Total daily fantasy reporting
Maybe in 2014 you had a great year that would help you get a good profit from FanDuel, DraftKings or any other popular site of Daily Fantasy Sports. You may have lost your wounds on some sites. But later January or early February will come, you will receive a 1099-MISC form from one of these sites, if you kicked your ass and received Net Earners more than $ 600, and it will be shown in Box 3. You can also be sent W-9 Form requesting your SSN and home address. I would advise you to comply, as fines are $ 50 plus a 28% retention. As a CPA, I advise you to report a net profit of $ 1, but something over $ 600 is something that will be reported to the IRS. Now, how are “Net winnings” on most of these sites calculated for 2014? Just take Withdrawals after one year, then add the completion balance as of 12/31/2014, then deduct the deposits for the year and subtract the initial balance as of 1/2012. This is a fair and accurate way to report your income to the IRS. Has the site calculated it for you? Usually, they do and should. But the amounts are not always correct, and you, both the participant and the American taxpayer, should check to see if this is wrong.
So what does this mean to you? For most people, your net winnings will be listed on line 21 of your 1040 tax form as other income. But what if you have any losses that we talked about above? For the player “Casual”, where this is a hobby, losses and other expenses, up to the amount on line 21, will be indicated in the A-Miscellaneous Deductions schedule by 2% AGI Floor. How the theoretical example will work:
Wage income: $ 60,000
FanDuel wins: $ 5,000
Losses from projects: (US $ 3,000)
Other deductible expenses (study, Internet share, DirecTV): ($ 1000)
As a “casual” player, this would mean that your AGI is $ 65,000, and 2% of them are $ 1,300, so only $ 2,700 ($ 4,000–1,300) would be deducted if you billed for deducting the amount as opposed to taking a standard deduction. For some of you who are starting out in your career, still in college, not owning a home, or even later in life with a mortgage payment, it is almost always wise to take standard deduction. Thus, your losses and expenses will not bring you benefit. So what other alternative? Filing your daily fantasy sports activities (DFS) on a C schedule. Using the example, you must submit your DFS activity in the amount of US $ 5,000 Gross income and expenses in the amount of US $ 4,000 for a net profit of US $ 1,000. This, together with your salary, will have your AGI in the amount of $ 61,000 instead of $ 65,000. Although your AGI will be lower, you will pay self-service taxes. Other factors to consider are general AGI, other activities, applicable AGI sensitive loans, and a dreaded alternative minimum tax. So much to consider if you do them yourself!
Rules of the game against the hobby
Now can you just send to schedule C if you want? Well, for IRC 183, you have to manage your daily activities as a Fantasy business. The IRS uses the 9 factors below to determine if a DFS taxpayer works for a business or hobby:
1. The procedure for the implementation of the taxpayer activities. Do you finish accurate books? Do you have a separate bank account? Were there records used to improve performance?
2. Examination of the taxpayer or his advisers. Has the taxpayer conducted a business case study? Did they consult with experts? For DFS, subscribing to Rotogrinders incentives or DirecTV, there will be evidence.
3. Does the time and effort on activities to profit? For DFS, does this mean that you play a few random lineups or are you “Grind?”?
4. Did you receive profit in similar activities in the past?
5. The history of income or loss from activities. If there are losses, are they related to circumstances beyond your control, or did they occur at the initial stage of the business?
6. Does the profit for several years (3 out of 5 including in the current year)?
7. Is the taxpayer and taxpayer financially related to DFS or does the taxpayer have other sources of income? Many DFS members are employees, some are quite high, but this does not hinder the status of Schedule C.
8. Is there an expectation of asset growth for any assets involved in business? This does not apply to DFS at all.
9. Does leasing lack personal elements of pleasure or relaxation? If the activity has large personal elements, this is a hobby. Well, for DFS, there are ABOUT! This would be more applicable to the racing industry.
The above factors are not complete in determining how you should register. Regardless of whether to record as a random “Hobby” or “Grinding tool”, no stone is put. And Daily Fantasy is a new industry. One of the industries in which I worked a lot in the past is horse racing. As a rule, very few taxpayers are profitable, and the IRS often tries to reclassify horse activity as a “hobby” rather than a “business”, often eliminating large losses from other incomes. Daily fantasy, as I have seen in some forums, an exact opportunity can occur for profitable Grinders, especially with the IRS wanting to classify a DFS member as a business, not as a Winner Winner. The IRS has the advantages of some juicy self-service taxes if they are classified as a business, if they are profitable, and not a prize. Simply placing the 1099-MISC revenue on line 21 of your 1040 may not work for sure.
For SE or not for SE, is this a question?
Box 3 of the 1099-MISC, unlike Box 7. Nonemployee Compensation, assumes that the DFS winnings are a Prize. However, the IRS has challenged this not only for DFS, but also in other activities in the past. The IRS Reule rule 58-112 describes a business as “regular, frequent, or continuous.” In one case, in accordance with the Government of 77-356 by income, the congressman was considered a business for making 10 knitting needles per year for $ 1,500 and showed "degree of repeatability, continuity and availability." On the contrary, the government decree 55-431 states that "as a rule, a person who accepts a random invitation to speak does not engage in trade or business." So, how does this translate for DFS? It depends on the frequency of your actions, and only a tax specialist can guide you if necessary. Not everything is bad that you have to file as a business. If you shred it, you will certainly use Internet access, possibly a DirecTV package, paying for research, such as Rotogrinders incentives and other items, to ensure DFS shredding. Now it is much easier than a business to pay for these items in full or in part! This self-employment tax may not look so bad, and it could be destroyed with a better price. Plus, as I said, lower AGI will certainly help you in other areas, such as Credits, AMT and Social Security. You have many options here, but, as always, look for a professional to do the right thing.
State and local tax issues
I have to be honest here, I am most familiar with the region in the Middle Atlantic. But local problems and how you handle your winnings, no matter where you live, and expenses can have a HUGE impact on your tax liability. Did you know that in Pennsylvania and DFS taxpayers in New Jersey it is better to apply for business in the surrounding states of New York, Maryland and Delaware because of problems with subtraction in DFS?
There are local problems in Philadelphia, New York, and various municipalities throughout Pennsylvania and Ohio. As a resident of Philadelphia, you may be subject to income tax (SIT) or BIRT (Business Privilege) and NPT tax returns. Some exceptions apply. This could damage very profitable choppers in the city of Brotherly Love. In New York, there is a local tax tied to state income tax. However, DFS tax payers who apply as a business must file the Unincorporated Business Tax (UBT) and possibly the MCTMT form if you live in New York and surrounding areas of New York.
The most common software for self-taxation is not able to provide local details that may be required to be fully taxable. It is especially recommended to look for a tax specialist in these cases, and what I have written so far is only scratching the surface.
Where to go from here
Simply placing the number obtained from your 1099-MISC in your H & R Block or TurboTax program for daily fiscal purposes may not be the wisest choice. These programs are very bulky with business income and local taxes. You need to know how often you participate, how much you earn and keep good records of your activities. I would recommend downloading your .CSV file every month or no more than 3 months from your site “Daily Fantasy” and providing this to your tax professional so they can determine the best course of action for your situation. If you are not sure how to report your daily victories in Fantasy, ask the tax specialist if he is a registered agent or CPA. As shown with this type of income, the IRS and other tax authorities may use different ways of interpreting their winnings.
