The Money Behind the Madness

Chris Smith of Forbes recently posted about the financial rewards schools and conferences get for playing in the NCAA tournament.

Payouts are based on how many tournament games a conference member has played in over the past six years. Under the "unit system," the total six-year value of playing just one tournament game in 2013 is more than $1.5 million for a team's conference. A Final Four run this year will earn the team's conference $7.7 million over the next six years.

A question not addressed in the article, but relevant in this day and age: What happens to these payments when a team changes conferences? I'm guessing there are provisions in conference agreements for this, and I assume that the Colonial Athletic Association (CAA) will continue to reap the benefits of Virginia Commonwealth University's (VCU) 2011 Final Four run even though the Rams are now in the Atlantic 10 (A-10), but I haven't found anything that confirms or refutes this.

So a berth in the Big Dance is a big deal to smaller schools and mid- and low-major conferences, although the Big South isn't getting any extra money from Liberty's one-and-done appearance since they were guaranteed at least one game due to the conference's automatic bid. But if James Madison* pulls off the unthinkable and shocks top-seeded Indiana this afternoon**, that win will be worth millions to the depleted CAA, which is in its first year without VCU and is losing Old Dominion and Georgia State next year. Meanwhile, VCU and conference foes Saint Louis, Butler, La Salle and Temple could provide a big windfall for the A-10 by going deep into the tournament. (For this blogger's money, the Rams and Billikens have the best shot at reaching the Sweet Sixteen and beyond.)

* Shoutout to our student bloggers from JMU's Beta Alpha Psi chapter!

** This is where I say a bittersweet goodbye to Southern University, which nearly became the first No. 16 seed to beat a No. 1 before losing narrowly to top-seeded Gonzaga on the tournament's opening day. There's a Virginia connection there: Southern coach Ryan Price graduated from William Fleming High School in Roanoke. That leaves VCU guard Troy Daniels (William Fleming) and Louisville forward Luke Hancock (Hidden Valley High School) as the only players left in the bracket representing your blogger's hometown, although North Carolina assistant coach Steve Robinson is also a Fleming graduate.

Report Your Bracket Winnings to the IRS

“The ball is tipped, and there you are.” March Madness is officially underway, and while many Americans are dreaming of their own “One Shining Moment” in their office bracket pool. But as tax information company CCH points out, it’s important to keep track of your bracket money and other gambling winnings.

Gambling winnings for the tax reporting year should be listed on line 21 of Internal Revenue Service (IRS) Form 1040. Taxpayers who weren’t as lucky and ended the year in the red can deduct gambling losses if they itemize their taxes using Schedule A (Form 1040), line 28. Taxpayers cannot report gambling losses that are more than their winnings.

Forms of gambling income that must be reported include, but are not limited to:

• Lottery winnings
• Horse racing wagers
• Raffle prizes
• Casino winnings
• Casual/seasonal gambling earnings (i.e. office pools)
• Fair market value for large non-cash prizes (i.e. cars or trips)
Taxpayers should provide Form W-2G for sizeable gambling winnings and all winnings subject to federal tax withholding.

“When reporting gambling wins and losses, you have to keep those numbers separate,” CCH Principal Federal Tax Analyst Mark Luscombe, CPA, said. “You can’t combine your win-loss totals and only report the difference — it really needs to be a clear record of everything you won and lost over the course of the year.”

For more information on reporting gambling wins and losses, watch a video interview with Luscombe.