@Gchan2430 wrote:
So it will be like I made $4000 more income. That's not too bad, taxwise. If I report the W2G and 1099K, will I be taxed twice?
It's unclear if PayPal is required to issue a 1099-K in this case, because the payments are coming from someone who will already be issuing a W-2G (assuming it is a gambling operation that complies with US tax law.)
You are only required to report your income once. If you get duplicate paperwork, there are two or three different ways that can be handled, which someone can help you with in February. (It's also possible the IRS might change how 1099-Ks are reported, since there will be so many more this year than before.)
The issue for gambling sites is that your winnings are per bet (or maybe per day) and are not aggregated. Suppose you make 50 $10 bets on this week's NFL schedule. 5 bets pay off 10:1 and you lose the rest. That will be reported as winning $500 and losing $400. If you do that every week, your tax paperwork will show you won $8000 and lost $6400. That $8000 is taxable income even though you "broke even", and you might or might not be able to deduct the losses.
Or suppose over the course of the year, you win $10,000 and lose $6000. You are able to cash out the $4000 you mentioned. But your W-2G will show you won $10,000 and $10,000 is your taxable income. You might be able to deduct the $6000 in losses if you itemize your deductions, but if you take the standard deduction, you can't deduct your losses and you pay income tax on the extra $10,000 of income.
