Showing posts with label sports betting. Show all posts
Showing posts with label sports betting. Show all posts

Thursday, March 5, 2020

Fantasy Sports and Tax Laws


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.