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Others violate tax law by not reporting their winning office pool wagers

If you work in an office, chances are you've dropped a few dollars into the men's college basketball tournament pool.

March madness office betting poolChances also are that you didn't realize your casual sports betting is illegal. 

No, this isn't some late April Fools' Day joke. 

Just ask John Bovery, a New Jersey office pool operator who spent almost a month in jail in 2010 on charges of money laundering and promoting gambling in connection with his lucrative betting pool.

First, a little background on the laws limiting sports wagering.

Sports betting illegal in most places: The Professional and Amateur Sports Protection Act (PASPA), a federal law enacted in 1992, effectively prohibits sports gambling outside of the four states -- Delaware, Montana, Nevada and Oregon -- that had previously allowed it. 

States also have their own gambling, or rather, anti-gambling, laws.

PASPA's provisions also say that it is illegal for any private person to operate a wagering scheme based on a competitive game in which professional or amateur athletes participate. 

But that's exactly what millions of Americans do year round.

Much money on March Madness: Americans will bet $2 billion through 2015 NCAA tournament brackets, according to the latest research by the American Gaming Association.

The total amount wagered on the college basketball games is expected to reach $9 billion, with $240 million of those wagers placed at sports books in Nevada, the only state where it's legal to make a bet on a single game.

That leaves more than $8 billion in illegal betting over the last month alone.

Add in the hundreds of college football games, the NFL Super Bowl, World Cup games and countless other sporting events on which a few bucks could be wagered and it's obvious that a lot of illegal money is changing hands.

In most cases, law enforcement agents don't bother with 24-hour surveillance of corporate cubicles across the country to bust betting pools.

NJ sports betting pool busted: John Bovery was the exception. Five years ago, law enforcement officers tore apart his three-bedroom condo in Parlin, New Jersey, searching for the allegedly ill-gotten gains of his sports betting pool operation.

Bovery's betting pool, however, wasn't your normal penny-ante operation. NJ Advance Media reports that from its 1990 beginning as a way for a few buddies to bet, Bovery's office pool had grown by 2009 to a value of $837,000.

The money had come from 8,000 entries from around the globe, and the bettors included prominent sports broadcasters, New Jersey state troopers, dozens of lawyers and agents for famous professional athletes.

Bovery's legal battles continue to this day.

After Bovery was indicted in 2011, he spent 25 days in jail.

Law officers eventually seized his bank accounts, which included not just deposits from pool participants, but also $124,000 in his life's savings.  

He's awaiting appeal of the civil case he filed against prosecutors. A criminal trial date is set for June, but is likely to be delayed further until the fall.

Follow all the laws: So should you be worried if you have some money riding on today's Final Four games? Probably not. But do know, especially if you're the one in charge of the office pool, that you're breaking the law.

And remember the law, too, when you win. I'm talking, of course, about the tax law.

Bankrate Taxes Blog logoAs I noted last week at my other tax blog, March Madness is a frustrating time for the U.S. Treasury. All that money and it doesn't get it's due portion because folks don't know or ignore the tax fact that all Final Four winning bets are taxable, income.

The Internal Revenue Service expects you to enter the money you pocket if you win your office pool or from any other bets on line 21, other income, on Form 1040. You might be able to reduce that amount if you itemize by claiming any losing bets, up to the amount of your winnings.

Also last week at Bankrate, I looked at how bad we Americans are at adding, subtracting and multiplying. The evidence? The IRS catches millions of math mistakes every year. 

My additional thoughts at Bankrate Taxes Blog generally are posted on Tuesday and Thursday. If you miss them on those days, check in here over the weekend where you'll usually find highlights and links.

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