Is the IRS Watching Your Betting End Zone?

Football season is back, and the betting fever is rising. But before placing that next wager, remember that not all bets are created equal. The IRS is reminding taxpayers that illegal gambling can lead to serious consequences, including criminal charges. So, keep your game straight and narrow and enjoy the season responsibly. 

The Growing Impact of Sports Betting in the U.S.

As per the American Gaming Association, around 68 million Americans placed bets on last year’s Super Bowl, marking a 35% jump from 2023. It's estimated that they wagered a whopping $23.1 million. On the flip side, the underground sports betting market in the U.S. pulls in over $700 million in yearly revenue. From 2020 through June 2024, the IRS Criminal Investigation unit launched 151 probes into illegal gambling, uncovering over $178.8 million in activity. These efforts led to 71 convictions, with an average prison sentence lasting a little more than two years.  

The IRS-CI’s Take on It  

“Sports betting has skyrocketed over the last five years and is now more widespread than ever,” said Guy Ficco, Chief of IRS Criminal Investigation. “While online gambling is just a few clicks away, it’s not always on the right side of the law. With the new football season underway, our special agents are keeping a close eye on the trends and using our skills to crack down on illegal gambling activities, including money laundering and tax evasion.” 

IRS-CI is the criminal investigation wing of the IRS, handling cases like tax fraud, money laundering, drug trafficking, public corruption, healthcare fraud, and identity theft. Their special agents are the only federal law enforcement officers who can investigate violations of the Internal Revenue Code. With a conviction rate of over 90%, they’re pretty effective. IRS-CI operates through 20 field offices in the U.S. and 12 international attaché posts. 

Earlier this year, special agents from IRS Criminal Investigation and Homeland Security uncovered that Ippei Mizuhara, Shohei Ohtani’s former interpreter, had been involved in an illegal gambling ring for several years. Mizuhara secretly transferred nearly $17 million from Ohtani’s bank account—without the baseball star’s knowledge—to cover his mounting gambling debts.   

Between November 2021 and March 2024, Mizuhara accessed Ohtani’s bank account using the player’s password, changed security settings, and updated contact information so that any bank verification calls went to him, not Ohtani. Posing as Ohtani, Mizuhara even used his personal information to fool bank employees into approving wire transfers. In total, he impersonated Ohtani in about 24 calls to the bank. Hard to believe, isn’t it? 

Why it’s important to Report Sports Betting Winnings?

If your client is into sports betting, remember to report their winnings on their annual tax return. The IRS also recommends keeping track of all gambling activity—this means logging your clients' bets, winnings, and any losses. If you're not sure about it or have questions on how to report gambling income, it's a good idea to visit the IRS website for more info. Just a heads-up: not knowing the rules doesn't excuse anyone from following them! 

How IRS-CI Finds It All?

Let’s break down the tactics and strategies that give the IRS-CI an edge: 

1. Exclusive Jurisdiction: As the only federal agency with the authority to investigate violations of the Internal Revenue Code, the IRS-CI holds a unique advantage. This exclusive power enables them to effectively tackle tax-related crimes, setting them apart from other law enforcement agencies. 
2. Global Reach: With 20 field offices in the U.S. and 12 international attaché posts, IRS-CI isn’t limited by borders. Their expansive network allows them to track down financial crimes worldwide, whether it's money laundering or offshore tax evasion. 
3. Experts at Play: With a conviction rate exceeding 90%, the IRS-CI isn’t just playing the game—they’re winning it. This efficiency showcases their expertise and serves as a strong warning to potential offenders. 

What Professionals Can Learn from This Story

• The IRS-CI’s focus on illegal sports betting highlights the need for strict compliance. Their recent investigations show that even small betting activities can attract scrutiny. It's crucial for professionals to remind clients that illegal gambling has severe legal consequences. 
• Professionals should ensure clients report all gambling winnings and maintain records. Accurate record-keeping can protect clients during audits and prevent hefty fines. Encouraging transparency in reporting builds trust and reduces the risk of penalties. 
• The case of Shohei Ohtani’s interpreter shows financial fraud can happen anywhere. Even trusted individuals can misuse financial information if not monitored properly. Implementing strict internal controls is essential to safeguard clients' assets. 
• IRS-CI’s 90% conviction rate means evading tax laws isn’t worth the risk. This high success rate demonstrates their efficiency in tackling financial crimes. Clients should be aware that attempts to bypass tax obligations are likely to be detected. 
• Staying informed about IRS guidelines is essential to keep clients legally compliant. Regular updates can help professionals advise clients accurately and avoid mistakes. A proactive approach ensures clients are always one step ahead of potential issues. 

Now that you know how the IRS-CI keeps a close eye on financial crimes, don’t let them catch you off guard! Want more insider tips and the latest scoops in accounting, tax, and finance? Subscribe to our weekly newsletter and keep your playbook up-to-date. After all, knowledge is the ultimate touchdown! 🏈