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  • DFSAccounting

    Hello Grinders!

    As the Official DFS Tax Partners of RotoGrinders , we here at DFS Accounting Services, LLC would like to take a moment to introduce ourselves. We are a consulting and advisory firm with 30+ years of collective accounting experience and are also a registered and licensed CPA firm with the AICPA and IL CPA Society. Our focus is on providing unparalleled tax and consulting services to the casual and professional Daily Fantasy Sports (DFS) Player. We also offer “free tax consultation on your DFS activities.”: dfsaccounting.com

    We aim to provide the RG Community with top-notch service for a 2nd year in a row!

    DFS is an exciting and competitive industry that offers big payouts and we understand the allure of playing DFS because we play it ourselves! With big winnings comes big tax responsibilities, and that’s where we come in!

    Now with that said, let’s get the DFS Tax Q&A going… please ask away!

    DFSAS Disclaimer: We are Certified Public Accountants licensed by the AICPA and State of Illinois. Any information provided is for informational purposes only and is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant, CPA, lawyer or other competent financial professional. Information posted by us on RotoGrinders or any other media forum does not constitute an accountant-client relationship. At your request, we can send an engagement letter, which outlines our responsibilities provided under our engagements.

  • drewcrawford03

    • 667

      RG Overall Ranking

    • 2018 FanDuel WFFC Finalist

    Advice on how to proceed if my FD 1099 MISC is the wrong amount (by a lot)? Yes, I have records to prove. I am in touch with support and they will be “consulting with their financial people”, but I’m sure it will be something about tickets/FDP entries. I am 100% certain their number is way off. Would appreciate any input assuming they insist their number is correct.

  • Aidenmiller444

    .

  • rotokevin

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

    • 2014 FanDuel WFBC Finalist

    @Frolik67 said...

    I meant can i use Bovada to offset DFS winnings from Fanduel, so then youre saying I cannot?

    I know that the DFS Accounting team has weighed in that this is a no-go. I used to hold that belief firmly, too, and keeping the two activities separate is still the “most correct” answer.

    That said, to my knowledge, the IRS hasn’t issued any guidance specifically relating to DFS. There are some letter rulings that reference similar fact patterns, but there’s nothing concrete and 100% prescriptive. It isn’t a stretch to say that DFS activity is economically similar to gambling activity, in which case, co-mingling the activity could be appropriate. See this article from TaxSlayer’s blog, which pretty clearly suggests to treat DFS income as gambling income: https://www.taxslayer.com/blog/flag-play-fantasy-sports-real-penalities/

    “But Kevin, what about the 1099-MISC vs. W2-G issue? They use different forms!” Sure, that’s true, but the 1099-MISC get misused for gambling activity ALL THE TIME. The IRS is used to seeing 1099-MISC amounts reported as gambling income. In fact, absent filing as a business on schedule C, a hobby 1099-MISC and a W2-G both flow to the same “other income” line on the 1040.

    I know around these parts we loathe even considering that “DFS” and “gambling” could exist in the same sentence (and for very, very good reasons), but the tax man is a different animal and it may be worthwhile to co-mingle them.

    “What if my DFS is a business? Can I include gambling activity with my DFS activity?” The key here is how you are defining your business. If you are defining as a fantasy sports business, probably not, but if your umbrella is a bit wider, say “sports analytics” or something of that nature, income from DFS and sports betting could be argued to be pooled as “related income.” Is the process behind assessing Russell Westbrook as a good DFS play and the decision to bet a yes/no triple double prop all that different? How about stacking the Dodgers and betting the “over” on the game? Or selecting Devan Dubnyk as a DFS goalie or betting on the Wild to win? I think there is strong enough logic that you could argue to co-mingle in this situation, too.

    All that said, taking such positions adds risk to your filing. Are you willing to endure an audit and defend these positions? Most accountants and their clients are quite risk-averse and take a very conservative stance, which is absolutely the correct posture. I don’t think that the case to co-mingle is altogether flimsy, though.

    I want to close by saying that the DFS Accounting guys seem very good, and I agree that their position on this and other DFS tax issues are the “most correct” answers. They also live this life every day whereas I’m mostly retired from the tax prep game at this point and certainly want no part of new clients. I simply wanted to say that my thinking has evolved on this topic.

    Disclaimer: I’m a CPA, but don’t take any tax advice from any online forum. The above is my opinion, not law. Always seek the advice of a professional. After all, it’s YOUR tax return and you owe it to yourself to understand what’s happening in it.

  • DFSAccounting

    @maxthecat said...

    The “full transaction history” excel document that DK sends you for Sportsbook upon request has individual rows for each bet and individual rows for each payout with separate transaction IDs. Basically, one cannot tell which bet ended in a loss or ended in a win. Does this matter? Would each bet/wager be considered a gambling “loss” regardless if that bet turned out to profitable or not, while all total winnings would be reported?

    For example, If I made only one bet the entire year and a $4,000 bet resulted in me winning $4,500 (a $500 profit), would I say my “winnings” were $4,500 and my “losses” were $4,000? If I cannot report the bet/wager itself as a loss, then I would be taxed way more than what I profited. Any understanding of this would be very helpful.

    Great question. This depends on how DK plans to report the transactions. We reached out to our contacts at DK and will provide an update as soon as we receive a response.

    Thank you!

  • Aidenmiller444

    Hi everyone. I apologize in advance for the long and/or confusing question. I am a college student here, completely new to taxes on a large scale, and with experience in tax returns at all only from the last few years. (all of which were less than about $13,000 or so in total income; just summer jobs + a little bit of dfs income). So please bear with me here if my question is completely ridiculous.

    I have no idea if the answer is just “absolutely not”, but is there any way in which someone can report dfs earnings from the 2019 calendar year in 2018? In other words, can someone pay taxes earlier than they need to? You might be asking, why the hell would anyone ever do this, however, I am just curious about how my marginal tax rate would potentially affect my after tax dfs winnings.

    I will be getting out of college this spring, of 2019, and starting a new job, where I will actually start earning non-dfs income.

    Say I had a net income of about $65,000 in the 2019 calender year, of which $31,000 or so was from gambling winnings. Also, say a net income of $20,000 in the 2018 calender year, of which about $14,000 of that income was from gambling winnings. Would the marginal tax rate on those those winnings be higher if I paid the 2019 winnings in 2019? I know the tax rate between brackets are only about 2 or 3%, but that’s potentially still like $1,500+ difference between the two brackets. Obviously any 2019 dfs winnings totals aren’t final, but I am just trying to figure out if there is any way I can file and/or pay taxes on my 2019 earnings early – in the 2018 tax year.
    The figures I posted earlier are the winning currently from 2019, so they weren’t just some sort of hypothetical winnings that I would blindly be paying for now, without actually having that figure currently. I hope what I’m asking isn’t too confusing of a question. I don’t know if this is even a thing that you can do, but I thought I might as well try and ask.

    Thank you for the help.

  • DFSAccounting

    @DFSAccounting said...

    Great question. This depends on how DK plans to report the transactions. We reached out to our contacts at DK and will provide an update as soon as we receive a response.

    Thank you!

    In follow up to this question, we had a call with DK. They suggested reaching out to sportsbook@draftkings.com and they will be able to review your individual account/situation and provide more clear guidance.

    Thank you

  • Pats7914

    • 86

      RG Overall Ranking

    • Ranked #64

      RG Tiered Ranking

    I dont really understand why players arent able to deduct losses from one site against 1099 wins on another site, yet individual sites are still able to issue net 1099s..

    I get the law changes and I get the sites are reporting net winning 1099s, but if losses arent deductible for hobby income why isnt the right way to do it for the sites to issue 1099s with gross winnings? This has always my biggest fear with DFS as it would kill the game and result in massive tax liabilities for large players, but I havent totally understood why netting 1099s are allowed (or how the hell yahoo decides that paypal or whoever paid you should be the ones issuing 1099s for them, which is what they responded when I asked about it). I really dont understand how the tax law would allow netting within one site, but not across sites. Seems to me like it should be either net across sites or the tax liability should be on gross winnings, not net, regardless of what the DK 1099 says.

    Unless losses from losing sites were being previously being deducted as an expense rather than a netting of income , but that seems like it wouldnt stand up to scrutiny.

  • TheWings977

    Quick question on Draftkings,

    If I had winnings of around $700 and losses of around $800, will I be receiving a 1099? I know the losses exceed the winnings but i’m not sure exactly how strict the rules are on just wins. Please advise. I’m not filing a schedule c or anything as this is just something I do every now and then.

  • d735123

    @Pats7914 said...

    I dont really understand why players arent able to deduct losses from one site against 1099 wins on another site, yet individual sites are still able to issue net 1099s..

    I get the law changes and I get the sites are reporting net winning 1099s, but if losses arent deductible for hobby income why isnt the right way to do it for the sites to issue 1099s with gross winnings? This has always my biggest fear with DFS as it would kill the game and result in massive tax liabilities for large players, but I havent totally understood why netting 1099s are allowed (or how the hell yahoo decides that paypal or whoever paid you should be the ones issuing 1099s for them, which is what they responded when I asked about it). I really dont understand how the tax law would allow netting within one site, but not across sites. Seems to me like it should be either net across sites or the tax liability should be on gross winnings, not net, regardless of what the DK 1099 says.

    Unless losses from losing sites were being previously being deducted as an expense rather than a netting of income , but that seems like it wouldnt stand up to scrutiny.

    Excellent point. Where does the idea that we can’t net across sites come from? Is it because you only have a 1099 for gains and not losses? But then getting 1099 or not is irrelevant when it comes to sites like Yahoo that don’t give you one either way and you’re supposed to calculate your net yourself and report. If we’re supposed to net within a site, what says we can’t net across sites?

  • DaBum2012

    • 2018 FanDuel WFBC Finalist

    Okeee doke! Folk, I just graduated from CSU in accounting and Supply Chain Management and this is how you do your taxes. They’ll give you the 1099 which in most cases, only post WINNINGS. You’re going to have to itemize your deductions (losses) on your schedule A, but it cannot be more than the amount you won. For your winnings, you got to use a schedule 1. FanDuel is reissuing corrected tax forms on the 8th of February for all of us that had messed up tax forms including myself. I got an email about that corrected form a few nights ago,

  • rotokevin

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

    • 2014 FanDuel WFBC Finalist

    @d735123 said...

    Excellent point. Where does the idea that we can’t net across sites come from? Is it because you only have a 1099 for gains and not losses? But then getting 1099 or not is irrelevant when it comes to sites like Yahoo that don’t give you one either way and you’re supposed to calculate your net yourself and report. If we’re supposed to net within a site, what says we can’t net across sites?

    As with many parts of the tax code, there’s what makes logical sense and there’s the law.

    What makes the most sense would be to simply net all of the activity and pay tax on the amount you actually profited from an activity.

    What the law says is that you must report all income and your ability to deduct related expenses will vary.

    The 100%, most correct way to file DFS income would be to report gross winnings less the entry fees paid on WINNING ENTRIES ONLY. All losing entry fees would be excluded from the gross income calculation, but may be deductible depending on how your filed. The net result is the same, but general guidance on any income stream is to report the gross earnings and present associated expenses for deductibility.

    Why are sites allowed to issue net 1099s? Because that was what they thought was right in 2009 when they first issued 1099s and they’ve either had discussions with the IRS privately to ascertain that such reporting is acceptable or the IRS hasn’t reviewed or challenged the forms.

    I’d also like to add that the IRS does a lot of 1:1 reviews on topics with taxpayers (and companies) where they issue what are called Private Letter Rulings that provide specific guidance to that one taxpayer. They can provide exceptions to general tax rules for situations with unique circumstances. These are published in the public domain and searchable databases of them exist. I’m not sure if FanDuel or DraftKings ever took such a step, but that can be a way that something that seems askew with the law can be an acceptable practice.

  • rotokevin

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

    • 2014 FanDuel WFBC Finalist

    @DaBum2012 said...

    Okeee doke! Folk, I just graduated from CSU in accounting and Supply Chain Management and this is how you do your taxes. They’ll give you the 1099 which in most cases, only post WINNINGS. You’re going to have to itemize your deductions (losses) on your schedule A, but it cannot be more than the amount you won. For your winnings, you got to use a schedule 1. FanDuel is reissuing corrected tax forms on the 8th of February for all of us that had messed up tax forms including myself. I got an email about that corrected form a few nights ago,

    This is mostly incorrect. Please refer to the many helpful articles across the site and other posts in this thread.

  • d735123

    @rotokevin said...

    As with many parts of the tax code, there’s what makes logical sense and there’s the law.

    What makes the most sense would be to simply net all of the activity and pay tax on the amount you actually profited from an activity.

    What the law says is that you must report all income and your ability to deduct related expenses will vary.

    The 100%, most correct way to file DFS income would be to report gross winnings less the entry fees paid on WINNING ENTRIES ONLY. All losing entry fees would be excluded from the gross income calculation, but may be deductible depending on how your filed. The net result is the same, but general guidance on any income stream is to report the gross earnings and present associated expenses for deductibility.

    Why are sites allowed to issue net 1099s? Because that was what they thought was right in 2009 when they first issued 1099s and they’ve either had discussions with the IRS privately to ascertain that such reporting is acceptable or the IRS hasn’t reviewed or challenged the forms.

    I’d also like to add that the IRS does a lot of 1:1 reviews on topics with taxpayers (and companies) where they issue what are called Private Letter Rulings that provide specific guidance to that one taxpayer. They can provide exceptions to general tax rules for situations with unique circumstances. These are published in the public domain and searchable databases of them exist. I’m not sure if FanDuel or DraftKings ever took such a step, but that can be a way that something that seems askew with the law can be an acceptable practice.

    Thank you very much. This all makes sense now.

    That the most correct way and current accepted practice are two different things makes me a bit nervous. It seems that if the most correct way were ever enforced, DFS would no longer exist.

  • Stewburtx8

    • 2012 FanDuel WFBC Finalist

    @Pats7914 said...

    why isnt the right way to do it for the sites to issue 1099s with gross winnings?

    I’ve always thought it probably is the correct way for sites to issue 1099’s with gross winnings.

    But as you alluded to, it’s better if we just let things be and hope the IRS has either signed off on the current practice or fail to review it, because reporting gross winnings would be VERY VERY bad for the players.

  • DFSAccounting

    @TheWings977 said...

    Quick question on Draftkings,

    If I had winnings of around $700 and losses of around $800, will I be receiving a 1099? I know the losses exceed the winnings but i’m not sure exactly how strict the rules are on just wins. Please advise. I’m not filing a schedule c or anything as this is just something I do every now and then.

    You should not receive a 1099

  • DFSAccounting

    @DaBum2012 said...

    Okeee doke! Folk, I just graduated from CSU in accounting and Supply Chain Management and this is how you do your taxes. They’ll give you the 1099 which in most cases, only post WINNINGS. You’re going to have to itemize your deductions (losses) on your schedule A, but it cannot be more than the amount you won. For your winnings, you got to use a schedule 1. FanDuel is reissuing corrected tax forms on the 8th of February for all of us that had messed up tax forms including myself. I got an email about that corrected form a few nights ago,

    This is inaccurate. The TCJA repealed the unreimbursed business expenses on Sch. A. Losses cannot offset winnings across multiple sites unless you file as a business (Sch. C)

  • DFSAccounting

    @rotokevin said...

    This is mostly incorrect. Please refer to the many helpful articles across the site and other posts in this thread.

    Yes. You are correct. The Sch. A point is incorrect. That is old tax law.

  • VinnyT87

    • 781

      RG Overall Ranking

    If my poker losses exceed my daily fantasy sports winnings, but I am profitable in DFS, can I deduct poker losses up to my DFS winnings? Or do I keep them separate?

  • leib0039

    Hey guys, I had a solid year on Yahoo fantasy and was expecting a 1099 form like other sites. I was told they don’t do that and its through Paypal and didn’t get much else. So I have been checking paypal under the tax docs and nothing. So does anyone know if they aren’t out yet or do I need to reach out to someone at paypal? Feeling very lost and any help or experience would be great! thanks

  • mambaland

    @leib0039 said...

    Hey guys, I had a solid year on Yahoo fantasy and was expecting a 1099 form like other sites. I was told they don’t do that and its through Paypal and didn’t get much else. So I have been checking paypal under the tax docs and nothing. So does anyone know if they aren’t out yet or do I need to reach out to someone at paypal? Feeling very lost and any help or experience would be great! thanks

    they may not 1099 paypal rules are not the same

  • mambaland

    @DFSAccounting said...

    Yes. You are correct. The Sch. A point is incorrect. That is old tax law.

    and that is from a guy with a degree…i trust the degens more

  • d735123

    @leib0039 said...

    Hey guys, I had a solid year on Yahoo fantasy and was expecting a 1099 form like other sites. I was told they don’t do that and its through Paypal and didn’t get much else. So I have been checking paypal under the tax docs and nothing. So does anyone know if they aren’t out yet or do I need to reach out to someone at paypal? Feeling very lost and any help or experience would be great! thanks

    You will only get a 1099 from Paypal if you received at least 200 payments. So you’re probably not getting one. Yahoo leaves it to you to report your income. And to figure out exactly what to report.

  • ctrentjr

    I’m new to DFS; do I receive a 1099 only if my net winnings on the site for the year are greater than $600, and is my tax liability only based on the net income from that site?

  • Dfrenkel

    Hi, I had some beginners luck and won a $9,500 prize. I had a few minor losses after, but withdrew $9,000 from my account. Prior to this, I had submitted my W9. Should I be expecting some documentation in the mail or do I need to self declare this income? I hold a active security clearance and try and keep my taxes above board.

    Thanks

  • Mwward21

    In Yahoo were you do not receive a 1099 do you calculate what to report on your tax return by taking your total winnings subtracted by all your entry fees (including losses)?

    Thanks

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