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  • PJGuin23

    DFS Tax Guru

    As many or some of you may know, I have a tax practice specializing in Daily Fantasy Sports participants. My site is Daily Fantasy Taxes, and I can make your DFS filing simple & easy if you are looking for help. I have a partnership with RotoGrinders to offer DFS Tax Services to the RG Community. I am a CPA and have DFS clients along with other industries such as Horse Racing (DFS similarities on Hobby-Business), Construction and Services. I met some of you in New York last November and had a blast! I was told all tax related posts would be kept to this thread. Alternatively you can read my Tax article here My rates are reasonable and I have e-filing. We can work over the phone or by e-mail, whichever you prefer.

    Note: I have a fax and a Secure Web Portal to exchange files if needed.

    Last piece of advice, wait to file your return if you have FanDuel or DraftKings income.

    So without further adieu, let’s get the DFS Tax General Q&A going……..ask away!

    PJGuin23’s Disclaimer: I am a Certified Public Accountant licensed by the Commonwealth of Pennsylvania. Any information provided is for informational purposes only and is not intended to substitute for obtaining accounting, tax, or financial advice from a professional accountant, CPA, lawyer or other competent financial professional. Presentation of information I provide on RotoGrinders does not constitute an accountant-client relationship. Such relationship can be established by engaging in professional services privately with PJGuin23. RotoGrinders readers are advised not to act upon information I provide without seeking the service of a professional accountant well versed in your particular situation.

    • Link
    • Last Updated 4 years ago
  • rotokevin

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

    • 2014 FanDuel WFBC Finalist

    Hey gang, I just wanted to drop in and let you know that you will be in good hands with Patrick. I’ve gotten to know him pretty well over the past year and he and I share very similar philosophies when it comes to tax preparation, specifically as it relates to the intricacies we face as DFS players.

    I love working on tax issues with the DFS community, but my day job has increased dramatically in terms of my responsibilities and time commitment. As a result, I’m not able to take on new clients this year. Cam and the RG team have made a great selection in choosing to partner with Patrick for this season.

  • ColonialRampage

    Okay, I’ll jump in. Is there a $ amount at which or a ratio to other income at which classifying DFS profit as hobby income becomes a significant audit risk? I have a sole propietorship business, and while I don’t treat my DFS play as a business I do spend a fair bit of time on it and turn a profit. I’d really rather not have to pay self-employment taxes on DFS income.

    Thanks.

  • PJGuin23

    DFS Tax Guru

    I’d have to take a look at each of the 9 factors that pertain to your situation. On my website I have a section called Casual vs. Pro and I will soon have an RG article on how it pertains to DFS. I’d have to look at your numbers to determine the best course of action for you. Giving a blanket ratio would be hard to say.

    Sometimes that threshold can be surprisingly small as in Rev Ruling 77-356 but again, nothing is set in stone here.

  • EC4THREE10

    What’s your consultation fee? Couldn’t find it on your page..

  • tjabchs6

    how would the IRS or my state know how much I’m really supposed to pay in taxes? here’s my example:

    last year, i withdrew a couple grand (almost all profit) from my yahoo account into my paypal account. also, i withdrew only around $100 from a different, small dfs site into the same account. that’s it.

    when i received my 1099 from paypal, it showed the amounts withdrawn into my account – making it look like i have to pay taxes on them or something. however, i’m aware that you have to pay taxes only on profit of $600 or more if it is only from the same site (or is it from all sites combined?).

    yahoo states that it is our own responsibility to report earnings/profit for taxes. obviously, in my case, taxes i would have to pay do not match up with the earnings on the 1099 paypal sent. wouldn’t the my state/the IRS question me then? i live in wisconsin.

  • PJGuin23

    DFS Tax Guru

    @tjabchs6 said...

    how would the IRS or my state know how much I’m really supposed to pay in taxes? here’s my example:

    last year, i withdrew a couple grand (almost all profit) from my yahoo account into my paypal account. also, i withdrew only around $100 from a different, small dfs site into the same account. that’s it.

    when i received my 1099 from paypal, it showed the amounts withdrawn into my account – making it look like i have to pay taxes on them or something. however, i’m aware that you have to pay taxes only on profit of $600 or more if it is only from the same site (or is it from all sites combined?).

    yahoo states that it is our own responsibility to report earnings/profit for taxes. obviously, in my case, taxes i would have to pay do not match up with the earnings on the 1099 paypal sent. wouldn’t the my state/the IRS question me then? i live in wisconsin.

    You must report net earnings even $1. That being said with Yahoo, they are not issuing 1099-MISC and punting issuance of 3rd party reporting to PayPal. The IRS and state would be looking for something even though the 1099-K is for withdrawals. You would be responsible for calculating true income.

  • PJGuin23

    DFS Tax Guru

    Looks like DK will be sending 1099s in 1-2 weeks. Get ready folks!

  • falldown

    I am a very casual player (played like 12 weeks of NFL only, less than $200 in entries each week) who hit a good score on Yahoo this year and withdrew through Paypal. Since I am so casual, i.e. less than 200 transactions, I have not, and do not expect to receive any sort of 1099 from paypal. How do I claim this income? I have already made an estimated tax payment.

    Hobby income even though the amount is significant? In my case, it is more like a lottery win than a side job.

  • PJGuin23

    DFS Tax Guru

    @falldown said...

    I am a very casual player (played like 12 weeks of NFL only, less than $200 in entries each week) who hit a good score on Yahoo this year and withdrew through Paypal. Since I am so casual, i.e. less than 200 transactions, I have not, and do not expect to receive any sort of 1099 from paypal. How do I claim this income? I have already made an estimated tax payment.

    Hobby income even though the amount is significant? In my case, it is more like a lottery win than a side job.

    I’d have to look at your activity log (CSV file) to make a Hobby-Business judgement call, your income and DFS income (how big the ‘score’ is) related to the rest of your income. Reportable income would be based off your net winnings

  • tvsfrink

    FH offers a subscription service – pay $X per month, get $X + $Y in contest entries. So to keep it simple, if I pay $10 (which does not go into my account balance, it’s a direct payment to FH), and I win a total of $18 from the contest entries I get in return…is my taxable profit $18 or $8?

    I know you can subtract deposits from winnings to determine taxable profit, but this seems a little different.

  • biggameaims

    • 2016 DraftKings FBBWC Finalist

    • 2015 FanDuel WFFC Finalist

    Stupid Question…..
    What are your options if you don’t have the money to pay your taxes?

    Payment plan through IRS?
    Interest?
    Penalties?

  • PJGuin23

    DFS Tax Guru

    @tvsfrink said...

    FH offers a subscription service – pay $X per month, get $X + $Y in contest entries. So to keep it simple, if I pay $10 (which does not go into my account balance, it’s a direct payment to FH), and I win a total of $18 from the contest entries I get in return…is my taxable profit $18 or $8?

    I know you can subtract deposits from winnings to determine taxable profit, but this seems a little different.

    Should be $8 but 1099 could say different.

  • PJGuin23

    DFS Tax Guru

    @biggameaims said...

    Stupid Question…..
    What are your options if you don’t have the money to pay your taxes?

    Payment plan through IRS?
    Interest?
    Penalties?

    All the above plus others. Now you get an IA (Form 9465), there will be interest and Penalties but a reduced amount. There’s also Currently not Collectible if you’re broke but need a financial statement. That would need to go to a Tax Resolution Specialist.

  • Stewburtx8

    • 2012 FanDuel WFBC Finalist

    @ColonialRampage said...

    Okay, I’ll jump in. Is there a $ amount at which or a ratio to other income at which classifying DFS profit as hobby income becomes a significant audit risk? I have a sole propietorship business, and while I don’t treat my DFS play as a business I do spend a fair bit of time on it and turn a profit. I’d really rather not have to pay self-employment taxes on DFS income.

    Thanks.

    First let me just say congrats to PJGuin on the partnership with RG this year. Both you and RotoKevin have always been tremendous answering tax questions for the RG community, and also having personal side PM conversations as it relates to tax (a personal interest of mine as well even though it’s just something I’ve done on the side for the last 8+ years). This community remains in good hands when it comes to DFS tax issues.

    The above question is a GREAT one and one I have continued to struggle with. For reference, I HAVE been audited on this exact issue. My very first year playing DFS (2012) I lucked into qualifying for the DFBC and also won the NFL Bomb one week (it was a lot smaller back then). So I had a pretty solid profit that season (might of been about 15-20% of our household income that year). I felt I still had a strong argument that DFS was a hobby and I had simply “won a prize” and I put this income on line 21 of the 1040. 2 years later I get a letter from the IRS stating I owe them a couple thousand dollars for self-employment tax. They wanted me to file this income as a business on Schedule C. Well I wrote them a letter stating my disagreement and made all the points I could about why DFS was simply a hobby. After several months, I got a letter stating I did not owe them anything.

    Fast forward to 2015 taxes and I have now shown a profit for 4 straight years. Nothing significant. 2013 and 2014 might of amounted to 2-3% of our household income. This year maybe 6-8%. But I still feel strongly that DFS is still a hobby/entertainment for me. Yes, I spend waay too much time on it but that is how I am with hobbies I enjoy. Hell, I start watching tv series, get hooked, and binge watch the hell out of them. So if I am going to play DFS, I am going to put time into and try to make a profit. But if it went away tomorrow, I would be very upset, but financially it would not change anything for me. But if I go through the IRS checklist for hobby vs. business, I feel I can check off a few more areas that would lean towards filing my DFS play as a business. It’s been an internal debate but I still think I am going to file the income on line 21 of the 1040. I don’t envy PJGuin or any of you who are in a similar situation trying to make this determination (and likely have higher income from DFS). Looking forward to your article on this Patrick.

  • jdelsas

    Can you deduct subscriptions paid throughout the year (e.g. RG, FantasyLabs, PFF, etc.) related to DFS to lower your net tax amount owed?

  • brink7

    Just so I understand how this works theoretically, a crazy outlandish example:

    Let’s say someone only played on a site for one week all year, on July in baseball. No other DFS activity at all.

    Through a promotion they received a free entry in an imaginary mega contest at the beginning of the week. They won first place and 30k in that contest.

    In the ensuing week, they entered that 30k in multiple high dollar contests and lost every cent of it to drive their bankroll down to zero by the end of the week.

    They never withdrew anything at the end of the week as they drained their bankroll to zero in that week. Started with zero, ended with zero.

    So in this case, even though we are dealing with a very high dollar amount here, if the rule is that they pay taxes on winnings MINUS contest entry fees then theoretically they would owe exactly zero dollars on taxes as their DFS income would be zero.

    Is this correct?

  • shocae

    • 227

      RG Overall Ranking

    • 2018 DraftKings FBBWC Finalist

    • 2017 FanDuel WFFC Finalist

    Do you have any advice for people filing as a pro for the first time? What are the pitfalls, if any, of doing so?

  • Unico10

    • 641

      RG Overall Ranking

    What if you have net winnings on one site and a net loss in another?

  • jriprap24

    Curious here, are you taxed on your total, gross winnings or on your net winnings? Because while I’ve won (~$1,000), I’ve probably invested about $400, giving me a gross of around $600. Thanks in advance for the answer!

  • biggameaims

    • 2016 DraftKings FBBWC Finalist

    • 2015 FanDuel WFFC Finalist

    Does enrolling into these types of scenarios flag you for future audits or some kind of IRS “watchlist”?

    Your answers are much appreciated PJ, thanks again.

  • PJGuin23

    DFS Tax Guru

    @jdelsas said...

    Can you deduct subscriptions paid throughout the year (e.g. RG, FantasyLabs, PFF, etc.) related to DFS to lower your net tax amount owed?

    Depends on how you file and what your income levels are. As a business, yes. Ad a hobby, maybe if they’re over 2% of AGI.

  • PJGuin23

    DFS Tax Guru

    @brink7 said...

    Just so I understand how this works theoretically, a crazy outlandish example:

    Let’s say someone only played on a site for one week all year, on July in baseball. No other DFS activity at all.

    Through a promotion they received a free entry in an imaginary mega contest at the beginning of the week. They won first place and 30k in that contest.

    In the ensuing week, they entered that 30k in multiple high dollar contests and lost every cent of it to drive their bankroll down to zero by the end of the week.

    They never withdrew anything at the end of the week as they drained their bankroll to zero in that week. Started with zero, ended with zero.

    So in this case, even though we are dealing with a very high dollar amount here, if the rule is that they pay taxes on winnings MINUS contest entry fees then theoretically they would owe exactly zero dollars on taxes as their DFS income would be zero.

    Is this correct?

    It would be correct in that scenario.

  • PJGuin23

    DFS Tax Guru

    @shocae said...

    Do you have any advice for people filing as a pro for the first time? What are the pitfalls, if any, of doing so?

    Be sure you have good records such as CSV transaction history files and subscriptions. Would help your case if you want to go that route.

    Pitfall- Self Employment Tax but possibly offset with expense deductions.

  • PJGuin23

    DFS Tax Guru

    @Unico10 said...

    What if you have net winnings on one site and a net loss in another?

    Depends on how you file. You can’t just Net the two and place it is Gross Income.

  • kbarnhill7523

    • 412

      RG Overall Ranking

    • Ranked #74

      RG Tiered Ranking

    • 2018 FanDuel WFFC Finalist

    • x2

      2017 FanDuel WFBBC Finalist

    So I work full-time, have an actual side business that I run that is based on my full-time job, and this year I also made a large amount playing DFS.

    Seeing that I work full-time AND have a side business there is no way I have file Schedule C, correct? Or is it based on portion of income over a certain threshold? My situation is very similar to Stew’s so I was thinking of “line 21-ing” it and calling it a day.

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