Published on: August 19, 2016 Last modified: August 20, 2019

As Fantasy Football Starts Back Up, Track Your Losses

Table of Contents
    Add a header to begin generating the table of contents

    On behalf of Silver Tax Group posted in Back Taxes on Friday, August 19, 2016.

    Fantasy sports football.jpg

    From the small Yahoo league to a FanDuel and DraftKings league with a significant payout, it is almost fantasy football draft day. It’s probably not your first thought, but you could owe a big tax bill next year if you win big.

    Last year, FanDuel and DraftKings spent a reported $500 million on advertising. The ads make it appear that winning is almost certain. The ads caught the attention of the attorney generals in several states who started to investigate whether the outfits needed permission from gambling authorities to operate. These investigations caused the companies to stop offering services to New York and Nevada residents.

    How to report winnings?

    If you win $100 in a local pool with buddies from high school or $30,000 on the FanDuel website this is income. You need to report it to the IRS or you could open yourself to an audit.

    In March, we wrote a guide with some practical answers about reporting winnings and what to do if the IRS starts asking questions.

    The more interesting part is whether you can offset your losses through a deduction.

    Can you offset losses as business expenses?

    To claim a business deduction, you need to play fantasy sports basically as your profession. A casual participant would not likely be able to use this deduction to offset losses.

    Gambling or not? 

    Could you offset the amount you paid as gambling losses? This one is not as easy to answer. The state Attorney Generals have investigated just this question looking at whether fantasy sports require skill or are games of chance (i.e. gambling). This supports an argument that these games are in fact gambling.

    If it cost you $10,000 to win $30,000, it is worthwhile to look into whether you could offset what you spent as gambling losses. Then you would only need to pay tax on $20,000.

    But gambling losses are highly audited. You need to have evidence to support your deduction, so keep track of what you paid in. If the IRS disallows your deduction, it could send a notice claiming you owe more taxes along with an assessment of interest and penalties. In this case, speak with a skilled tax attorney to resolve the matter as quickly as possible.

    Share The Knowledge! 😊

    Share on linkedin
    LinkedIn
    Share on twitter
    Twitter
    Share on facebook
    Facebook
    Share on reddit
    Reddit
    Share on whatsapp
    WhatsApp
    Share on email
    Email
    Share on print
    Print

    Get More Knowledge

    Ready to secure your financial future? Subscribe Today For Tax Knowledge Tomorrow

    JOIN 2,000+ OTHERS. YES, IT’S COMPLETELY FREE. ZERO SPAM, UNSUBSCRIBE AT ANY TIME.

    How Can we help?

    Don’t worry, our consultations are 100% Confidential & 100% Free