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Tax News Now Ep. 18 - From the Casino Floor to the Locker Room: What CPAs Must Understand About Gambling Losses and NIL Taxation with Brandon Lagarde
237 Plays10 days ago
In this episode of Tax News Now, Mark Gallegos and his guest, Brandon Lagarde of Eisner Advisory Group LLC, explore the rapidly evolving tax landscape surrounding two major money-in-sports trends: the explosion of legalized sports gambling and the rise of NIL (Name, Image, and Likeness) income for college athletes. The discussion covers key compliance issues practitioners need to understand, including the new gambling loss limitation rules, reporting of winnings, recordkeeping challenges, and the tax complexities of cryptocurrency used for wagering. The episode also highlights the unique tax challenges facing college athletes and encourages CPAs to take a proactive advisory role as both areas continue to grow.
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Transcript
Introduction to Tax Complexities for CPAs
00:00:09
Speaker
Welcome back to Tax News Now, the podcast where we cut through headlines, decode complexity, and focus on what actually matters for CPAs and advisors working with real clients in the real world. I'm Mark Gallegos, and today's episode is one I think every practitioner needs to hear.
00:00:24
Speaker
Money is moving in ways that it has never done before.
Evolution of Money and Gambling's Impact on Taxes
00:00:27
Speaker
It's moving through phones, through apps, through fantasy leagues, prediction markets, college locker rooms. It's moving faster than the rules govern it and faster than the awareness that people are learning from it or even earning from it.
00:00:39
Speaker
And for decades, gambling meant going to Vegas or going to Atlantic City. But today, it's a tap on the screen during halftime. For decades, college athletes earned scholarships. Today, they earn six-figure NIL deals before they can legally rent a car.
00:00:54
Speaker
And so that behavior has changed. The technology has changed and the culture has changed. And guess what? The tax code has welled. It's racing to catch up. And starting in 2026, it's going to land harder than most clients realize.
00:01:07
Speaker
So this episode isn't about scaring anyone with penalties or memorizing every code section. It's about awareness. It's about advisory. And it's about being the person in your client's life who sees what's coming before they do.
00:01:19
Speaker
And that's why I'm thrilled to welcome today's guests to the Tax News Now podcast.
Guest Introduction: Brandon Lagarde
00:01:22
Speaker
um Joining me is Brandon Lagarde, CPA, a tax advisor, a known, respected CPA, someone that I respect at a high level and has done a fantastic job with leading in our industry and doing some amazing things.
00:01:36
Speaker
He spent his entire career helping individuals, families, closely held businesses navigate complex tax issues with clarity and judgment. um He's an LSU fan, and um you know I guess he could see where you know gambling has gone with ah LSU football along the way. But beyond the credentials, Brandon is genuinely and thoughtfully deeply experienced and someone who sees not just tax as compliance, but as advisory in the
Gambling Tax Changes and Misconceptions
00:02:01
Speaker
truest sense.
00:02:01
Speaker
So Brandon, welcome to the podcast. Thanks, Marks. Thanks for being. Thanks for inviting me to to participate. Right. So now imagine this, Brandon, picture this. Your client walks into your office, drops a stack of paper on your desk and says, great year. I broke even on sports betting.
00:02:19
Speaker
I won $100,000, but I also lost $100,000. It's a wash, right? And you look at them and say, well, actually, this could be a problem starting in 2026.
00:02:30
Speaker
So these this is where the math doesn't add up anymore, right? Yeah, I mean, that's that's kind of the the typical scenario you have here, you know, is again, client who has just gambles on an infrequent basis, maybe it goes a casino, walks into your office and hands you a bunch of W2Gs. And you're wow, you did pretty good this year with your winnings. And I said, no, no, no, I didn't do that good because, you know, I broke even. I lost just as much as I as i won. Well, that's going to change starting 2026. The new rules 26 is,
00:03:00
Speaker
the new rules are twenty six is You can't deduct, ah the old rule, i'm sorry, was that you could deduct your gambling losses up to your winnings. Well, now you can only deduct 90% of your losses. Still up to your winnings, but only 90% of your losses are deductible. So in that scenario, where someone walks in and says, I made $100,000 gambling,
00:03:21
Speaker
and you lost $100,000 through the same gambling process, guess what? You don't have a phantom income of $10,000. And I think that's gonna shock people a lot. um and And part of the reason why it's gonna shock people too, and and you know the gambling industry, like you mentioned in your opening, has just exploded.
00:03:41
Speaker
It's not just going to Vegas, or Atlantic City, and putting money slot machine and and hoping that you you know get all sevens. Although i think nowadays it's it's a lot of ah ah computers and I'm not sure they still have the old spinning wheels anymore, but now sports gaming and sports gambling has exploded.
00:04:00
Speaker
And that's really where you see a lot of challenges, a lot of, wouldn't say misinformation, but just a lot of questions around what happens now? You know, now that so many more people are gambling, like you said, at the touch of a fingertip on your phone. You know, you just go back seven years, sports gambling, sports betting was legal in almost every state except think Nevada might've been legal.
00:04:27
Speaker
Now it's legal in, 38 states plus. So, you know, really it's just blown up the industry as far as people who are participating and in gambling.
00:04:39
Speaker
Absolutely. And I think that it's just going to continue to explode further. but me Let me throw some numbers out at you that I was looking at that really blew me away. The American Gaming Association estimates that Americans legally wagered well over $150 billion dollars on sports in this recent past year. And that's just legal track piece of gambling.
00:05:03
Speaker
You add onto that fantasy sports, prediction markets, online poker, casino apps, informal pools and offshore platforms. You got some big numbers behind that. um And obviously this has changed.
00:05:14
Speaker
Where do you see this? You know, I mean, just talking to clients and, you know, are they are they involved in any of this stuff? Yeah, I throw another another stat I heard out there, and this was a a recent stat I was listening to on one of the sports radio networks as they were talking about some of the recent trouble college kids are having with gambling. But it was 75% of college-age males participate in sports gambling. 75% is what the stat is, which is crazy um to to think about that much is happening.
00:05:47
Speaker
um And again, it's just because it's easy. And it's easy to put $5 down on a parlay in hopes that you're going to catch 10 of the 10 legs that you bet on and turn that $5 into $3,000 or even more than that.
00:06:03
Speaker
And that's when, again, you get into some of the compliance issues and the reporting and things that get triggered once you start winning big pots like that. um But You know, a lot of people participate in gambling through other means, too. um As you mentioned, it's not just the people who are sports betting with, you DraftKings or any of these platforms, but it's also folks that are participating in their fantasy football league at work or their...
00:06:29
Speaker
you know, again, playing video poker machine at that the ah yeah the local um bar that they play at. I mean, again, it's it's just permeates now so much um that we're we're seeing more and more people who are not just using it, but also having text issues associated with that.
00:06:48
Speaker
So think about how we got here, Brandon. The Supreme Court in 2018 was a a decision, Murphy versus the NCAA. They'd opened the door for state by state legislation.
00:06:59
Speaker
And once that happened, the floodgates opened as we've been talking about. Now you've got sports betting in most states, daily fantasy on every platform imaginable, prediction markets like CalShay and Polymarket, where people are betting not only on sports, but elections, economic data, geopolitical events.
00:07:16
Speaker
We've got obviously casino apps, online poker, skill-based games, um crypto-based gambling platforms. All of these things are out there. And on top of that, watch a sporting event and the broadcast, right? The odds are baked right into the broadcast graphics, right? Gambling isn't really a subculture. It is the culture.
00:07:36
Speaker
And we're seeing more and more of that. You know, you're watching the Masters a few weeks ago. I'll talk about gambling throughout it, right? So it's a big thing. Yeah, it's it's it's wild. um you know yeah ESPN, which is the biggest sports network out there, has their own app and they advertise it. And you can even flip on the TV before the weekend's games and they're talking about what to bet on. um With a caveat, of course, of, you know, ah they're not an investment advisors or gambling experts and and, you know, seek help if you need help. But it it really is ah permeating so much. And you mentioned two other areas that have really started to ah blow up recently or or really get to um kind of more normal is Polymarket and CalSheet, these prediction markets that are now ah super hot right now.
Cryptocurrency and Gambling: Tax Complexities
00:08:27
Speaker
know, you can...
00:08:29
Speaker
almost place a bet on any world event. You know, when ah when will, you know, the Iran war end, you could place a bet on that. and You could place a bet on just about anything right now. And it's just crazy, ah the the amount of betting out there.
00:08:46
Speaker
You mentioned something briefly that kind of prompted a thought in my head too, is It's not just taking money and putting it and depositing it into a bank, taking money from your bank account and depositing into one of these platforms and then betting on their platform.
00:08:58
Speaker
um Crypto is being used in many of these cases, especially some of these prediction markets. And we all know the tax issues associated with using crypto for certain things. um yeah If I take my Bitcoin and use it to place a bet on polymarket, there are tax implications just in that, in actually using the actual cryptocurrency to place a bet.
00:09:19
Speaker
And that stuff has not even touched the world of guidance being issued on how to address those situations. or really just you know Again, there's just so much out there that, as you mentioned when started off, that There's a lot of catch up that is occurring with guidance being issued, um not only by IRS, but also states trying to address this issue as well.
00:09:42
Speaker
um It's just ah it's a fascinating area to to to look into because of the volume that's occurring ah right now in this space. We're seeing, I mean, we think of gambling, we think of like Las Vegas, Atlantic City, casinos, we think of the standard card games or slot machines, right? And it is truly grown into, um hey, I'm going to bet on a football game. And then, you know, you know, you're losing the bet in the first quarter.
00:10:10
Speaker
And so what can you do now? You can place another bet on something else within the same game in the second quarter, the third quarter, et cetera. So there's more games within the game. And I think this has created, you know, people to want to continue to, ah I guess, invest their money. and And like you said, if I'm using digital asset like crypto or or Bitcoin or anything like that, there are tax ramifications that,
00:10:35
Speaker
Most, most users probably aren't aware of or not tracking that at least. So it's a big deal. Have you seen stuff show up on the, you know, like, like you mentioned on the prediction markets, you know, Calci or, or any of them where you're starting to see from the election or people wagering on geopolitical events with your client base at all?
00:10:55
Speaker
You know, it's funny, it's it's funny even though you know it's become a little more of ah you know, it used to be kind of a vice, right? It was it was one of these things that gambling had this bad connotation of associated with. And now it's become fairly normal in terms of the culture. but I think people still a little bit are are less likely to tell you that they are placing bets or that they even want to bet, depending on how big the bet it is. So we haven't seen quite an uptick yet. And in some of those prediction markets,
00:11:26
Speaker
recently just opened up to being able to participate. think prior to you know last year, in order to use Polymarket, you had to essentially create an offshore count and you know participate in in some strange hoops to jump through. Now it's easier to do.
00:11:43
Speaker
So we hadn't quite seen the uptick in the prediction markets yet, but I know it's common because people, again, it's it's it's easy. And for you know for some, it's it's fun to do. um I seem to always lose any bet i make on any sports bet I do. um So, you know, I tend to stay away. But, ah you know, we yeah we certainly have definitely have seen an uptick people getting, you know, W2Gs from, the you know, FanDuel and... the kind of the the fantasy or daily fantasy games.
00:12:19
Speaker
um We definitely have seen uptick in people playing in those games and also, again, getting reporting notices from the services. And that's another another part that I think people, yeah again,
00:12:33
Speaker
fail to realize, and we talk about in tax all the time, is just because you didn't get a W2G from the particular platform, it's still taxable if you won. ah So regardless of if you actually received a W2G or any type of 1089 from the company that you're gambling with,
00:12:52
Speaker
it's still taxable. So, you know, I won my fantasy league this year, um which was great. And I'm not to tell you how much I won because IRS might be listening to this someday, but you know, I should pick that up in income this year. And of course I will also, of course, by the losses that I put out. um But, you know, again, that's definitely a misconception that just because you don't receive that W2G or 1089 from whoever you're betting with, doesn't mean that you don't have taxable income on that, on that gambling income.
00:13:22
Speaker
Yeah, I mean, rule number one is all gambling winnings are taxable income, period. Whether or not you get W2G, whether or not you get a 1089, 1089K, whatever the form may be, you know, if you win, you win.
00:13:35
Speaker
And I think, you know, to take that a little further, you know, I think one of the things that for the casual gambler out there, those winnings get reported um is you know, other income on Schedule 1 of the 1040, but they're reported at gross versus net, right?
00:13:52
Speaker
Um, and you want to speak to that whole gross net thing. And then, and then where do you get to take the losses? Yeah, absolutely. So that's another kind of common misconception too. So again, assume that the person does get a W2G or maybe they're just reporting their income like they should, regardless of receiving a W2G, um, client picks their, their income up, uh, you know, the gambling winnings on, uh, thing, it's line eight, uh, as other income on their 1040.
00:14:19
Speaker
And again, it's a common misconception that someone will say, well, won $100,000 by betting on the you know the the Saints to win a game next year. um But I lost $100,000 on something else. So my net zero, so I'm going put zero on other income line.
00:14:38
Speaker
Well, that's just not how it works. that your Your gross winnings are reported as other income, and your losses are actually itemized deductions. And as you know, in the world of itemized deductions, and because the standard deduction has gone up, fewer people actually itemize.
00:14:54
Speaker
So there is ah there are there are possible opportunities and chances, I guess, i i opportunities more of chances that you have someone that actually has some gambling winnings, and maybe it's not huge numbers, maybe it's you know, $10,000 or whatnot, which is big in some places, for some winnings, but, you know, maybe it's not the $100,000, maybe it's $10,000. They say, well, obviously lost that much during the year, so I'm gonna support zero.
00:15:20
Speaker
no No, $10,000 should be another income. And the $10,000 or whatever you lost, which we'll maybe talk about the record keeping you need for the losses, that should be an itemized deduction. And if you don't itemize, then you're not really getting the benefit of that gambling loss. You're just picking up ah the the winnings.
00:15:38
Speaker
So that's really important to to recognize that. especially when you look at some of the states out there that either don't have itemized deductions as a thing, um like Louisiana actually you know got rid of itemized deductions for the most part couple years back. So for those in Louisiana who try to itemize the deductions,
00:15:58
Speaker
Guess what? If you have a lot of gambling winnings and you don't have any itemized deductions to offset because one, the state doesn't allow itemized deductions or two, they just have a different methodology or or don't allow gambling losses in general, you can have a big state impact that you don't know is going to happen.
00:16:15
Speaker
um So we definitely see that coming up in states that don't allow itemized deductions again because your losses are actually claimed as an itemized deduction, not just as offsetting of your gross income from your gambling winnings.
00:16:28
Speaker
Yeah, no, it's some good points there. I know I have, I mean, clients say to me all the time, I'll have this conversation, Mark, I won $20,000 on one bet, but I'm down $75,000 for the year. And they'll say, I have a loss, right? I i don't have to pay tax on any any of this.
00:16:44
Speaker
And I'll say, well, not exactly. i mean, you have $20,000 of taxable winnings and your losses might be deductible, but only if you itemize, like you mentioned, Brandon. So if you don't have any records um and, you know, how do you support those losses, right?
00:17:00
Speaker
So this is where, you know, sometimes clients version of breaking even or winning is completely different from the way the taxes are, right? and he'll be interesting to see too. and And I'll tell you just in practice, back to your comment on you know what where clients will tell you is, well, look, I told i know I lost more than I have have won because i go to the casino once a week and and yeah I'm not really tracking my losses because it makes me sad and depressed by tracking my losses. So when it comes time to tax filing, yeah you get you let's say they did report the W2Gs or they're just reporting their winnings because that's they're supposed to do
00:17:35
Speaker
and you put the winnings on their return and you say, well, how much did you lose this year? i said, oh, well, back to our comment earlier, well, I definitely broke even. So just, you know I easily spent the amount of winnings. Well, again, under the new rules, under one be beautiful bill, h r one you're still gonna income because your losses are gonna be limited to 90% of the deduction for losses will be limited ninety to 90% of your losses. So that's not gonna cut it. you know Break even is not gonna work anymore. You're gonna have to actually do worse than break even in order to offset your winnings. And that's where you get into so much record keeping.
00:18:13
Speaker
um you know Most casinos, you know if you're a member, if you have the little car where you put into the slot machine, assuming that's what you're playing, You can get a win-loss statement and track your losses that way.
00:18:28
Speaker
Usually some of the sports gambling places also will have the ability to produce some documentation that shows you know how much you've wagered with them for the year. But some don't do a great job of that. um Some casinos don't do a great job of that, depending on you know which casino you're at. So it really is work that's needed to be done to track your losses, more so now than ever before, because now just breaking even, which is the common answer you get from most clients,
00:18:58
Speaker
It doesn't cut it. You're going to have phantom income if you break even. And that's ah that's a big difference that is going to happen and you know coming up this year. Yeah, it's good good points. And what would you say, you know, i think part of it is having good record keeping, right, of anything in accounting and tax, but clients that, you know, went to the casino once a week, you know, and they're using their player's card or or maybe they're hitting multiple casinos and they're not really using a player's card.
00:19:28
Speaker
What are you asking for or having them provide as far as documentation? They don't have their W2Gs or if they don't have anything other than their word of mouth. Yeah, unfortunately, unfortunately it it is a lot of assertions that are made by the client to say, you really need to provide us with some some some statements or some documentation that this is what you've lost. And they say, yes, I can provide that the whether you know Whether you obtain records from their bank statements or you at least get some assertion from them that you you know can rely upon that says, yeah, I know that I go once a week and you know I gamble $100 every time i go and and I could show you where you know I took the money out of my bank. Because again, this is also very much a
00:20:17
Speaker
outside of the online platforms you know going to the casino it's a cash basis transaction so it's like you can go and say well give me the show me your your your record where you wrote a check to caesar's palace to buy chips you know it's not like you can even do that so you're really relying on cash as your record keep and so what we tell people is you really need to provide some tracking you need to be able to track what you're spending.
00:20:46
Speaker
And it's not just because we're being evil tax people, it's because we need to substantiate this in case you get audited. And really for us to sign a return, you know we need to have some substantiation that shows that yes, you actually did spend amount of dollars.
00:21:02
Speaker
Ultimately, the the best defense on that is again, use your player's card and use, you know, try to track as much as you can and get the win-loss statements from those from those casinos to at least provide some level of of comfort to us that you have that. But if you don't have that, it it really is hard for us to feel comfortable with, you know, assertions outside of being able to say, look,
00:21:28
Speaker
We need you to certify you know that like you did spend this. And um at the end of the day, again, it is a challenge that we face with people who aren't using the systems that to help them track their their spending. Because again, for us, it looked like an ATM withdrawal from the cash from their bank account.
00:21:46
Speaker
And they went spent it on, I mean, presumably, they went spent it on the casino. But how do even prove that? um So you do have some reliance on them to have to provide you with that. assertion that they actually did spend the money on what they said they sent it on.
00:22:01
Speaker
Yeah. And I think, I think now with, you know, people using playing player cards and also a lot of online stuff, right? It's easier to pull the documentation, you know, from apps or download from somewhere. So it does seem least the clients I'm working with to get information like your winnings, but also the amount of losses seems to be substantiated easier.
00:22:26
Speaker
than it was in the past. Yeah, it's and it's hard. I mean, and we say it's in a lot of areas with technology. It's hard to to really um to not be able to track these things um and to have an excuse from a client say well, i just you know I just don't really track this stuff. It's not really an answer that's going to work because it is real easy to track these things now, whether it's participating in whatever program they have that's available to the users or keeping track on an Excel spreadsheet. You know, if you gamble that much, maybe you should keep track of what you're spending your money on using some, you know, some technology to help you. And there's stuff out there that will help you track your money you're spending, whether it's a, you know, a, a,
00:23:14
Speaker
online bank app or something to help you that you can identify. But again, with the cash economy, with with cash you know being taken out and you know put into a slot machine, it is difficult to to prove that. and IRS would have a feel to do with that if that's really all you have is kind of, yeah, I took $100,000 out of, I could show you where I took all the cash out and I've dropped it into all slot machines, but I don't play with the player's card. like,
00:23:39
Speaker
First off, if you spend $100,000 casino without a player's card, you're missing out on a ton of rewards. um So you definitely want to do that. And most people I know that, you know, gamble frequently, man, they love those rewards. So, you know, they're not going to not play without a player's card.
00:23:55
Speaker
yeah That's right. Now, I know we mentioned it already, but let's just kind of recircle back to it. We got the new h r one One Big Beautiful Bill Act, signed last July 4th.
00:24:06
Speaker
um And it changed the gambling loss deduction for starting in 2026. So 25, we were still good to go with the old rules, like you mentioned. But in 26, which we're sitting in right now, and people need to be very aware of this. The new rule says taxpayers may deduct only 90% of their gambling losses.
00:24:27
Speaker
um still capped at the winnings. So this still requires itemizing. And this is critical. It applies to professional gamblers too, not just the casual ones. So again, this is this for a professional gambler.
00:24:40
Speaker
This could be something that is, you know, a bigger thing. Brent, do you, have you had any conversations with any of your clients, you know, you know, in end of last year, or even during the busy season at all, where this conversation came up at all?
00:24:55
Speaker
Yes, we we have a few clients. Actually, have we have one client um to to go unnamed that comes in with hundreds of W2Gs a year. um And so that conversation was had.
00:25:06
Speaker
Say, look, this is a new rule that's coming up. And be aware, and of course, They do track their losses, so you know they they are pretty good with that because they're there every day. um But yeah, i mean that's a conversation that you have to have. And i do think, too, they're, again, being very, very clear on how this works, and we've said it a couple times now, but you still get people confused with, well, I can't deduct all my losses against, I i can't, I'm going always pay tax on winnings regardless, and the answer is no.
00:25:40
Speaker
You have to have more losses than winnings. you know You have to, again, back to our example, if you have $100,000 winnings, if you have of that IMI deduction. you'll still have plenty of losses such a winnings.
00:25:53
Speaker
as i ammitsduction so you'll still plenty losses off such your winnings But you have to be weary of the math and understand that there are situations and there years where someone maybe does truly break even or does maybe have $100,000 of winnings and $110,000 losses. Well, in that case,
00:26:14
Speaker
that person's actually going have a little bit of income because 10% of, you know, 9% of $110,000 isn't enough to cover your your winning. So, um again, the math matters, and you really do have to be careful of that and have that conversation during the year as clients are doing these activities to understand that, you know, end of the year comes, you're not trying to go lose a bunch of money at the casino because you might actually win more, and that would be a problem. We just compound your issue. so You really have to have these conversations early and often. If you have someone who you know, you know, spends a lot of time and, you know, gambles a lot. um
00:26:54
Speaker
And again, it's, we all have those clients that every year they come in with a stack of W2Gs and we know who they are. Those are easy. It's the ones that,
00:27:06
Speaker
Don't provide that or we don't know that they gamble that much that, you know, could kind of catch you off guard. Those are the ones a little harder to to catch. Absolutely. and And I think as this becomes more prevalent.
00:27:20
Speaker
Not just the W2Gs, but it's the online stuff that. Maybe they're not getting an official 1089 form for it, but they're, they're having to remember, oh yeah, you know, now I'm talking to you, it's April, but last April I did something online and won money and I completely forgot about it, right? Time is gone. so Yeah, just ah on under on the gambling piece and the sports gambling piece, because you know sports is kind of the the the theme, I guess, of of this this, some of this conversation, but because that's kind of what really exploded in the marketplace was was sports gambling.
00:27:55
Speaker
um The threshold for submitting a W2G is times a wager. So if I wager $5, I have to win a lot of money in order for the trigger event to occur to receive a W2G. So if I wager $100 on bet,
00:28:14
Speaker
I have to win a lot in order for that to trigger. So there are lot of opportunities for someone to not win that much, but still win decent amount if they're betting, say, $500, $1,000 the Super Bowl, for To trigger the W2G, bet $1,000, have to um you know to you to trigger the w two g if i bet a thousand dollars they would have to win I'm not going to to do math right now, but they'd have to win a lot of money. 300 times 1,000 $300,000. unless they won a $300,000 off that $1,000 that's not going to trigger W2G. But that doesn't that person didn't $100,000 playing on their online gambling.
00:28:49
Speaker
have plenty of that the Super that's –
00:28:54
Speaker
playing on their online gambling um i have plenty of friends that a thousand dollars a suit bowl that's fairly normal. Now, I have a lot of friends who lose all $1,000 too, but um you know it's it's very common for the weekend warriors to to put $100 down in the game or just put $1,000 in the game. So again, that's also very kind of fundamental to just because you don't get a W2G doesn't mean that you don't have to report the income. And that income could be high, very high,
00:29:29
Speaker
Cause it's not 300 times a wager, it's 200 times a wager and you still have to report that income. So I just want to make that kind of point cause that, that definitely goes, um, kind of unnoticed quite a bit.
00:29:43
Speaker
That's a great point. And, and again, things that take people by surprise. And, and I think, you know, this is where we're just trying to get the word out, educated, um, you know, Brandon, we got, you and I will be at the AICPA engage conference in six weeks or whatever it is. and You know, in Las Vegas and you never know. i mean, you know, you we might be win $100,000, lose $100,000, think you broke even.
00:30:07
Speaker
But like your math says, now, if that was the case, I'm still going to pay tax on it because, you know, 90% my losses of $100,000. I still then have $100,000 of winnings, less now than 90,000 calculated losses I could take.
00:30:21
Speaker
I got $10,000 of income I got to pick up at the federal level. and And I'm from, like you mentioned, for Louisiana. for I'm from Illinois. We have no itemized deductions for the state.
00:30:32
Speaker
Therefore, that full $100,000 taxable to my state. So, again, these are things that people need to be aware of. And and i guess I guess a follow-up question is when someone wins, the question is, do they have money withheld or not at the federal and state level, right?
00:30:47
Speaker
Right. I think that's all over the board also. Yeah, and that's another, again, just withholding. So people will commonly come in and say, hey, i have yeah I want a bunch of money, but don't worry.
00:31:00
Speaker
They withheld, you know, where're we were close to Mississippi here in Baton Rouge and Mississippi actually was kind of the, you know, it was the biggest branch off from Vegas for a while down here with casinos because Mississippi actually made casinos legal before Louisiana made land-based casinos legal.
00:31:19
Speaker
We had some riverboat casinos that are illegal here in Louisiana for some time. And then um that trickled into land-based casinos. But Mississippi actually was was was ahead of us quite a bit. So the Gulf Coast of Mississippi has a lot of land-based casinos. um And they go to Mississippi, they'll gamble, and they'd win, and they'd have withholdings from their winnings.
00:31:42
Speaker
Well, guess what? They have Mississippi withholdings, and they have federal withholdings. And so in their mind, it's all covered. you know In their mind, the tax has been paid on it. There's nothing they need to do. You're like, well, that's not always true. ah One,
00:32:02
Speaker
How does your state work with that state? And I think Mississippi, Louisiana have sort of an agreement that they, you know, you do kind of a reciprocity agreement on specifically on gambling winnings. So sure maybe it kind of nets out to where you're not having to, you know, follow return to Mississippi to just to cover the credit for tax paid Mississippi. You know, there's there's some some workarounds that they may have in certain states on that.
00:32:27
Speaker
But the federal side, again, they withhold at a 24% rate, generally speaking. And if you're in a higher rate, you're going to owe more tax on that, assuming that you don't have enough losses to offset, which again, the losses, tracking losses is a big part of all of this.
00:32:46
Speaker
So yeah, it's it's withholding is not is great if you hit the threshold to withhold, but is is not always the gonna solve your problem of covering all the taxes needed on that particular amount.
00:33:03
Speaker
Yeah, no, and these are things that, you know, I guess if you went to Las Vegas, Nevada does not have state income tax, but things we gotta look out for along the way. Yeah. You mentioned the, you mentioned the professional gambler, cause that's also important distinction too. Cause I think people will say, well, if I become a professional gambler,
00:33:22
Speaker
You know, because i gamble every Sunday on, ah you know, a bet every Sunday on every football game and every baseball game and every basketball game and every hockey game and horse race and gymnastics event. There's a lot of things you can bet on. You can actually bet it in overseas events, soccer matches, which is kind of wild to me, but um that you can bet just on about anything right now.
00:33:45
Speaker
But, um yeah you know, you I'm a professional gambler, so, know, again, I can, I'm not worried about this limitation because i have all these losses, I'm a trader business, so this doesn't apply to me. And as you mentioned, it does apply to you.
00:33:59
Speaker
Your gambling loss cap will just include maybe more losses from business expenses if you actually are professional gambler, but you're still subject to the cap. So you're not you're not going to solve anything by saying, hey, yeah i want to i want to get around this rule.
00:34:18
Speaker
set me up an LLC or set me up an S Corp to do all my gambling in because i heard on TikTok that's what I need to do. That's not going to get you anywhere um as far as the, you know the cap's concerned.
00:34:30
Speaker
It might get you more losses. Maybe if you actually are the trader business of, of doing that, but you're still subject to the, to the cap. So again, that's just something important to, to people aware of because you hear that too, from time to time as well, I'm not subject to this rule because a professional.
00:34:49
Speaker
I do this for a living. Um, and some people actually do this for a living. I'm not saying they don't, there are people who actually do it for a living. Absolutely. And I think from a practical standpoint, you know, when dealing with clients, I think, you know, a few patterns I see consistently. One, ah you know, when it comes to like sports apps and stuff, you know, they're all different, right? You could be using DraftKings, FanDuel, BetMGM, Caesars, a poker app, fantasy site, and they have their own definitions, their own definition of profit loss reports.
00:35:22
Speaker
Nothing is consistent and streamlined across all the different platforms, right? And so there's confusion at times regarding cash deposited versus cash withdrawn, net account balances, gross winnings.
00:35:35
Speaker
All these things create this confusion. And we know that we've mentioned earlier, the IRS wants the gross amount and the You know, the client or the the better only knows their net amount for the most part. And so this is where the surprises lie.
00:35:51
Speaker
What kind of clients um do you do you run into that they tend to surprise you about their gambling activity? Because I assume most of them are like, like oh, by the way, yeah, I won a couple of dollars, you know, this year. It's not like they're proactively planning for it throughout. Right. Yeah, like I said, in some cases, you know, we've been working the client for long enough and they're retired and they have a lot of time in their hands and and and extra cash to to go spend on on on activities like this. um And so most time we there there is a pattern there where we know that they're going to, every year, it's you know wait for Susie to bring the stack of W2Gs to get the staff person ah to to run through them all. um
00:36:36
Speaker
Sometimes, though, what you said, we'll have ah a random WD2G pop up. Rarely, if ever in my career, has someone came to us and said, hey, man, I won, ah bet hundred thousand I bet a Super Bowl and i won again, back their mind, know,
00:36:55
Speaker
what do we need to do about about my taxes because again back to in their mind you know they don't have any, one, if they don't get any type of reporting done, then they're not gonna, usually don't fess up to that.
00:37:10
Speaker
um And that's where, again, some of the education on, look, you really need to be careful about that because um if you have that situation, again, that's potentially fraud if you don't report that um or is. um But you know most of the time we run into it because People are getting the W2Gs. They're consistently year after year.
00:37:33
Speaker
um they They tell you up front, I like to gamble. um This is what I do. And it's it's not as a surprise. um With sports gaming, because of the threshold, and like I mentioned earlier, the the wager and the 300 times wager is the reporting obligation for that platform. You'll sometimes run across some some platforms that are issuing...
00:37:55
Speaker
either 1089s or W2Gs for lesser amounts. And that could be a surprise to the person and to us that says, why did you get the 1089 miscellaneous for, you know, $700 from DraftKings?
00:38:07
Speaker
Like, oh, it's because they paid at a bonus and yeah that's kind of treated differently than a wager. So we have had that come up where someone does show up with 1089 miscellaneous. um But to your point earlier, these platforms all kind of have their own way of doing things. There's no consistent approach. There's no, um it's like, it's kind of like broker statements. They're kind of a little similar, but they kind of have similar stuff, but not Not all of them look the same and the way they report is different.
00:38:39
Speaker
Same thing with the way they treat 1089s and 7089s for certain things are a little different. So it is kind of a little bit of the wild west. I think it's gotten better over the last four years since the they've they've kind of cropped up. They've gotten better with reporting.
00:38:54
Speaker
um And some of the smaller ones still, think, struggle with the reporting. But some of the bigger ones, like the ones that we, you know, kind of the mainstream ones, like the DraftKings, the ESPN FanDuel, those, those seem to be, again, a little more consistent with what they do and and and how they do it.
00:39:12
Speaker
And you have less surprises in terms of reporting with them. um But again, clients, I think, are just generally surprised that They should be paying taxes in their fantasy football winnings. But again, it's not something they talk to you about unless you're friends with them and you know they won and they're like, hey man, you got to pick that up in your taxes and they laugh at you and say, stop talking to me. And then they're long no longer your friends anymore after that. So...
00:39:38
Speaker
but Now, you mentioned earlier, and I want to recircle to this about, you know, obviously people, they use the traditional way of gambling. I put money into a slot machine and, you know, maybe I'll win or lose.
00:39:50
Speaker
um ah I use sport betting apps online that are prevalent everywhere. But also we have a cry crypto based gambling that is going on quite a bit and offshore platforms and people using crypto.
00:40:04
Speaker
um And I think this is an area where it stacks up with the gambling rules on top of digital asset rules. Right. And and, you know, sometimes I can convince clients, hey, I understand this is the gambling rules and this is what we got to follow. And then if you stack on to that, the digital asset rules,
00:40:23
Speaker
I think that's where they, you kind of lose clients along the way, as far as understanding, because they, it is complicated, right? Have you, have you run into this? Yeah, I haven't haven't had an opportunity to run into that, um but I could, again, yeah the guidance out there and now for crypto is certainly that if I paid $1,000 for my Bitcoin and I turn around and that Bitcoin's now worth $70,000, which would have been great if I'd gotten into Bitcoin in the mid-20s, because probably wouldn't be yeah working still. But um but yeah if I have a $1,000 basis in that crypto,
00:40:57
Speaker
If I turn around and and place a bet using the crypto and the bet is a $70,000 bet, guess what? I have the taxable event that should be triggered on the use of that crypto to place that bet. At least that's the current guidance in the IRS. s But there's a lot of issues with how that gets reported. and I know but this is yeah this digital assets is is a whole nother topic that probably has been covered, if not will be covered. but But that definitely is a problem. um Still getting in clients to even share with you that they own crypto is still somewhat of a give and take.
00:41:34
Speaker
so right So we haven't quite seen it yet, but it's also think one of those things that people just think that they're doing this, you know, they're they're trading crypto, they're exchanging crypto for things. and They're not really thinking about all the tax consequences along with it, including using it to to bet on things because it's so easy just to place a bet using you know Bitcoin or or any other crypto that may be out there that they accept, especially with things like the Pi market and some of these other um platforms that are offshore that
00:42:07
Speaker
um That again, are up and coming. Crypto is, I think, a very popular way that people ah use to to put place bets. I see that as being a ticking time bomb for those individuals who are using it because i there's a lot there that they're not being educated on.
00:42:25
Speaker
Yeah, no, i agree. And I think like that is ah something that we will continue to see more and more of. But while we're trying to figure out the rules and how to advise our clients on digital asset reporting, um the the apps and the way people can utilize that in order to place bets and win um are moving faster, probably. So it's ah it's an education for everyone as we move along and probably the IRS as well.
00:42:53
Speaker
Now, one of the things that I think, you know we mentioned is the casual versus professional gambler, right? And there is a distinction, you know. um I had a friend once who, you know, he would go to Vegas, you know, maybe four or five times a year. and he And he would, you know, spend a couple hours in those trips gambling and thought he was a professional gambler, right? And said, well, I can write off all my expenses. Yeah. That's not, as you mentioned, how it works.
00:43:20
Speaker
But with that being said, will you when you talk to clients or when you even hear the term professional gambler, um do you assume that most of them assume they can just write off all their expenses?
00:43:31
Speaker
Because i I think they think, you know, professional gambler means I have a legit business and therefore all my ordinary necessary business expenses just kind of create not only a loss, but, you know, a loss that can be in excess of my winnings.
00:43:47
Speaker
Oh, absolutely. i mean, again, I think when I if if what i hear clients say, well, I you know ah should be classified as a professional gambler because I do it so much and so frequently. ah Again, there could be some potential for that, but you really have to drill down to the to the facts because Again, back to the you know, the proliferation of gambling, they can do it at home on your computer or your phone. So you really start to expand the amount expenses that they want to take advantage of. Right. So all of a sudden they're like, well, you know, I heard I can write my living expenses off because i gamble at home. And, you know, so it's really one, it's certainly a slippery slope to go down to classify yourself as a professional gambler.
00:44:28
Speaker
And two, it's, it's very limited facts and circumstances that to me would qualify as that. And again, back to you're still subject to the the cap on your losses too. So again, it's it's going to be really difficult to prove that you're a professional unless you are, you know, um I'm not going to say on TV at the World Series of Poker. That would help if that if you are TV at the World Series a Poker. But I think your weekend trips to Vegas doesn't really qualify as that. i mean, it it has to be your primary occupation. Like it has to be what you do.
00:45:01
Speaker
um And if you're a doctor, lawyer, accountant, and this is your side hustle, I think ours can be pretty quick to say it's a hobby and not the professional gambler.
00:45:13
Speaker
So, you know, we're talking about professional gambling, you know, again, like you mentioned, Brandon, you could have a situation where someone thinks you're a professional gambler, but doesn't realize that our code section 165 subsection D that it still caps losses at winnings, right? Like you mentioned, and under the new HR one tax bill, it's 90% limitation that will kick in here in 26.
00:45:34
Speaker
So let's just say professional gambler, they want to be, ah you know, they're on schedule $100,000 of winnings. They think they have $100,000 of losses. Well, now remember 90% of that $100,000 loss. So now we have 90,000 losses I can actually utilize.
00:45:51
Speaker
I have $10,000 of winnings. And because they're a professional gambler that those $10,000 of winnings is subject to self-employment tax. on top you regular tax. So again, things that maybe people didn't think of along the way before they thought of becoming a professional gambler.
00:46:07
Speaker
That's a good point. Like I said, i think they think, professional gambler so I can generate these losses to offset my other income. And one, if you have other income from an actual real job or, you know, from other business sources, know, if you own a business, this can be hard, one, to even cross a threshold into being considered that. And second, to your point,
00:46:26
Speaker
your losses are still going be captured to winnings subject to the cap too. you're, you may just create a bunch more losses that really aren't do you any good. So what you actually gaining if anything? So, um, but yeah, it has come up before with, with clients who want to classify themselves as professional gamblers and usually sway them away from that for various reasons. But I think even now more so because of the new rules that are in place, uh, with wagering losses.
00:46:53
Speaker
Yeah. and And I'll say loud and clear for our listeners, clients that want to self-label themselves as professional gambler because they read it in some sort of article or TikTok video they were watching. It's not necessarily a self-help election, right? It could actually potentially put them in a worse scenario at times. So, yeah. um So, and they and they truly should be professional in the sense of it meets the rules.
NIL Income for Athletes and Tax Challenges
00:47:19
Speaker
Now, Brandon, let's kind of pivot to something a little bit differently. um And it's kind of in the same level, but it's the NIL income, right? So money flowing into sports through broad new channels. We see this, I mean, I feel like it's just overnight. It's just exploded, right? Where all kinds of people, um and I guess this, when did it take place? Was 2021 where we had this policy change where the Supreme Court um, versus the NCAA, um, think it was the Alston decision and where college athletes can monetize their name, image and likeness.
00:47:52
Speaker
And we see this, we, oh, it's college athletes, college cheerleaders, pretty much anybody that can get somebody to give them money because of their name, image and likeness. It's become a multi-billion dollar field. Right. And we see this a lot now just in college sports, right? Any team you follow for the most part.
00:48:11
Speaker
Yeah, I mean, so I'm at LSU, big fan here in Baton Rouge, and I'm going to give a plug out to a program, a documentary that was on Amazon called Money Game that actually follows Libby Dunn, who was kind of, the i guess, the the first big NIL athlete that took advantage of that 21 ruling, who became a multimillionaire just off of her name, image, image of likeness.
00:48:35
Speaker
um I think just that year, Dunn and Angel Reese were both listed as the top five ah earners at LSU. So NIL is near and dear to my heart because i feel like we're like the mecca of it down here and and at LSU. and But now it's it's kind of similar to the gambling discussion where there's been an expansion of...
00:48:59
Speaker
of the program or expansion of use of it. um Same thing with NAL. You know, it it wasn't even a thing in 2020 and 2019. If anything, if keep up with LSU coaching circles, you know, we we recently hired Lane Kiffin from Ole Miss.
00:49:18
Speaker
We promised him that not only would he pay a lot of money to coach LSU, but he's also going to get a $25 million NIL budget to spend on players, which is unheard of to think about. Then we have our other coach that was recently hired in a basketball program, Will Wade, who was investigated by the FBI for LSU.
00:49:36
Speaker
four allegedly paying players before NAL became a thing. So he head of his game. um And we brought him back to LSU to hopefully win some championships.
00:49:48
Speaker
My point is is that there's been just a tremendous change in the way that college athletes are paid and the way that business is done in college athletics.
00:49:59
Speaker
I mean, now, again, NAL covers Now, it's not just you know the local car dealership paying Libby Dunn, for example, to advertise for them. That happens a lot. And we have a lot of clients who are directly paying you student athletes to to be on the billboards and to advertise for them.
00:50:20
Speaker
And you'll see that on the on the, if you watch Money Game, you'll see um this happening. It's now become national endorsement deals. It's become Instagram, TikTok, YouTube, camp appearances, licensing opportunities they have. um Now schools, starting in 2025, schools can now actually pay players directly through the revenue sharing program, which changes the game even more so.
00:50:48
Speaker
So you you have now student athletes that, well, depending on the sport, you make more money now in college than you'll ever make in professional career. Even if you make the profession's professional career, um you may want to stay in college a little longer because you're doing pretty good in college right now. um So it's it's one of those areas that the tax law has yet to catch up to what's going on.
00:51:17
Speaker
um And part of it is just because This is such a unique business that's going on right now. Because the last thing that universities want to have is to have college athletes treated as employees.
00:51:34
Speaker
And that is what is causing it to be such a very problematic issue for the athletes are being paid. And also just, generally speaking, and just brings a whole slew of issues along with it.
00:51:50
Speaker
Because you're talking about people being paid as contractors. um These are 18-year-old kids who may have had a summer job, maybe, yeah would would yeah had a W-2 when they were little.
00:52:04
Speaker
And now they're getting 29s sent to them with five, six zeros behind the number. And they don't... They don't know what to do.
00:52:14
Speaker
um right so it's, it's just become just such a huge deal, um, in any college town, but certainly here, at you know, Baton Rouge has become just such a prominent part of our local economy and the NIL world. It's just, it's, it's, it's a real, real big issue right now for athletes.
00:52:35
Speaker
Oh, yeah. And I think like you mentioned, I mean, the income is wild. And we got revenue share, cash payments, sponsorship, endorsement deals. We even see athletes getting social media payments per post, per engagement.
00:52:48
Speaker
They're getting appearance fees, autograph session fees. They're getting free product, free vehicles, gear, travel. Group licensing, collectives, and yes, even digital asset, crypto, and NFT-based deals exist too in this.
00:53:03
Speaker
And so, you know, with all that being said, it creates a tax problem, right? I mean, just because they're earning all this, it sounds great, but there is a reality that they may never thought they have to pay tax on all this.
00:53:17
Speaker
Yeah, and some of the big surprises that you'll see there, again, is is you know one is there's still, in my opinion, there's still uncertainty around classification of some of these payments. um ah So revenue share, for example, is a big stream of income that universities now can spend. So that revenue share is essentially the NCAA loss case in 2025.
00:53:42
Speaker
um And per that case, now every school has to essentially share the revenue that they're getting from TV money and from those types of sources with student athletes. And most schools, especially like LSU, have pushed most of that money towards the football programs, but they do share amongst other programs as well. um But yeah there's a question out there of what type of income is that? Is that royalty income?
00:54:08
Speaker
which is not subject to self-employment, or are they doing something for that? um And even payments being being made by the collective. So the collectives, again, this is kind of where the IRS is trying to catch up with the industry right now, because a couple years ago, schools were creating collectives, which were basically organizations that would collect money from donors and provide NIL money to kids, to students.
00:54:32
Speaker
And for a period of time, collectives were setting themselves up as nonprofit organizations. And so if I'm a donor to that nonprofit collective, great, I get a tax deduction.
00:54:43
Speaker
IRS came out of years ago and said, no, that's not going to work. These collectives are not nonprofits. They're actually for-profit entities. um So what does that mean now to people who maybe gave under the thought that they were gonna get something in exchange through a tax deduction? and then what does that mean for the, again, the payments being made by those collectives to the students?
00:55:02
Speaker
You know, is that self-employment income? Because they're not really performing services for the collective, they're performing services for the school. So it's just this weird contract relationship that's going on.
00:55:15
Speaker
um And it is and it it is tough to navigate. um And ultimately, students are relying on kind of what we said about the gambling. They're relying on the fact that they got a 1089 NEC or they got a 1089 miscellaneous.
00:55:29
Speaker
And that's what they're rolling with. They're not really questioning, like, is this classified correctly? Am I subject to self-employment? why is my Why is the number on my 1089 much higher than cash I got? Oh, because they bought tickets from mom and dad to go to the Rose Bowl. Well, guess what?
00:55:47
Speaker
that was That was an in-kind compensation arrangement that you have that now you're taxed on non-cash. And there's a lot of non-cash that they're being taxed on. um And because they're not employees, you can't fall within within similar type employment fringe benefit rules that you have. So it's really just, it's kind of a whips off for some of this to happen. Because again, I think they're surprised, one, not only that they're getting 1089, which they should know that they're getting taxed on stuff, but a lot of times the number on that form is is not the same number the cash they received.
00:56:21
Speaker
And then have they moving as have they been making estimated payments? They don't know what estimated payment it is. um the The answer's probably not. um And so there's there's there's a huge opportunity for CPAs to really help college athletes in general, but especially those who are in you know kind of dealing with these issues. um Throw in multi-state issues on top of that, and that's wild.
00:56:52
Speaker
Yeah, I was going to say, I mean, like you could have an athlete that plays in state a signs with a company in state B, and then makes appearance and gets paid for it in state C and d All potential filing jurisdictions, no withholding on any of that money and haven't made any tax payments. And then, you know, now they're trying to figure out on April 15th, do they got to pay some tax or not, right?
00:57:15
Speaker
Yeah, and i'll I'll say down the South, I think in many places, Illinois, maybe the same way and and up there by you, um we really love our college football, as you can tell. yeah We really, really love our college football. paul So, you know, if if i'm if I'm our department revenue here in Louisiana and that, you know, the quarterback from Alabama comes here and plays and I know he's gotten a six-figure deal,
00:57:40
Speaker
I might try to tax him on that because he's, you know, playing a game in Louisiana. so I'm going to go after that that that college person. So, again, and that's not really well defined on how do you deal with multi-state jurisdiction issues. To your point, you've got someone who may be, you know, a lot of people play for LSU do not live in Louisiana.
00:58:01
Speaker
So the residents of Texas or residents of Florida, residents of Arkansas, residents of Mississippi, they're coming here to play. So, you know, if they were to file a tax return based off their where they reside, do they file a return Mississippi, picking up the income, and then also file in Louisiana because they're performing services here? What about the game in Alabama? What about the game and you know the the game that they play in California if they go to the Rose Bowl, which, you know, hopefully get back to bowl games again with our new coach, but our big bowl games. So it is fraught with...
00:58:34
Speaker
a lot of uncertainty. um And there's just a ton of guidance that's needed in this area. And it's going to fall on the unsuspecting student, athlete, and family to have to come up with kind of, what do i do? what what's What's happening? what what What should I do here?
00:58:51
Speaker
And no state has really kind of expanded their jock tax to students yet that I'm aware of, but I can see that coming. Um, but again, it's just, it's a, it's a, it's a world fraught with, with issues.
00:59:06
Speaker
Yeah, and I keep coming back to that there's really no tax infrastructure around this. um There's like, you know, obviously, like you mentioned, there's no HR department, no payroll system, no withholding. It's just basically young men and women that are earning some money and not really aware that there is a tax ecosystem that potentially is going to be looking for some money along the way.
00:59:32
Speaker
Yeah, professional athletes, I mean, again, the the the infrastructure that they have for professional athletes and specifically, you know, in NFL and even other major professional sports, I mean, there's, there's, because there is the, one is the employee-employer relationship. So that takes care of a little bit of the tax issues because one is withholding being done and things like that. Um,
00:59:54
Speaker
And you have benefits, you have health insurance, you have four n k you know, you have sort of all your typical, you know, kind of employee-employee relationship issues. You have fringe benefits, so you have potential tax-free fringe benefits, depending on if it's a working condition fringe or something like that.
01:00:09
Speaker
You don't have any of that in the in the college athlete space. um And schools are are really fighting hard. Some schools, some schools I think are maybe not fighting as hard, but schools generally are trying to not have these kids classified employees. And again,
01:00:26
Speaker
From a tax standpoint, that's somewhat of a disservice um to the athletes because it's a lot easier to just have your holdings done and and kind of just deal with that infrastructure that that's around there. In addition to that, have a little more certainty around multi-state issues. um you know NFL teams, for example, they deal with multi-states all the time. They're withholding from uh if someone goes and plays in illinois they withhold illinois tax on those earnings they have duty days they have that concept built in to their system you don't have that all with college athletes and i could just see a state getting really aggressive with couch athletes um
01:01:07
Speaker
And mean, there's plenty of ball games played in California. There's plenty of ball games played in these high-tech states that I could easily see them being one of the first you states to come in and start to look at that a little closer. not saying they should. I'm just saying I could see that being ah a place, you know, just it's just a problem that they have that they need to address.
01:01:26
Speaker
So Brandon, we know that, you know, CPAs may be listening right now and we know they may not be a gambling specialist or an NIL specialist. But they're going get clients that have, you know, kids that are doing this or they're involved in it or maybe just new people coming in. What's the mindset, you know, practitioners should have as this continues to explode as we've talked about?
01:01:48
Speaker
Yeah, I mean, certainly see it as an uptake in this specific area. And i think you look have to look at this not just as a simple compliance engagement where you're going to take forms and put in a tax return and produce your your typical compliance work. It's opportunity
Emerging Tax Advisory Opportunities for CPAs
01:02:03
Speaker
to be really proactive with those clients and proactive with these engagements and help navigate, as I mentioned,
01:02:10
Speaker
between all the gambling rules and all the NIL rules, or I guess lack thereof, there's just a ton of uncertainty out there. And CPAs, you we tend to not like uncertainty, but that's kind of where we could really shine with clients and say, hey, here are the here are the issues.
01:02:28
Speaker
Let's chart a path forward, try to document as best we can and why we did this, try to help you navigate. But you know I see, yeah know again, right now, is people you CPAs are probably like, I don't really have, i don't live in a bitch college town. I don't have you know players coming to me. But this is this is just going to keep getting bigger and bigger. They're already talking about paying high school kids um for NIL. Soon they'll be paying you know elementary school kids who to to do this. so you know, this is gonna, this is gonna come about quicker than you think.
01:03:02
Speaker
um Even if today you're like, I don't have these issues pop in my practice. um And the other the other thing too, that's exciting is that it's it's all very new, is all, this is all stuff that you can, um If you want to become an expert in this um area, you can because it's interesting, it's fun, it's and it's really great work we can do for clients and for new clients who are who were in this space. so So it is a very, very interesting time be b
01:03:33
Speaker
It's taxed for very many reasons. um But anytime I see sort of a new opportunity where we as CPAs can really help clients navigate something that's that's somewhat new, it's is's exciting. And so that's the way i look at it.
01:03:47
Speaker
And as we wrap up, I mean, you obviously, you know, like you're tracking this, you're staying with this. We've seen the new tax bill this year. And it just feels like in any given year or any given month, there's there's always a sway in tax, you know, policy of some level or things coming up. um What are you doing yourself individually to stay on top of things and stay curious in this and proactive? I mean because I know, I mean, like everyone, you know, they're consumed with the work and they're like, hey, have time to read. don't time to do anything. What do you do yourself to kind of stay up to date?
01:04:19
Speaker
Yeah, it it it's, it's, it takes, it takes effort, um you know, to to do that and make sure I go to, you know, good conferences. so that Certainly, as we mentioned, we we'll be in Vegas at the Engage conference next month and hearing from experts and in very many fields. So, you know,
01:04:37
Speaker
June and November great times to to take time to learn. and And certainly during tax season, I think we all have a pass on on trying to really engage and focus because we're focused on client work. But these times when you're not so focused on client work, you really need to spend the time to keep keep up and um Tax is always changing. taxes is There's always not just new tax issues pop up, but also new areas. And again, I think we've identified two really big new areas that
01:05:09
Speaker
You maybe you won't do this every day, but to the extent that it comes up in your practice, you at least have some knowledge to go with that. and that's really the key is, is continuing learn and continuing to be curious about what's new.
01:05:22
Speaker
And, uh, it
Conclusion and Call to Action
01:05:23
Speaker
just keeps this job fun and keeps, keeps, keeps it exciting. That's great. I appreciate it, Brennan. And, um you know, as we wrap up, one theme keeps coming through pretty clearly to me that, you know, the world is moving fast and and money and tax changes are moving faster, right? And as our clients, whether they're sports bettors, fantasy players, college athletes, or they're just curious people testing out an app and trying to see can they make a couple bucks and operating in this landscape that didn't exist five years ago, change is happening constantly.
01:05:56
Speaker
um Great advisors aren't the ones who know every single code section, right? i don't know them all. You don't know them all, Brandon, but they're the ones that see what's coming. We slow down when client mentions something casually and we try to have some curiosity to figure out how do we do this.
01:06:10
Speaker
um And, you know, I think there's just a lot there, you know, between gambling with the 2026 rules kicking in with the loss limitation percentage, and also with NIL money coming in and understanding the taxation of it.
01:06:24
Speaker
So these are things that are important. Brandon, thank you so much for joining us on the Tax News Now podcast. I mean, you bring a lot of wealth of knowledge and things that I think people can really um jump out and and hear from you, you know? And so I appreciate it. So thank you for being here today.
01:06:40
Speaker
Good Tigers. And thank you to our listeners. Stay curious, stay proactive, invest in the conversations that matter. And if today's episode hit home, do me a favor, subscribe to Tax News Now wherever you listen, share it with a colleague who needs to hear it and drop us a rating.
01:06:55
Speaker
We genuinely help other practitioners find the show. Thanks for joining us today and we'll see you next time.