer is well aware that gambling is an “emphasis area” for IRS Criminal Investigations (IRS CI), and both tax evasion and illegal gambling can lead to fines and prison time. Contact our office today to discuss your legal options.

Lending Practices

Tax evasion in connection with commercial, consumer, and private lending practices is currently a key focus for the IRS as well. This includes lending both related and unrelated to wagering and gambling. The IRS scrutinizes the returns of companies and individuals engaged in lending practices and also places particular emphasis on private foundations and other exempt organizations. Companies, individuals, and exempt organizations are all common targets for IRS audits and IRS CI investigations, and, here too, reporting violations and other unlawful activities can lead to substantial penalties.

Trusts

Due to the potential for abuse, the IRS considers trusts to be a key enforcement area as well. Last year, the IRS issued updated guidance for trusts in light of new restrictions imposed under the Tax Cuts and Jobs Act. Trustees and beneficiaries alike need to have a clear understanding of the Internal Revenue Code provisions that apply to trusts, and they must ensure that both the trust’s returns and their personal returns accurately report all taxable activities.

Each of these three areas presents unique challenges for taxpayers; and, with the IRS focusing on these areas in 2021, taxpayers must ensure that they are taking the necessary steps to comply with the federal tax laws. If you have any questions or concerns, we encourage you to contact us for a confidential consultation.

Request a Confidential Consultation with Boston Tax Lawyer Kevin E. Thorn

Kevin E. Thorn, Managing Partner of Thorn Law Group, is a Boston tax lawyer who has been representing individual and corporate taxpayers in IRS matters for nearly two decades. If you would like to discuss your federal income tax obligations with Mr. Thorn in confidence, call 617-692-2989, email ket@thornlawgroup.com or request an appointment online today.