Gaming the IRS’ Third-Party Reporting System: Evidence from Pari-Mutuel Wagering

According to a study, taxpayers may purposefully avoid reporting their income to the IRS through third-party reports. An IRS modification in 2017 lowered third-party tax reporting of pari-mutuel gaming winnings. Comparing US and Canadian thoroughbred racing, the study indicates a large increase in wager types less likely to prompt third-party reports. These data show that taxpayers willfully dodge third-party reporting, leading to the enormous US tax deficit.

Image courtesy of interviewee. January 9, 2024

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