I received a 1099k from gambling winnings, when in reality my losses were greater than my winnings. Do I need to report my 1099k?

[LenaH]

Yes, you need to report your 1099-K for your gambling winnings. Although usually gambling winnings are reported on the form W-2G, you received a form 1099-K for your winnings because they were made electronically. 

To report your gambling winnings on your tax return, complete the following steps in TurboTax:

1. Open your return.
2. Search for Other Income with the magnifying glass tool on the top of the page.
3. Select the Jump to Other Income link in the search results.
4. Select No to the question Did you get a 1099-MISC?
5. Scroll down to Gambling Winnings under Less Common Income.
6. Click Start next to Gambling Winnings. 
7. Choose Yes to the question Did you win money or prizes from gambling or lotteries during 2020?
8. Choose I did not receive a W-2G.
9. Follow the on-screen instructions to enter your data. 
10. After you enter your gambling or lottery winnings that weren't reported on W-2G, you can enter your Gambling Losses on the next screen. 

You are able to deduct gambling losses up to the amount of your gambling winnings. In addition, your gambling losses will only be able to be deducted on Schedule A if you itemize your deductions, as opposed to taking the standard deduction. For more information, please see Can You Claim Gambling Losses on Your Taxes?

[kevinfitzgerald2]

Thank you so much Lenah!  One follow up question though.  I put in my winnings, and then my losses which were equal, but I noticed that my 2020 refund dropped significantly. Does that sound right?

[LenaH]

Your refund mostly likely decreased because you are taking the standard deduction on your tax return. Once you entered your gambling winnings, you had an increase in taxable income. However, since gambling losses are only deducted if you itemize on Schedule A, your input of losses will not change your tax calculation if you take the standard deduction. 

TurboTax automatically selects the deduction (standard or itemized) that gives you the best outcome on your federal taxes. If the total of your itemized deductions are not greater than the standard deduction, it is better to take the standard deduction. Itemized deductions include items such as: mortgage interest, donations, state taxes, real estate taxes and medical expenses. 

For more information on deductions, please see How does the Standard Deduction differ from itemizing deductions?

[Sunshine545243]

When I enter my 1099k under mis income, it raises my taxable portion of my Social security even though I actually had losses. That makes me paying about 3,000 more in taxes. How can that be corrected?

[TeresaM]

To report gambling losses, you will need to itemize your income tax deductions on Schedule A. You would typically itemize deductions if your gambling losses plus all other itemized expenses are greater than the standard deduction for your filing status. In 2021 the standard deduction for filing single is $$12,550 and married filing jointly is $25,100. If you claim the standard deduction,

• You are still obligated to report and pay tax on all winnings you earn during the year.
• You will not be able to deduct any of your losses directly from winnings.

 You will be prompted to enter losses in the W2-G section. It will then show on Line 32 of the Schedule A Miscellaneous Itemized Deductions Worksheet.

[Af2747]

What if I have w-2g’s for my gambling winnings and also received a 1099k from my PayPal because I would put my winnings in there?..Wouldn’t I be reporting my winnings 2 times?

[AbrahamT]

You would put it in twice. Both in the W2 section and the 1099K section. Then you would back it out as follows

 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.

For the W-2 input, it's located in the same input screen as you would enter your regular W2's. You

would just select How to enter my 1099 or W-2G income.

 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 amount for one of the duplicate reported income.

[Af2747]

I’m still confused because the 1099k amount is  a lot more than the reported w2g’s reported amounts. I’m guessing  because the smaller amounts not reported that were deposited in my PayPal? Also a lot of it is my losses because I put back in thru Paypal .. Needless to say it was a bad year.. and on paper it’s look like I won a lot .. but reality I lost it plus more.

[LindaS5247]

Gambling losses are tax deductible, but only to the extent of your winnings and requires you to report all the money you win as taxable income on your return. 

The deduction for gambling losses is only available if you itemize your deductions. If you claim the standard deduction, then you can't reduce your tax by your gambling losses.

Remember to keep track of your winnings and losses:

The IRS requires you to keep a log of your winnings and losses as a prerequisite to deducting losses from your winnings. Your winnings include each win during the year.

The IRS does allow you to net your wins and losses on the same day for the same type of wagering if you meet certain requirements. This means that if you win at the slots one day and lose the next day, you have to report the winnings on your tax return as income and then deduct the losses separately as an itemized deduction.

Your records need to include:

• the date and type of gambling you engage in
• the name and address of the places where you gamble
• the people you gambled with
• the amount you win and lose

Other documentation to prove your losses can include:

• Form W-2G
• Form 5754
• wagering tickets
• canceled checks or credit records
• receipts from the gambling facility

Remember: To report your gambling losses, you must itemize your income tax deductions on Schedule A. You would typically itemize deductions if your gambling losses plus all other itemized expenses are greater than the standard deduction for your filing status. If you claim the standard deduction, you:

• are still obligated to report and pay tax on all winnings you earn during the year
• will not be able to deduct any of your losses
• You can include in your gambling losses the actual cost of wagers plus other expenses connected to your gambling activity, including travel to and from a casino.  Keep in mind that the IRS does not permit you to simply subtract your losses from your winnings and report the difference on your tax return. And if you have a particularly unlucky year, you cannot just deduct your losses without reporting any winnings. If the IRS allowed this, then it's essentially subsidizing taxpayer gambling.

Click here for helpful information from TurboTax regarding reporting your gambling winnings and losses.

And for information from the IRS:  https://www.irs.gov/taxtopics/tc419

[Af2747]

Ok , think I got it now .. I know my losses are a lot more than my winnings. Just looking at numbers are crazy.  Just I want to make sure I have everything in order in case my return is audited. 
- Bank Statements for the year

-Win/loss statements from Casino(s) 

- Also trying to get paypal statements for cash in and out for the year

Will all this be good for an audit if I need it 

[RobertB4444]

Yes, that should be enough to document that the money is not earnings.

@Af2747

[skisbosco]

Hi,

The instructions for this situation are clear.  But I do not see 'filing the 1099-k' in your instructions, only the gambling wins and losses.  My concern is that the IRS will not know the gambling wins/losses are tied to the 1099-k filing, and will treat them separately (thus expecting taxes to be paid on gambling wins/losses as well a taxes paid on 1099-k values).   

Is there a way to indicate to the IRS in the filing that the 1099-k values are gambling wins/losses?  Or is there a need to also file the 1099k, and then back out this 'income' somehow so that it's not duplicative?  If so, how?

thanks!

[JamesG1]

For the sake of this example, I am presuming that your gambling wins = IRS form 1099-K.

To report the receipt of the 1099-K in TurboTax Online, follow these steps that record the IRS form 1099-K funds as other income.

• Down the left side of the screen, click Federal.
• Down the left side of the screen, click Wages & Income.
• Click Show more to the right of Other Common Income.
• Under Your income and expenses, click the Edit/Add button to the right of Form 1099-K.
• At the screen Did you get a 1099-K? click Yes.
• At the screen How would you like to enter your 1099-K? click Type it in myself.  Click Continue.
• At the screen Choose which type of income your 1099-K is for, select the button for Other income.  Click Continue.
• At the screen Let’s get the info from your 1099-K, enter the information.      Click Continue.
• At the screen Your Other 1099-K income, you enter further information for the Other income.  Click Continue.
• At the screen Your 1099-K summary, notice that the income relates to Other income.  Click Done.

The entry will be reported:

• on line 8z of Schedule 1 of the Federal 1040 tax return, and 
• on line 8 of the Federal 1040 tax return.

You want to report the full amount of the 1099-K because the IRS will be looking for that to be reported on your tax return.  Then reverse out the incorrect amount.  So you would report $100 in income and $-100 as the reversal.  Make sure that you retain documentation to justify your actions.

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:

• Down the left side of the screen, click Federal.
• Down the left side of the screen, click Wages & Income.
• Click Show more to the right of Less Common Income.
• To the right of Miscellaneous Income, 1099-A, 1099-C, click the Start / Revisit button.
• To the right of Other reportable income, click the Start / Revisit button.
• At the screen Other Taxable Income, enter a description such as “Incorrect form 1099-K [amount]” and a negative amount. 

The entry will be reported:

• on line 8z of Schedule 1 of the Federal 1040 tax return, and 
• on line 8 of the Federal 1040 tax return.

So now you have reported the IRS form 1099-K and notified the IRS of the reversal.  Then you report the same $100 as gambling income as described by @LenaH above

@skisbosco 

[skisbosco]

Makes perfect sense.  Thanks.