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  • rotokevin

    2014 RG Bowling Co-Champion, CPA & DFS Tax Guru

    • 2014 FanDuel WFBC Finalist

    DFS and Taxes

    Hey gang. We’ve had a lot of tax discussion in the forums lately, but I’m super excited to announce that there is now a Taxes in Daily Fantasy lesson available in GrindersU.

    The article is comprehensive and covers most common tax-related questions we’ve discussed. Of course, no article can cover everything, so I’ll monitor this thread to answer additional questions.

    To make this thread useful, let’s strive to keep it on topic and not simply regurgitate the content of the lesson. Also, please scan the thread to make sure your question hasn’t already been answered. Following these simple guidelines will make the experience better for everyone.

    So, with that, let’s talk taxes.

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    • Last Updated 1 year ago
  • rotokevin

    2014 RG Bowling Co-Champion, CPA & DFS Tax Guru

    • 2014 FanDuel WFBC Finalist

    As we enter the homestretch of tax season, I wanted to bump this thread. Anyone else have questions before they file?

  • LawnStar

    When you receive a 1099, will your taxable income be based on the winnings – entry fees or would you still need to claim your entry fees separately under a misc expense?

  • BernieKozar

    @rotokevin said…

    As we enter the homestretch of tax season, I wanted to bump this thread. Anyone else have questions before they file?

    My CPA said to report 1099 I received as gambling income, and that it would be the most beneficial way for me to do so.

  • rotokevin

    2014 RG Bowling Co-Champion, CPA & DFS Tax Guru

    • 2014 FanDuel WFBC Finalist

    @LawnStar said…

    When you receive a 1099, will your taxable income be based on the winnings – entry fees or would you still need to claim your entry fees separately under a misc expense?

    Check out the lesson for the full details, but generally speaking your 1099 will be your net winnings from that site.

  • rotokevin

    2014 RG Bowling Co-Champion, CPA & DFS Tax Guru

    • 2014 FanDuel WFBC Finalist

    @BernieKozar said…

    My CPA said to report 1099 I received as gambling income, and that it would be the most beneficial way for me to do so.

    I’ve heard this from quite a few players and I attribute it to CPAs not understanding the nature of DFS. It should fall under “other income” for most players. I struggle to understand the justification for reporting as gambling earnings when it is not submitted on the W2-G.

  • rysportguy

    Hey I have been wondering about how to best do my taxes. I make no other income as I am a college student and have profited around $3000 last year on two sites but lost around $1000 on other sites last year. I can’t do itemized deductions since this is my only income so I’m thinking the for profit hobby is the way to go so that I am able to right off my loses. The problem is that then I have to pay the self-employment tax and from what I can read the self employment tax is assessed on earnings and not profit so I would have to pay the tax on the $3000 anyway so there is no point in writing off loses. So basically I am best off not writing off any of my loses and just paying it as miscellanies income. Am I right with this line of thinking?

  • rotokevin

    2014 RG Bowling Co-Champion, CPA & DFS Tax Guru

    • 2014 FanDuel WFBC Finalist

    @rysportguy said…

    Hey I have been wondering about how to best do my taxes. I make no other income as I am a college student and have profited around $3000 last year on two sites but lost around $1000 on other sites last year. I can’t do itemized deductions since this is my only income so I’m thinking the for profit hobby is the way to go so that I am able to right off my loses. The problem is that then I have to pay the self-employment tax and from what I can read the self employment tax is assessed on earnings and not profit so I would have to pay the tax on the $3000 anyway so there is no point in writing off loses. So basically I am best off not writing off any of my loses and just paying it as miscellanies income. Am I right with this line of thinking?

    If the entirety of your income is a 1099 for $3k, claim it as “miscellaneous income” which will be completely erased by your standard deduction. You’ll owe nothing and you’ll receive nothing. In fact, you probably don’t even need to file a return if that is everything you have.

    And for clarity, self-employment tax is assessed on the profit from the activity, not the revenue. So if you need to file your activity on schedule C (based on what you’ve said here, that feels unlikely, though) the SE tax would be on the profit of $2k, not the gross $3k.

  • kcchiefsfan73

    Sorry if this is repetitive as I haven’t read through this entire forum subject. Just wanted to mention I had my taxes done this past weekend, surprisingly had a good conversation with my “old school” tax man. He had me provide the following as deductions for DFS winnings (office space, tv’s, laptops, directv sports packages, subscriptions to any websites/publications, etc). Feel much better about it now going forward.

  • rotokevin

    2014 RG Bowling Co-Champion, CPA & DFS Tax Guru

    • 2014 FanDuel WFBC Finalist

    @kcchiefsfan73 said…

    Sorry if this is repetitive as I haven’t read through this entire forum subject. Just wanted to mention I had my taxes done this past weekend, surprisingly had a good conversation with my “old school” tax man. He had me provide the following as deductions for DFS winnings (office space, tv’s, laptops, directv sports packages, subscriptions to any websites/publications, etc). Feel much better about it now going forward.

    Nice to hear that there is some independent corroboration of my opinions.

  • BernieKozar

    @rotokevin said…

    I’ve heard this from quite a few players and I attribute it to CPAs not understanding the nature of DFS. It should fall under “other income” for most players. I struggle to understand the justification for reporting as gambling earnings when it is not submitted on the W2-G.

    Yeah, I get that. But unfortunately I have been going to this guy for a decade and I’m not just going to drop him now over a measly 1099 for 2.5k which is 5% of my total income.

    If we go that route, I do have 1.8k poker tournament receipts that I bricked in 2013 which I can write off as gambling losses.

    I just don’t want to be in any trouble with the IRS, and he assured me I wouldn’t be.

  • headChopper

    RG Contributor (OG Status)

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    Question for RK- I usually handle my own taxes because I like to be able to take liberties in write offs that a tax adviser,who doesn’t understand DFS, may not agree with.
    So what if I came to you with my tax info and you were doing them, but came across something you didn’t fully believe was valid. Would you a) go along with it because its a gray area and the customer seems to really believe in the write off b) stand pat that you cannot enter that information on the forms c) part ways with the customer over a difference in opinions?

  • rotokevin

    2014 RG Bowling Co-Champion, CPA & DFS Tax Guru

    • 2014 FanDuel WFBC Finalist

    @headChopper said…

    Question for RK- I usually handle my own taxes because I like to be able to take liberties in write offs that a tax adviser,who doesn’t understand DFS, may not agree with.
    So what if I came to you with my tax info and you were doing them, but came across something you didn’t fully believe was valid. Would you a) go along with it because its a gray area and the customer seems to really believe in the write off b) stand pat that you cannot enter that information on the forms c) part ways with the customer over a difference in opinions?

    So here’s Chop dropping the ethics bomb on me. Are you trying to get my license revoked?

    The tax code is black and white about very few things, leaving plenty of gray area in which the taxpayer and his tax advisor can discuss the risks of taking various positions. I’ve never had a situation where a client was adamant about taking a particular stance that was in direct violation of the tax code. So long as there is a reasonable argument to be made for taking a stance, we can usually arrive at a conclusion that everyone is comfortable with.

    If you and your tax advisor can’t come to a position that satisfies both parties, it’s best to part ways. That could easily be initiated by either party. The important part is to understand the benefits and risks of taking specific positions when filing your taxes. A good tax advisor will work with you to gain that understanding, whether that person ultimately files your return or not.

  • mexgladiator

    Hi Kevin,

    I don’t think anyone asked this yet, but is there a way to transfer winnings into brokerage/investment accounts where taxes won’t need to be paid until these earnings are actually withdrawn and used? Somewhat how stock duvidends can be automatically reinvested. This way interest can accumulate on the winnings and offset the taxes on withdrawals sometime in the future.

  • rotokevin

    2014 RG Bowling Co-Champion, CPA & DFS Tax Guru

    • 2014 FanDuel WFBC Finalist

    @mexgladiator said…

    Hi Kevin,

    I don’t think anyone asked this yet, but is there a way to transfer winnings into brokerage/investment accounts where taxes won’t need to be paid until these earnings are actually withdrawn and used? Somewhat how stock duvidends can be automatically reinvested. This way interest can accumulate on the winnings and offset the taxes on withdrawals sometime in the future.

    That would be a cool trick, but no.

    Separately, unless the assets are held in a tax advantaged account such as an IRA or 401(k), dividend and interest income is taxed in the period received, regardless of whether or not it is reinvested.

  • Jonede

    • 702

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    @rotokevin said…

    I’m going to be direct on this – Yuck. Receiving the 1099-K is one thing, but when it is linked to another taxpayer’s tax ID, that’s awful.

    You (or your tax professional) are going to have to get in touch with the IRS on that one. Since the 1099 is in your father’s name, he’s going to have to claim the income on his return. In terms of showing the “losses” to offset the 1099, your best bet would be to show an accounting of your deposits made. Of course, the problem there is that the deposits were made in your name. You’re probably in better shape if it is a joint account with your father.

    Your father should be able to offset the 1099 and owe no tax, but it’s going to be a pretty big audit flag to show a large gross income number and write it down to zero, even though that is factual. Seriously, get in touch with the IRS. Their phone reps are usually pretty helpful, though be prepared to spend a couple hours with them (both on hold and discussing the issue itself.)

    Kevin,

    PayPal has told me that I can change the account to a business account and then add myself onto the account. After that, they said I am able to ask for a restructured 1099k to reflect the change. Would you recommend doing this? I don’t have a business through DFS but it might be a way to negate this problem.

    Jon

  • hambazaza

    RG Blog Program Manager, 2014 RG Party Beer Pong Champion

    • Blogger of the Month

    • Beer Pong Champion

    i have a curious question that doesn’t apply to me (yet, but maybe it will someday if I get a ticket to the DFBC)

    how is a trip to the DFBC final taxed? What happens if I go there and I come in last place and get 5K back? am I taxed for the price of the trip (which i guess is 10K+? how much is FD valuing that anyway?) AND for the 5K in winnings?

    what if i’m normally a slightly winning player with less than 1K in total winnings then this happens, I can’t claim enough losses to offset that one trip.

    am I misunderstanding this?

  • Stewburtx8

    • 2012 FanDuel WFBC Finalist

    @hambazaza said…

    i have a curious question that doesn’t apply to me (yet, but maybe it will someday if I get a ticket to the DFBC)

    how is a trip to the DFBC final taxed? What happens if I go there and I come in last place and get 5K back? am I taxed for the price of the trip (which i guess is 10K+? how much is FD valuing that anyway?) AND for the 5K in winnings?

    what if i’m normally a slightly winning player with less than 1K in total winnings then this happens, I can’t claim enough losses to offset that one trip.

    am I misunderstanding this?

    Fanduel does NOT include the value of the trip on your 1099. Now according to the IRS, you should still claim that. But most people probably do not claim it since the IRS does not know about it.

  • YoungFischer

    Hmmm, what about using a self-directed IRA and using the money to play DFS?

  • mberkowi

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      RG Overall Ranking

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    I just found this thread. Very helpful and thanks RotoKevin. I have a few questions:

    1. If I already itemize, can I take expenses such as subscriptions as other misc deductions on schedule A, as long as the expenses are below my DFS income? Are these subject to 2% AGI floor? I bought a laptop in 2014 that I probably use 90% for DFS. Can that be deducted?

    2.Do I need to claim the cash value of any unclaimed FPP or unreleased deposit bonuses as income?

  • tiltatout

    Hi everyone,

    I just found this thread and I posted this in another thread (sorry) but it’s probably more usefull/relevent here.

    First of all I want to make sure I understand correctly: You get taxed fully on all your DFS profits at your income bracket rate. That seems crazy to me. What about the amateur that wants to put up a line-up in December? This guy is basically paying 40% rake?

    So from that I get that I better hurry up to make profits and a lot of volume to minimize variance…

    Now if this is true and with this out of the way the lesson mentions additional state/county taxes… To be honest I am a foreign citizen just out of college and I have no idea what that means. If anyone has any insight on what that implies for a New York resident I would be most grateful.

    Finally the reason I ask this is because friends have proposed to buy some of my action for the whole NFL season. I would gladly accept but I am not sure how to handle the whole tax thing. Is there a way for me to signal that part of my profits are not actually mine but have been “given back”? Should I consider that I pay all the taxes on it and include it in the percentage I charge them?

    Thank you very much!

  • PJGuin23

    DFS Tax Guru

    @tiltatout said...

    Hi everyone,

    I just found this thread and I posted this in another thread (sorry) but it’s probably more usefull/relevent here.

    First of all I want to make sure I understand correctly: You get taxed fully on all your DFS profits at your income bracket rate. That seems crazy to me. What about the amateur that wants to put up a line-up in December? This guy is basically paying 40% rake?

    So from that I get that I better hurry up to make profits and a lot of volume to minimize variance…

    Now if this is true and with this out of the way the lesson mentions additional state/county taxes… To be honest I am a foreign citizen just out of college and I have no idea what that means. If anyone has any insight on what that implies for a New York resident I would be most grateful.

    Finally the reason I ask this is because friends have proposed to buy some of my action for the whole NFL season. I would gladly accept but I am not sure how to handle the whole tax thing. Is there a way for me to signal that part of my profits are not actually mine but have been “given back”? Should I consider that I pay all the taxes on it and include it in the percentage I charge them?

    Thank you very much!

    PM me for specifics to your situation. I am a DFS CPA. It sounds like you have a lot of moving parts and I can break them down for you. Your rate depends on many things. But you’re right, it would be your marginal rate including Wages plus DFS income. New York also has specific city/local issues depending on where you reside. I’m based out of suburban Philadelphia and have many NY clients.

  • barnstorm

    In DFS, you only have to report your net profit? But in sports gambling, you have to report every winning bet as MISC income on Line 21 and every losing bet as an Itemized deduction? So they allow DFS to net their winnings and losses, but not gambling?

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