1099-K PayPal and Casino Winnings

[Confused227]

Hello - this year I found out I am

getting a 1099-K on my PayPayl transactions from casino transactions. 

I use PayPal as my main source to withdraw and deposit money from the online casino. 

I am already receiving a tax form for my casino winnings - but I am also receiving a 1099k from PayPal regarding the same amount, if not more. 

overall I am down form

the casino - and the 1099K Makes it seem like I have made income from this, when I am already going to use my casino tax forms to report winnings/losses. 

so why am I being taxed for my income twice? Also I use PayPal for a lot of things - so there are other transactions that are outside of gambling on there that money has got sent to me. 

how am I supposed to report this? Vey  confused and lost. 

[PatriciaV]

No, you do not need to report Form 1099-K separately if the income is already included under Less Common Income >> Prizes, Awards, and Gambling Winnings. This topic will also allow you to enter your gambling losses. If you are able to itemize your deductions, your gambling losses will be reported on Schedule A to offset your winnings.

Note: Form 1099-K is used by the IRS to track payments that you received from credit cards, debit cards, or electronic payment services (Square, PayPal, ePay, etc.). For 2022 the IRS does not require you to report these payments separately. TurboTax will not give you a separate field for the amounts reported on your 1099-K(s), which is why you need to report this income under the appropriate income topic.

[Confused227]

So I am confused - am I still reporting or not reporting? 

Here is my example. I have 109 K in wins - but I am overall 120 K in losses. So I can report the max up to 109. 

Because I used Paypal, my transactions are showing 323K from going back and forth, which includes the gambling winning in a w2. But overall I am at a loss and do not have 323K in my account, this comes from the constant deposits and withdrawals of the same money. 

So I am unsure how to go about reporting the 1099k. 

[PatriciaV]

Yes, report all your gambling winnings, regardless of how they were reported to you. You may include whatever was in the amount on Form 1099-K unless it was also reported on a W-2. You do not need to report all the income reported on the 1099-K. If the total from the 1099-K is more than your winnings and is not another type of income you need to report, then you can ignore the rest. 

The IRS expects you to report all your gambling winnings, even if you lost more than you won. Follow the instructions in the post above to report the losses to minimize the tax on your gambling activities. And keep good records to support your tax return.

[Confused227]

Thanks Patricia - 

so even if the 1099k is just showing money that I repeatedly put into pay pal.

for instance if I put 10k deposit and withdraw 10k deposit. It’s the same money I always had. It’s notnecessarily income ? 

I worry because - I am paying taxes on money that I do not have - the 1099k is not reflective of all the actual transactions from the casino. 

so you are saying take out whats reported on the w-2 from

the casino…. But what about the rest? I’m still getting taxes on income I don’t have being it was a transaction through  PayPal.

[Confused227]

I worry because - I am paying taxes on money that I do not have - the 1099k is not reflective of all the actual transactions from the casino. 

[hbl3973]

Confused227,

The gist of the advice here is that you report the W2-G form in TurboTax, put in gambling losses up to the amount of your winnings, and do not enter the 1099-K transactions report from PayPal.  Hopefully, the IRS will rethink the whole 1099-K scheme in the future.

That said, the amounts of your transactions seem quite large for a person who simply likes to risk a couple hundred bucks at a casino a few times a year.  If you, on the other hand, consider yourself a usually successful professional gambler, i.e. one who seeks to make a living gambling and comes out ahead for most years, then the gambling income and expenses would go instead on a Schedule C.

[Confused227]

Thanks - I got on a very lucky run but kept going up and down on winnings. 
This was the first year and overall i am down 

I was also told to report the whole 1099k and then report Misc Other income and enter a -balance to off set the 1099k. I don’t think they seems right. 

the issue was that I would constantly deposit and withdraw the same money over and over again - it was my system to ensure I wasn’t spending too much.