1099-K for Gambling

[jamesneedsanswers]

Yeah you should have filed the 1099-K and then backed out the number. Let me see if I can find the instructions for you.

[vastone23]

You contacted PayPal and got them to correct the 1099-k?

[jamesneedsanswers]

I've seen people contact PayPal to correct the 1099-K. Mine sent out a corrected 1099 in March without me having to reach out.

What online gambling website did you use?

[vastone23]

I used 10 different sports books in 2021. My win loss statements combined from the 10 sports books shows a win of 2500$… but PayPal says I made 95 grand.. obviously not correct. 

If you back out all deposits I made into Sportsbook , it is around 7k total. Which again is no where 95k. 

PayPal has not sent me a corrected one but maybe I will contact tomorrow to see if they would look into that to account for the payments made to the Sportsbooks

I was looking in to my 2022 return today but did not see anywhere to add a 1099k but also zero it out. So if you find those instructions. Please post. 

[NCperson]

@vastone23 - 

top of page 8

https://www.irs.gov/pub/taxpros/fs-2023-06.pdf

If you cannot get the form corrected, the error should be reported on Form 1040, Schedule 1, Additional Income and Adjustments to Income, Part I, Additional Income, Line 8z, Other Income, with an offsetting entry in Part II, Adjustments  to Income, Line 24z, Other Adjustments.

[jamesneedsanswers]

This is so great. Thanks for the official IRS document. @NCperson 

[NCperson]

@vastone23 - also gambling  losses can not be netted against gains and then reported on a tax return. 

gains need to be reported as income and then losses can be reported on Schedule A as an itemized deduction.

and losses can not exceed the gains, 

If Paypal is reporting your gains, it is correct. (but it should be reported on a W-2G form. 

[jlanza265]

Good morning. I just got done working with my appeals officer. We came to a resolution. I was not completely satisfied with the outcome. She basically took my 1099-k after I showed me every debit and credit and said I broke even on gambling. However, since I did gamble I had to file with itemized deductions. Causing me to owe taxes($2500) and they are trying to add interest and penalties. The whole process took about 16 months. They are slow and the penalties keep adding up. With your amounts I might hire someone. It appears this is becoming more and more of an issue. People receiving 1099-k and also 1099-misc from gambling sites. You are paying double tax. It’s pretty scary but just relax. Breath. Start going through every deposit and withdraw on your PayPal transaction for the year in question. Unless you hire someone they should do all of this. The cheapest I found was about $1000 and that was after the IRS told me my total of $2500. I wasn’t sure it was worth it if they couldn’t save me the whole amount so I just agreed to the settlement to relieve some stress. Any particular issues you have questions about? Maybe if you send a spreadsheet in your reply to the CP2000 they will see all your debits and credits. I didn’t do that initially, I just sent my totals showing only about $1000 profit. 

[NCperson]

@jlanza265 - this is the problem with gambling and taxes- and most don't understand the implications.

The winnings are taxable income and the losses are deductible, but only if you can itemize your deductions.  you do not net the winnings and losses together ; they have to be reported separately. 

So let's look at an example.  $10,000 of winnings and $10,000 of losses.  Looks like a breakeven, right? 

The standard deduction for someone who is single is $13,850 in 2023

The $10,000 winnings get reported as income. 

but there is no loss to itemize since you are already eligible for a $13,850 standard deducion.  

so then there is tax to pay on the $10,000 winnings, even though you broke even when gambling. 

[vastone23]

Hey J Lanza … could I email you personally?

my email is [email address removed]

[jlanza265]

Yeah I understand the wins and losses. The problem is with the PayPal 1099-k. Let’s say I deposited $20,000 and only played 1000 and decided to cash out 20,000 and broke even. The IRS is trying to tax the 20000 as income when it’s not. It’s complete nonsense and they need to fix itZ I know it’s on the taxpayer to show all this on return but to levy these notices and try to scare people and force them to pay these astronomical penalties and fees is ridiculous. 

[jlanza265]

I did not file my 1099-k initially. I didn’t know how to back then and I don’t even remember receiving one honestly. Once I got CP-2000 I tried filing an amended return but it didn’t work. I believe you go to misc income and put the amount on 1099-k in and then put another misc income and use a negative number for how much you put in or lost. 

[2023fuma]

Has anyone had success with contacting PayPal and getting an updated 1099-K, or is that pointless? 

[SusanY1 · Accepted solution]

PayPal is not able to adjust the 1099-K in most cases, but you can make all necessary adjustments to your tax return.  There is more information HERE.

@2023fuma 

[Sleekshears]

I am so nervous will not be playing these 3rd party casino games any more this is a hastle not sure how to go about this