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  • anth2622

    Had a question on taxes was hoping someone could provide guidance on.

    Last year, I had winnings in DFS and paid taxes on the 1099 for DK. This year, I have incurred some losses on DK and was curious if there is any way to carryback the losses to offset prior year winnings and receive ta tax benefit for this year? The winnings last year were greater than current year losses so there wouldn’t be an issue of a limitation. Any info would be greatly appreciated.

  • rotokevin

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

    • 2014 FanDuel WFBC Finalist

    Maybe. It kind of depends how you filed last year and how business-like your DFS activity is. You’ll want to talk with a tax advisor about whether or not it makes sense to go down that path.

  • einars

    @rotokevin said...

    Maybe. It kind of depends how you filed last year and how business-like your DFS activity is. You’ll want to talk with a tax advisor about whether or not it makes sense to go down that path.

    this^^ only way you can deduct loses is if you have set up your DFS as a company. Most likely you cannot carry back your loses

    but if you want a real answer contact a licensed CPA…dont trust forums :D

  • pdidawg82

    SC World Cup Bracket Champion

    • Blogger of the Month

    @einars said...

    this^^ only way you can deduct loses is if you have set up your DFS as a company. Most likely you cannot carry back your loses

    but if you want a real answer contact a licensed CPA…dont trust forums :D

    Rotokevin IS a licensed CPA, for what it’s worth…

  • einars

    @pdidawg82 said...

    Rotokevin IS a licensed CPA, for what it’s worth…

    ehh good point…i just took the taxes section (REG) of the CPA exam so i know a little of what i am talking about (not as much as keven tho). Even so its still probably worth checking with someone who is getting paid for their advice….little extra security

  • Skipbidder

    • 15

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    Perhaps try to find advice about a knowledgeable tax professional in your area. My experience is that this is not a subject that is generally well-known by your average tax guy.

    “Tax Help for Gamblers” by Scott and Chien is probably worth a read (especially if you can pick up a used copy). It was not written for DFS specifically, but you would still likely find it relevant. It’s starting to get to be a little bit dated (pub 2007). Tax law on other forms of gambling is very blurry. It is even harder for DFS, which appears to be sometimes treated differently.

    If you can’t file as a professional (and you probably can’t), then you could consider hobby business as a way to file. (You will find polarized opinions about whether or not this is a good idea.)

  • Stewburtx8

    • 2012 FanDuel WFBC Finalist

    @Skipbidder said...

    Perhaps try to find advice about a knowledgeable tax professional in your area. My experience is that this is not a subject that is generally well-known by your average tax guy.

    “Tax Help for Gamblers” by Scott and Chien is probably worth a read (especially if you can pick up a used copy). It was not written for DFS specifically, but you would still likely find it relevant. It’s starting to get to be a little bit dated (pub 2007). Tax law on other forms of gambling is very blurry. It is even harder for DFS, which appears to be sometimes treated differently.

    If you can’t file as a professional (and you probably can’t), then you could consider hobby business as a way to file. (You will find polarized opinions about whether or not this is a good idea.)

    I would assume a book called “Tax Help for Gamblers” would not be that relevant to DFS since DFS is not considered “gambling.” Any gambling winnings will show up a W2-G. Any DFS winnings will show up on a 1099-MISC.

  • blaze1

    Oh no, not another “tax help” thread. These are getting as bad as “rate my lineup” threads.

    Call a tax expert. The bottom line is everyones tax situation is different. Tax experts know how to handle a 1099-MISC and “hobbies as businesses”.

  • PJGuin23

    DFS Tax Guru

    @Stewburtx8 said...

    I would assume a book called “Tax Help for Gamblers” would not be that relevant to DFS since DFS is not considered “gambling.” Any gambling winnings will show up a W2-G. Any DFS winnings will show up on a 1099-MISC.

    I agree with this for the most part. Gambling is not an area I’d be paralleling too much with DFS for tax or even legal purposes. Sure, there’s staking like in poker but again tax forms and treatment are vastly different. And hobby vs. Professional treatment is another animal to explore. And unlike an industry like horse racing, going ‘pro’ could be costlier because if you profit, there’s SE taxes. You also have to consider how DFS earnings affects AGI and Alt Min Taxes. DFS is a whole different animal than ‘gambling’ in that respect.

    Need to seek a tax professional to discuss your situation as a holistic approach. Nothing is clear, cut and dry.

  • Skipbidder

    • 15

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    • Ranked #14

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    @Stewburtx8 said...

    I would assume a book called “Tax Help for Gamblers” would not be that relevant to DFS since DFS is not considered “gambling.” Any gambling winnings will show up a W2-G. Any DFS winnings will show up on a 1099-MISC.

    Then you would assume wrong.

    From IRS ruling in Tschetschot v Commisioner in 2007 US Tax Court, “A casino’s decision to issue a Form W2-G, Certain Gambling Winnings, or a Form 1099-Misc, Miscellaneous Income, does not affect the nature of the winnings for tax purposes.

    Many types of gambling winnings come on a 1099.
    Casino promotions sometimes come on a 1099. (You win entries for the drawing based on your rated play in casino. You win the car. You get a 1099 for the car.)
    Some casinos choose to issue 1099s for tournament wins or bad-beat jackpots. The IRS has ruled that these count as gambling winnings.

    There WAS a carve out for fantasy sports in the Unlawful Internet Gaming Enforcement Act. But that only meant that this particular law didn’t apply to fantasy sports. It wasn’t a legislative statement that these were not gambling. Other forms of gambling were also exempted.

    The UIGEA is often cited by people to argue that DFS isn’t gambling. That is a meritless assertion. Horse racing, state lotteries, and tribal gaming were all excluded too. Care to argue that horseracing isn’t gambling? Or that something is gambling if run by a non-tribal entity but is not gambling if done by a tribe? This has a lot more to do with campaign donation than it did with anything else.

  • PJGuin23

    DFS Tax Guru

    @Skipbidder said...

    Then you would assume wrong.

    From IRS ruling in Tschetschot v Commisioner in 2007 US Tax Court, “A casino’s decision to issue a Form W2-G, Certain Gambling Winnings, or a Form 1099-Misc, Miscellaneous Income, does not affect the nature of the winnings for tax purposes.

    Many types of gambling winnings come on a 1099.
    Casino promotions sometimes come on a 1099. (You win entries for the drawing based on your rated play in casino. You win the car. You get a 1099 for the car.)
    Some casinos choose to issue 1099s for tournament wins or bad-beat jackpots. The IRS has ruled that these count as gambling winnings.

    There WAS a carve out for fantasy sports in the Unlawful Internet Gaming Enforcement Act. But that only meant that this particular law didn’t apply to fantasy sports. It wasn’t a legislative statement that these were not gambling. Other forms of gambling were also exempted.

    The UIGEA is often cited by people to argue that DFS isn’t gambling. That is a meritless assertion. Horse racing, state lotteries, and tribal gaming were all excluded too. Care to argue that horseracing isn’t gambling? Or that something is gambling if run by a non-tribal entity but is not gambling if done by a tribe? This has a lot more to do with campaign donation than it did with anything else.

    Horse racing as an entrant, not a gambler isn’t gambling. You pay a fee to enter and receive a 1099 when you win. You win at the track, you get a W2-G. And that court case has no relevance to DFS.

  • Stewburtx8

    • 2012 FanDuel WFBC Finalist

    @Skipbidder said...

    Then you would assume wrong.

    From IRS ruling in Tschetschot v Commisioner in 2007 US Tax Court, “A casino’s decision to issue a Form W2-G, Certain Gambling Winnings, or a Form 1099-Misc, Miscellaneous Income, does not affect the nature of the winnings for tax purposes.

    Many types of gambling winnings come on a 1099.
    Casino promotions sometimes come on a 1099. (You win entries for the drawing based on your rated play in casino. You win the car. You get a 1099 for the car.)
    Some casinos choose to issue 1099s for tournament wins or bad-beat jackpots. The IRS has ruled that these count as gambling winnings.

    There WAS a carve out for fantasy sports in the Unlawful Internet Gaming Enforcement Act. But that only meant that this particular law didn’t apply to fantasy sports. It wasn’t a legislative statement that these were not gambling. Other forms of gambling were also exempted.

    The UIGEA is often cited by people to argue that DFS isn’t gambling. That is a meritless assertion. Horse racing, state lotteries, and tribal gaming were all excluded too. Care to argue that horseracing isn’t gambling? Or that something is gambling if run by a non-tribal entity but is not gambling if done by a tribe? This has a lot more to do with campaign donation than it did with anything else.

    I’m not going to get into a back and forth on this, but there are some differences between “gambling winnings” and DFS winnings on a 1099-MISC. As others have said, see a tax professional, although RK’s articles on this site are a very good starting point.

    As for the DFS as gambling argument: The UIGEA specifically defines fantasy sports. The bill specifically exempts fantasy sports games, educational games, or any online contest that “has an outcome that reflects the relative knowledge of the participants, or their skill at physical reaction or physical manipulation (but not chance), and, in the case of a fantasy or simulation sports game, has an outcome that is determined predominantly by accumulated statistical results of sporting events. This is very different from the carve out for horse racing, state lotteries, etc.

    It’s also not just the UIGEA. Most states have laws on the books that define fantasy sports as a “game of skill,” and therefore not gambling.

  • stlcardinals84

    Leading RG Analyst

    • 306

      RG Overall Ranking

    • 2018 DraftKings FBWC Finalist

    • 2018 DraftKings FBBWC Finalist

    Just throwing this out there, but RotoKevin and I are both tax professionals.

    I did returns for about six DFS players last year, and I am more than happy to work with people through Skype/e-mail/phone to do tax returns even if they are not from my area.

    Should you need additional tax guidance, advice, or if you are interested in potential tax services, feel free to send me a private message on here and I’ll be happy to help.

  • PJGuin23

    DFS Tax Guru

    @stlcardinals84 said...

    Just throwing this out there, but RotoKevin and I are both tax professionals.

    I did returns for about six DFS players last year, and I am more than happy to work with people through Skype/e-mail/phone to do tax returns even if they are not from my area.

    Should you need additional tax guidance, advice, or if you are interested in potential tax services, feel free to send me a private message on here and I’ll be happy to help.

    Me too! I’m a Pennsylvania CPA. Ideally we’d have a few of DFS tax professionals throughout the nation because of the intricacies of state and local tax laws.

    If you’re an active participant from Pennsylvania or New Jersey, you really want to talk to me. All I’m going to say is ideal structuring of your operations maybe different from other parts of the country.

  • sethayates

    We should probably add this statement to every single tax thread. You can claim anything you want on your taxes using a variety of different methods. Certain methods are going to create a major audit risk. Just because the IRS accepts your return does not mean they are agreeing that what you claimed is correct. If people have detailed questions they need to ask a licensed CPA. I realize that STL, RK, and others are licensed CPAs but their answers here aren’t actionable advice. Trust me on this, if you get audited by the IRS they aren’t going to accept that you heard on the RG forums you could do it this way. Kevin’s articles are a great starting point and I believe some DFS players have filed using his advice and been audited. With that being said every situation is different. Feel free to file any way you want but realize that you are the only person liable to the IRS if your deductions are disallowed.

  • ebsteelers

    a dfs tax book for dummies would be nice with how popular the industry seems to be getting

  • PJGuin23

    DFS Tax Guru

    @sethayates said...

    We should probably add this statement to every single tax thread. You can claim anything you want on your taxes using a variety of different methods. Certain methods are going to create a major audit risk. Just because the IRS accepts your return does not mean they are agreeing that what you claimed is correct. If people have detailed questions they need to ask a licensed CPA. I realize that STL, RK, and others are licensed CPAs but their answers here aren’t actionable advice. Trust me on this, if you get audited by the IRS they aren’t going to accept that you heard on the RG forums you could do it this way. Kevin’s articles are a great starting point and I believe some DFS players have filed using his advice and been audited. With that being said every situation is different. Feel free to file any way you want but realize that you are the only person liable to the IRS if your deductions are disallowed.

    Amen. People think they can hang their accountants/CPAs around a noose for shit that they try to push the envelope on.

    I try to “lead people to water” so to speak but not give away the farm. People really need to see a tax professional about this if they’re unsure or active participants with this whether it’s myself, RK or STL. Like I said a person more local to you is also ideal. I have more knowledge of the mid Atlantic region. I’m sure RK has more upper midwest knowledge.
  • mitchyslacks

    I’m only an ex-tax professional, but there are basically only two ways to treat DFS income-business or miscellaneous.

    With miscellaneous you can deduct losses up to winnings in the same year only. Any expenses tied to that income are considered personal and thus non-deductible.

    With business, you can carry losses back and forward, with restrictions. You can also deduct business expenses, which is the juicier benefit.

    There is considerable audit risk when claiming huge losses from something like DFS on a Sch C, but it can be done, and is the right option for someone who mostly has winning years of significant amounts ( similar to a top poker pro). The IRS is certainly not fond of gambling losses showing up on Sch C, and are likely to take a stance that DFS is gambling activity for their purposes.

    You’re best with taking the miscellaneous income route, especially with profits under 5-10k, IMO

  • PJGuin23

    DFS Tax Guru

    I agree with the Miscellaneous route for small amounts but also determine what effects are there on AGI and AMT. This is a very subjective area. For the professional stance and losses it’s 3 out of 5 years for IRC 183 you should show profit, but that also depends on the auditor. If you run it in a business like manner and intend to make a profit I feel are larger factors from my experience with IRC 183.

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