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Level 2

Solved

1099-K for Gambling

Forum|Forum|3 years ago
October 9, 2022
3 replies
0 views

Hi all,

I am mentally preparing for the 1099-K I found out I would be receiving for using PayPal as my main way of withdrawing and deposit. Since I like to withdraw and deposit on a daily basis - I will have a good amount of money on my 1099-K. Overall though - my deposits into the Sportsbook is WAY more than my withdrawals. Is there anyway to proactively enter this on my tax returns with evidence so I don't get audited? This is having me really concerned with these changes.

I know the 1099-K is really just a list of incoming transactions (money received) - I assume it's going to trigger something if that number is fairly high. I have also stopped using PayPal and honestly will never use it again. I already closed my Venmo account. I am not trying to avoid paying taxes at all as I've won and paid taxes on gambling in the past but the HEADACHE that is caused by these papers aren't worth the mental health.

Thank you for all your help,
James

Best answer by SusanY1

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

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

Bsch4477

Level 15

The 1099-k will reflect what has been paid to you. If all that is gambling income you report that on your return just as you always have and deduct any documented losses but not more than your winnings on Sch A if you itemize. Nothing has changed except the threshold for 1099-K reporting.

jamesneedsanswersAuthor

Level 2

A 1099-K isn’t really income thought - it’s deposit. If I deposit 10,000 and I withdraw $10,000 without even playing - I would get a 1099-K for $10,000 but that’s not really income. It’s very confusing as winnings should only be defined on a W2G and 1099-K really is only defined as a transactional report / not actual income. I don’t have any winnings to report. I read that I could get it the number in when I file my taxes and back it out with a negative number because it’s not really income. It’s very confusing for everybody involved. I’ve read a few forums about it and haven’t seen the right / good way to handle this.

Bsch4477

Level 15

It’s confusing for everyone because the IRS hasn’t yet told us how this will be handled. Rest assured, though, that you will only be taxed on actual income.

Roncomanjason2

Level 2

Hi, curious as if you found a correct way to

do this as I am in the same exact situation.

AmyC

Level 15

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.

Do not use this section if it is all business income!

Since you received a 1099-K for multiple things, you have to break it down for each category.

If you had hobby income, select that button, enter the 1099-K information except the income. Instead, use your calculator determine all income related to hobby and enter that amount.
Next, personal item sales, enter the 1099-K information again except for the income. Use the calculator and determine the personal item sales.
Continue doing this through all of the options that apply to you.

Enter the same 1099-k information over and over but with the correct amount for each category.

**Say "Thanks" by clicking the thumb icon in a post. **Mark the post that answers your question by clicking on "Mark as Best Answer"

Roncomanjason2

Level 2

The 1099 I received is from PayPal. PayPal generates them after a threshold of monetary value or transactions. The problem I’m having is this. I deposited a thousand dollars at a casino online. I played for a while and then withdrew the remaining amount of my money to PayPal. I did this countless times. But because money entered PayPal they assumed I have a business and sent me a 1099k. I am significantly down at the online casinos. Is there a way to offset this? I’m in an utter panic.

vastone23

Level 2

Hey was there ever a solution to your problem? I was just hit with a CP2000 from the IRS as PayPal sent Ina. 1099k saying I made 95k. I did not. And truly thought I entered my taxes in correctly with collecting all my win / loss statements and paid the taxes on those win losses

so I am trying to find someone who went through this already as I am debating on hiring a lawyer or submitting all of my research and proof by myself?

they are saying I owe 38k in tax, 7k in penalties and 4k in interest ..

I contacted turbo tax today and their tax professional told me I filed correctly and wouldn’t change a thing

jlanza265

Level 2

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.

jlanza265

Level 2

@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.

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.