Whether you’re planning to raise funds for your not-for-profit with a simple bingo game or raffle, or with a more elaborate casino night, you need to understand and follow the federal rules that govern these kinds of activities. Gaming activities can open the door to unexpected taxes and trigger requirements for specific IRS filings.
Filings and special taxes
If you regularly conduct a gaming activity, you may be required to report it to the IRS. For example, nonprofits that gross more than $1,000 in unrelated business income from regular gaming fundraisers may need to file Form 990-T, “Exempt Organization Business Income Tax Return.”
Your group also may be subject to a wagering excise or occupational tax, depending on:
- The type of wagering you engage in,
- How it’s structured, and
- How your organization benefits from the proceeds.
Generally, this tax applies to lotteries or wagering pools that involve a sporting event or a contest that’s conducted for profit.
Winnings and withholding
Depending on the type of game and the amount won by an individual, you may also be required to report the winnings to the IRS. This applies if your fundraiser includes a single instant/pull-tab prize of $600 or more (if more than 300 times the amount of the wager), a single bingo or slot machine prize of $1,200 or more, or a single Keno prize of $1,500. You’ll need to obtain the winner’s name and Social Security number.
Regular income tax or backup withholding is necessary in some games with winnings over a certain threshold. No withholding is required for bingo prizes up to $1,200. But withholding is necessary when raffle and some other types of winnings are $600 or more. Your organization is required to pay these amounts, regardless of whether you get the withholding from the winner.
Tip of the iceberg
These are just some of the federal rules surrounding gaming. In addition, many states and municipalities impose their own regulations on gaming activities, including requiring licenses or permits. To ensure your fundraiser complies with complex IRS rules, contact us.