Winning big in this year's Fantasy Football league, it dawns
on you that you may have to report the winnings to Uncle Sam, but you're not
100% sure. Here's the 411 on what
constitutes taxable income.
To put it simply, if your winnings are at least $600, the
organizers of those gaming websites like DraftKings are legally bound to report
to the IRS. They should send you and the
IRS a 1099-MISC form. There is also a
form used called the 1099-K, that is used if you receive your winnings through
PayPal. 1099 forms are the notification
to the government that you have taxable winnings and, in turn, give you notice
of what you must report on taxes.
Regardless of whether you receive 1099, you're responsible for reporting
net profits on the federal and state tax returns.
If you forgo using 1099, you can report winnings on your
1040 as 'other income' and enter it on line 21 of the 1040 form. If you can establish that playing fantasy
sports if your profession, that it's a legit business, then you'd be able to report
a net profit as business income. You are
also able to report losses, which makes this a great tax filing choice. To claim fantasy sports as a business and not
a hobby, the IRS requires a few founding characteristics. Fantasy sports is more than just a hobby if
you engage in it regularly, and you intend to earn a profit. If an activity produces a profit two out of
every five years, the IRS may consider it a business.
Fantasy sports can be considered a business, so make sure
you're up to date on all the tax requirements, so you're sure to file
appropriately.