I live in Michigan and am married filing jointly. I have basically broken even on my wagers, but will be using the standard deduction. Will it just be added to my income and taxed at my normal federal and state rate? Or will there be higher taxes I have to pay?
Since they are gambling winnings you simply need to report them as such on your return and the losses can only be reported on the Sch A if you itemize.
Gambling
To enter the W-2G or other documents For your Gambling winnings--Go to Federal>Wages & Income>Less Common Income>Gambling Winnings
You can enter your winnings, and then keep clicking through the interview to enter gambling losses.
https://www.irs.gov/help/ita/how-do-i-claim-my-gambling-winnings-and-or-losses
Gambling winnings are taxable income. Losses are an itemized deduction. If you do not have enough itemized deductions to exceed your standard deduction, your losses will have no effect.
https://blog.turbotax.intuit.com/income-and-investments/how-are-gambling-winnings-taxed-8891/
https://ttlc.intuit.com/questions/1900352-can-i-deduct-my-gambling-losses
2021 STANDARD DEDUCTION AMOUNTS
SINGLE $12,550 (65 or older + $1700)
MARRIED FILING SEPARATELY $12,550 (65 or older + $1350)
MARRIED FILING JOINTLY $25,100 (65 or older + $1350 per spouse)
HEAD OF HOUSEHOLD $18,800 (65 or older +$1700)
Legally Blind + $1350
Your gambling winnings will be taxed at your normal tax rates, the same as any other ordinary income. But note that gambling winnings are taxable when you win, whether you leave the winnings in an account or take them out. It's income when it goes into your PayPal account, not when you take it out of the account.
People have to be very careful about the churn rate with sports betting. Suppose you win $100,000 but you lose $100,000 so you break even. That will be reported on your tax return as $100,000 of income. That will add to your adjusted gross income and may change your eligibility for making deductible IRA contributions or receiving other tax deductions and credits. Then, you can take a tax deduction on schedule a for your losses. But if you don’t already itemize, you will not get the full benefit of the deduction and some of your winnings will end up being taxable even though you theoretically broke even. For example, suppose you are married and have $10,000 of itemized deduction so you would normally use the standard deduction of $25,000. If you have $10,000 of winnings and $10,000 of losses so you break even, the $10,000 is taxable income, and the $10,000 of losses is an itemized deduction, but since your itemized deduction is less than the standard, you can’t actually deduct the losses so you will pay full income tax on the $10,000 of winnings.
You don’t have to worry about the 1099K from PayPal for withdrawing part of your winnings, you have to worry about the W-2 G from the sports betting company that will report your winnings for the year.
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?
@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.
I use my paypal acccount for my sportsbetting & withdraw daily from each sportsbook used from the day prior into my paypal balance. I received a 1099K from paypal for 150k of transactions and my winnings are around 12k for round numbers. What would be the best approach ?
i am in this same exact situation! Currently trying to search for an answer as well.
I have W2s also that i need to claim so i am confused if this all has to be claimed twice now.
So you have two options, Option 1 is to report just one tax form and then wait for the CP notice that imputes the income to them after they file. Or report both forms after and back out the duplicate income as follows,
W2 G Income, hit magnifying glass ,type W2G, then jump to W2G
For the K-1 income reporting, Personal income, then Less Common Income, then Prizes, Awards and Gambling Winnings, then update until you reach this screen
And then finally, to back out the duplicate income Go into Less Common Income, Misc Income, Lets work on Misc income,, Did you receive Other Wages-answer Yes till you get to the screen Any Other Income, hit yes, then source of Other Income, Other, then in description enter duplicate income and put a negative 60,000 like this
I have been issued a 1099-k by PayPal for a huuuge amount but none of it is actually my income. How do I even prove that it is not my income. Can I simply show the payment sent to betting site vs payment received via betting site as the proof ?
First things first. First, enter the 1099-K as many times as necessary for each category. Then, the IRS will verify that the totals match. If the IRS chooses to audit you, you can show them the paper trail.
First, grab a calculator or make a spreadsheet. Next, go to the income section, scroll down to Other Common Income. Select income from 1099-K.
Since you received a 1099-K for multiple things, you have to break it down for each category.
Enter the same 1099-k information over and over but with the correct amount for each category.
@Anonymous86
I have the same question. Received about $500k in 1099k from PayPal. They were mostly withdrawals from various gambling sites, not winnings since I deposited the money first. How do I reconcile this?
Same here! Just got a 1099-K from PayPal for over $100k but I didn't actually win $100k on the gambling site. It was a lot of withdrawls that made the total go so high. Theoretically, I could use PayPal to deposit $500 into the online casino and then immediately use PayPal to withdrawl the same $500, do that 200 times over and reach $100k in withdrawl transactions without ever actually gambling a penny of it. How does the IRS reconcile this? Do we enter the PayPal withdrawls reported on 1099-K as income from online gambling but deduct the PayPal deposits to reach a "net" income?
I was able to reach out to CPA regarding this matter and what I was told is I have to report 1099K as income but use the schedule A for itemized deductions and report up to the same amount as my gambling losses ( I actually lost during the fiscal year 2022). The only caveat with this is the AGI will be super high and in case if we get audited be ready with the paper trial
@Anon95 wrote:
Same here! Just got a 1099-K from PayPal for over $100k but I didn't actually win $100k on the gambling site. It was a lot of withdrawls that made the total go so high. Theoretically, I could use PayPal to deposit $500 into the online casino and then immediately use PayPal to withdrawl the same $500, do that 200 times over and reach $100k in withdrawl transactions without ever actually gambling a penny of it. How does the IRS reconcile this? Do we enter the PayPal withdrawls reported on 1099-K as income from online gambling but deduct the PayPal deposits to reach a "net" income?
That's the real problem. If your gambling site says you "won" $10,000 and lost "15,000", that's what you should be reporting on your tax return. But if PayPal issues you a 1099-K for more, because of the churn in the account, how do you report it?
One option that is still consistent with IRS guidelines is to leave the 1099-K off your return, report the winnings under "gambling winnings", report the losses on the deduction page, and file by mail. You would attach a copy of the 1099-K and a letter of explanation as to why you reported a different amount. This would also work if your PayPal account contains different types of income (you mixed your eBay sales and your gambling activities, for example). However, filing by mail is not preferred.
Another option would be to zero out the entire 1099-K. Report the whole 1099-K as other income, then create another item of other income with a minus sign (negative number) to cancel out the 1099-K, and use a reason like "gambling winnings reported elsewhere". Then report the actual winnings and losses as usual. The IRS may or may not send a letter asking for a more detailed explanation.
In most cases, the casino will take 25 percent off your winnings for IRS gambling taxes before paying you. Not all gambling winnings in the amounts above are subject to IRS Form W2-G. W2-G forms are not required for winnings from table games such as blackjack, craps, baccarat, and roulette, regardless of the amount.
For gambling winnings, there's no 1099-K entry form screen like there is for a W-2, in TurboTax. You don’t have to worry about the 1099K from PayPal for withdrawing part of your winnings, you have to worry about the W-2 G from the sports betting company that will report your winnings for the year.
In addition to what Opus 17 said, you may deduct gambling losses only if you itemize your deductions on Schedule A (Form 1040) and kept a record of your winnings and losses. The amount of losses you deduct can't be more than the amount of gambling income you reported on your return.
Click on the link below to see how to enter W-2G:
Here's where you enter Form W-2G (Certain Gambling Winnings) in TurboTax:
I am in same boat, I talked to tax specialist at tax act, I think they are leading me down the wrong road. They tried to make me put as income then . Then put it in loss .like I was a professional gambler. Which I feel like im due to get audit.
So if someone has a high churn right on sports books/casino via PayPal. If I received this 1099k for a large large amount. However I deposited over 10k more than what they sent me. Aka a 10k net loss on the year. My losses outweighed my wins by 10k. Didn't win anything at any book overall. I can simply write off by itemizing my taxes and write off that entire 1099k amount because it was a loss. I can't write off all the losses however I can write off the quote on quote wins as reported on my 1099k. Is that correct? I think I understand but I believe since I didn't win $ on any sites overall and was down I shouldn't owe any income taxes on that. Thanks!
You had gambling receipts that will be recorded on W2-G's. The receipts were only deposited and withdrawn from the the Paypal account. So the Paypal account performs the same function as a dedicated checking account. Is that correct?
A 1099-K that reports income that is not accurate should still be entered into your tax return but then backed out. It is important that you retain records of what you did should a taxing authority ask questions about this income down the road.
To report Other income, follow these directions.
Other income may need to be reversed if some or all the income reported on the 1099-K is not accurate. Post the negative entry as follows:
The entries will be reported:
Make sure that you keep records of all transactions. Later, you may need to demonstrate to the IRS that this is not taxable income.
That is correct PayPal acted like a checking account in this instance.
I never received a W2G for any website at all. Simply just the 1099k. But thanks for the Info. Based of that info it sounds like yes I can report the income on the 1099k as other income than just simply back it out since I lost more than I received by a larage amount and wouldn't have to pay taxes on that income since it was all gambling and at a loss
thanks for the info
NO .... All your gambling income/winnings MUST be reported on the form 1040 and the losses can go on the Sch A ... you will enter the amount from the 1099-K as gambling winnings in the proper section for gambling winnings and then you will be asked for the losses. Do NOT just put it on and negate it off completely on the Sch 1 line 8 ... this will get you an IRS audit letter for sure.
I don't fully understand the ins and outs of sports gambling but if you only won $10,000, your gambling income is not $200,000, with 190,000 on Schedule A, although that's one way to do it.
No I'm saying report the full amount on the 1099k as gambling winnings.
than also on the itemized portion where you can report losses I will report the full amount of my winnings as gambling losses. I can show those records if requested. My goal here is to report my gambling winnings and losses properly. However since I lost over 10k net after all my wins and losses are calculated I don't believe I will be taxed on that gambling wins as income because I have the losses to more than out weigh the amount that showed up in this 1099k. Essentially it looks like I earned way more in 2022 than I did. However in reality I lost money overall by a large amount in gambling net
Not quite right ... the gambling winnings must be reported as income and only the losses (up to the amount of winnings) can be used on the Sch A which is not a $ for $ reduction and is not done on the form 1040 "above the line". You are not allowed to net the losses against the winnings and only report the difference on the form 1040 and you can never deduct more loss than you reported in gains.
In the TT program, when you enter the gambling winnings in the W-2G section (even if you have no W-2G to enter) you are asked for the total of the winnings and on the next screen the total of the losses ... the program will put them in the correct places on your return.
Do not also enter the 1099-K if you got one for the gambling if you already entered the gambling winnings somewhere else in the return. Do not enter that amount twice unless you like paying more in taxes than required.