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Subject: Fantasy Winnings / IRS
Posted by: Ukula
- [118563011] Mon, Sep 30, 2002, 12:03
I know there are numerous lawyers/tax accountants/etc... on these boards so here goes:
If I win $1,000 in online fantasy contests such as TSN Ultimate Baseball can I deduct $1,000 of gambling losses (including entry fees and losing pari-mutuel tickets) on my taxes to effectively reduce my tax liability to zero? The IRS code seems a little "gray" to me. Are fantasy contest winnings considered gambling winnings? If not, how is it different than winnings from casino gambling, horse racing, or raffles? Any thoughts would be appreciated. |
| 1 | ukula
ID: 383222
Mon, Sep 30, 2002, 22:52
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Thanks for the help guys - I appreciate it.
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| 2 | J
Leader
ID: 49346417
Mon, Sep 30, 2002, 22:54
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calm down man, if someone knew the answer, they'd respond. Its an interesting question, and I'm curious as to the answer as well...
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| 3 | rockafellerskank
Sustainer
ID: 57830822
Mon, Sep 30, 2002, 23:00
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lTopic 419 - Gambling Income and Expenses
Gambling winnings are fully taxable and must be reported on your tax return. You must file Form 1040 (PDF) and include all of your winnings on line 21. Gambling income includes, but is not limited to, winnings from lotteries, raffles, horse races, and casinos. It includes not only cash winnings, but also the fair market value of prizes such as cars and trips. For additional information, refer to Publication 525 (PDF), Taxable and Nontaxable Income.
If you receive $600 or more in gambling winnings, the payer generally is required to issue you a Form W-2G (PDF). If you have won more than $5,000, the payer generally is required to withhold 27% of the proceeds for Federal Income Tax. If you did not provide your social security number the payer may have to withhold 30%. For more information on withholding, refer to Publication 505 (PDF), Tax Withholding and Estimated Tax.
You can deduct gambling losses only if you itemize deductions. Claim your gambling losses as a miscellaneous deduction on Schedule A Form 1040, line 27. However, the amount of losses you deduct cannot be more than the amount of gambling income you have reported on your return. It is important to keep an accurate diary or similar record of your gambling winnings and losses. To deduct your losses, you must be able to provide receipts, tickets, statements or other records that show the amount of both your winnings and losses. Refer to Publication 529 (PDF), Miscellaneous Deductions, for more information.
I am not a lawyer or tax advisor, but I have access to the Internet and google.com it really anly takes about 2-3 minutes to find stuff like this.
rfs ®
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| 4 | Dave R
Leader
ID: 12441623
Mon, Sep 30, 2002, 23:02
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my guess would be yes if you can document the losses sustained, but I'm no accountant.
Whats the concern, did you win $1000 from TSN?
Did you loose that much from other activities? I think you've got bigger issues to deal with.
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| 5 | rockfish
ID: 531038288
Mon, Sep 30, 2002, 23:27
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Dave R,give him a break dude. He justed asked a question.
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| 6 | Dave R
Leader
ID: 12441623
Mon, Sep 30, 2002, 23:29
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I just gave him an answer
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| 7 | Ender
ID: 13443221
Mon, Sep 30, 2002, 23:43
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I'd say anyone who has $1,000 of gambling losses that they are able to report has waaaaay more to worry about than taxes on their winnings.
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| 8 | rockafellerskank
Sustainer
ID: 30831210
Tue, Oct 01, 2002, 00:02
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What's wrong with losing $1,000 at gambling?
I have a friend that spends about $1,000 year on cigaretes.
I have another friend that easily spends over $1,000 per year in bars.
I know someone else that donates over $1,000 per year to his church.
My boss spends several $1000 per year on lunches when a packed lunch will do just fine.
I'm single, so I spend seveal $1000 per year on dates.
I know a guy that drives a Porsche. He spends much more than $1,000 per year on car washes and private parking and valets.
I consider all of the above a waste of money.
What's my point? Far be it from me to critizize any of these people, from spending their money they earned legally. Just because someone may spend money in a manner that you or I don't approve us gives us no right to critisize him.
So what if Ukula spends $1000 or more per year gambling. Perhaps it s a drop in the bucket to him. Even if it isn't, he is free to chose his own lifestyle.
BTW, maybe all of those "friends" above are me!
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| 9 | ChicagoTRS
Sustainer
ID: 58735170
Tue, Oct 01, 2002, 00:24
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I know people who win or lose a $1000 a week gambling...a $1000 a year does not seem like much...it all matters what kind of income a person has and what they enjoy doing. A $1000 is not really much money to many people.
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| 10 | J
Leader
ID: 49346417
Tue, Oct 01, 2002, 00:39
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lmao rfs
you should let me hang on to some of your [friends'] money :)
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| 11 | rockafellerskank
Sustainer
ID: 30831210
Tue, Oct 01, 2002, 00:42
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naw, J, you would just spend it friviously on your college education or books. Or worse, FSU tickets!
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| 12 | Tosh
Donor
ID: 23650284
Tue, Oct 01, 2002, 00:48
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Good points rfs. Rather than start up a debate about the ethics of gambling, I'll just pose a different question.
Thanks to rfs in post 3 ... If you receive $600 or more in gambling winnings, the payer generally is required to issue you a Form W-2G
I just made $635 in baseball, but it was spread over 4 different teams. Since no one team made more than $600, will I still have to report it, or fill out such a form?
And does that mean that my TSN Magazine subscription must now be claimed as gambling income since I've made more than $600 from one company this year?
Hmmm
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| 13 | Dave R
Leader
ID: 269241611
Tue, Oct 01, 2002, 07:12
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Tosh, when I won in hoops, all prizes were covered by one check. TSN's record keeping seems to be solid, so I would guess your winning will come as one payment.
As far as the subscription I wouldn't think you need to worry about it, I'm not.
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| 14 | Ender
ID: 13443221
Tue, Oct 01, 2002, 08:25
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Spend your money how you want. Judgement? No. Concern over losing $1000 and fear that he may have a problem? Yes. It's his call, but it sure sounds like a warning sign to me.
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| 15 | wiggs@work
ID: 447432423
Tue, Oct 01, 2002, 08:27
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RFS,
sounds like your friend has quite a life!! In fact, I envy your "friend"
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| 16 | ukula
ID: 3195919
Tue, Oct 01, 2002, 10:24
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Let me clear something up. $1,000 of gambling losses doesn't mean you lost $1,000 (stop laughing and hear me out). For example, say I go to the local track and have $1,000 in losing tickets and $1,400 in winning tickets - I just made $400! I can keep the $1,000 in losing tickets as proof of my losses for income tax purposes. The IRS doesn't know (or care) about my $20.00 show bet winnings in the 5th race. They only care about winnings of more than 300-1 ($600 on a $2 bet). Losing Lotto tickets, losing scratch off tickets, etc are all proof of gambling losses and can be used to offset any winnings. This part I know.
My question actually was whether or not fantasy contests were considered gambling like raffles, casinos, pari-mutuel racing, bingos, lotteries, etc. It doesn't actually state fantasy games in the tax code, thus my question to the forum. In the official rules of most fantasy games it states that the contest is a game of skill - is this different than gambling? I think horse racing is a game of skill and that is considered gambling. Then again, bingo and lotteries are games of chance.
The person who won TSN Ultimate baseball's $1000 prize should gather up old lotto tickets, etc. to offset the $1,000 that he'll have to declare on his 1040. Why should he give $300 to the IRS if he doesn't have to. Just my opinion.
And finally, no I don't have a gambling problem. With a wife who likes to shop, three kids, two dogs, and a rabbit, I can't afford to. And yes, I do have fantasy sports income this year that I'll have to report on my taxes. I really don't want to give the IRS any more than I have to because I can really use the money (see wife, kids, dogs, rabbit).
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| 17 | Taxman
Leader
ID: 2011411915
Tue, Oct 01, 2002, 11:22
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Be it that I am up to my rabbits in filing tax returns due by midnight October 15th, I have resisted the urge to dole out "free advice". However, be mindfull that free advice is often worth what it costs. The following is a not so short soliloquy (also I am bored with preparing returns right now) concerning gambling winning and expenses.
The difference in the "tax law" and "what can you get away with" is more than large.
The IRS position is adequately detailed by RFS in post 3. (Although, I take issue with the term "generally" as applied to issuance of the 1099 G and the withholding a % of winnings in excess of $5000. I beleive that IRS requires those actions without exceptions). Note these winnings are not subject to payroll taxes.
The taxpayer reality (and subject to the civil and criminal fraud statutes) position is that if the winnings are not reported to IRS AND the individual's return is not audited,.....Remember, failure to report income can be a criminal offense .
Using someone else's lottery tickets to offset your winnings is a poor idea if you can not show/prove at audit the personal wherewithal to have purchased the lottery losses. (IRS does have means to track your cash expenditures by tracking the income on your tax return and your bank account transactions).
So the short answer is see post #3. If you are a serious gambler, think about forming a corporation or LLC (if legal for a corporation to gamble in your jurisdiction) which would allow you a 100% write off of your provable losses to offset against income. A serious gambler is at a disadvantage since the losses are only deductible as an "other itemized" expense ("other itemized" expenses are only deductible on schedule A with your other itemized deductions such as home mtg interest, real estate taxes, state income taxes, charitable contributions etc. to the extent the "other itemized " expenses exceed 2% of your adjusted gross income (more or less your taxable income before itemized/standard deduction on exemption/dependent deductions). If you don't itemize, no deduction for the gambling losses.
Another problem for the individual is proving the existance of a "business" to allow deductions of other expenses such as travel, meals, hotels, seminars shills etc. whereas a corporation does not have that problem (but the income, if any paid to you from the corporation would be earnings subject to payroll taxes).
Gee, wish I was good enough at fantasy sports to need to use this information:>)
Taxman
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| 18 | albo222
Donor
ID: 541025107
Tue, Oct 01, 2002, 11:53
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The question is whether TSN reports winnings of over $600 to the IRS as income.
If they do then those losses you mention can be used to offset the income.
I wonder if the $35 dollar entry fee for 3 teams can be used as a gambling loss if you don't win anything.
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| 19 | ukula
ID: 3195919
Tue, Oct 01, 2002, 11:58
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Taxman - thanks for the input, but I believe that gambling losses are not subject to the 2% limit for miscellaneous deductions. When I received my cash prize it was on a 1099-MISC NOT a W2G. Therefore my question remains whether or not fantasy sports winnings are considered gambling winnings. I guess if I claimed gambling losses of say $1,000 (for arguments sake) I would also have to account for my $550 worth of winnings on all of the small bets I placed, thus generating a deductible gambling loss of $450. I guess they wouldn't buy the fact that I had $1,000 of losses without a single winner. What about the cost of the TSN entry fees - are those part of the loss? My guess would be yes.
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| 20 | Dec
ID: 586221713
Tue, Oct 01, 2002, 13:53
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ukula
I`m not an US tax expert but in your case finding 1000$ expenses to put your net income at $0 your fantasy online contests should not be difficult to acheive.
You could easily justify:
- All your entry fees (you need to pay in order to win)
- Part of your computer. (There is no way you can play fantasy online contests at work, don't you?)
- Internet provider fees (Don't think you made your trade on the phone)
I think it's a safer way than finding old gambling ticket
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| 21 | ChicagoTRS
Sustainer
ID: 256101115
Tue, Oct 01, 2002, 14:26
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If TSN requires your SSN to provide you with your winnings then they are probably reporting it to Uncle Sam...if no SSN is required I would not even worry about reporting it. $1000 is pocket change.
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| 22 | Erik B.
ID: 239592612
Tue, Oct 01, 2002, 16:51
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Guys:
I DO know that our accountants report winnings to the IRS over a certain amount (I think it's $600). That's why we make you go through the paperwork.
-Erik
GM/TSN Games
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| 23 | interesting
ID: 598382516
Tue, Oct 01, 2002, 21:11
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Aren't the most you can win from TSN leagues (basketball, football, etc) $40?
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| 24 | beebop
ID: 26819275
Tue, Oct 01, 2002, 21:16
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No,you get more money for finishing top 100 WWR.
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| 25 | Ender
ID: 13443221
Tue, Oct 01, 2002, 21:35
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Erik, since this thread has your attention, can I direct you here in the hoops forum to answer a question? Basically clarification is needed on how many division prizes you are allowed to win. Please answer in the linked thread rather than here.
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| 26 | Tosh
Donor
ID: 23650284
Tue, Oct 01, 2002, 21:35
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Thanks for the information guys. Interesting stuff.
Thanks Dave R as well for letting me know what to expect.
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| 27 | stinkypuff
ID: 459443
Fri, Oct 04, 2002, 03:32
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I formed Stinkypuff Inc., an off-shore consulting firm with headquarters in a Cayman Islands post office box, for just such an occasion. Alas, the occasion never arose.
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