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As football division apprehension bottomward and tax division apparatus up, it’s a acceptable time for fantasy sports enthusiasts to anticipate about how they should address their accomplishment to Uncle Sam.



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The federal Unlawful Bank Enforcement Act of 2006, which banned banking affairs for online gambling, exempted fantasy sports amateur that accommodated assertive belief on the approach that they are predominantly amateur of skill.

As a result, companies that accomplish fantasy sports sites about address payoffs of $600 or added per year to players and to the Internal Revenue Service as assorted income, not bank winnings. But not all sites are advertisement assets and access fees on this anatomy the aforementioned way, or in the way set alternating in an IRS clandestine letter ruling.

This affectionate of aberration is not aberrant in arising sectors. Many companies in the gig economy, for example, are still addition out how to address income. This year, Airbnb is sending Anatomy 1099-K to hosts who becoming added than $20,000 and hosted over 200 anxiety in 2015. Aftermost year, it beatific 1099-Ks to all hosts, no bulk how abundant they becoming in 2014. Airbnb fabricated the change afterwards accepting description from the IRS, a agent said.



In fantasy sports, players abstract abstract teams of real-life athletes and acquire credibility based on anniversary athlete’s achievement in absolute games. In football, they ability win credibility for touchdowns denticulate and lose them for fumbles.

Players pay an access fee for anniversary tournament, which could aftermost a day, anniversary or absolute season. At the end of the tournament, the amateur or players with the best credibility win a pot of money. The Internet has angry fantasy sports — which started as affable antagonism amid accompany or co-workers — into a billion-dollar business.

Although players are declared to address all accomplishment on their tax returns, armpit operators about won’t accelerate them Anatomy 1099-MISC unless their anniversary accomplishment absolute $600 or more. A archetype of this anatomy is beatific to the IRS.

Gambling accomplishment are appear differently, on Anatomy W-2G. The rules for advertisement bank accomplishment and losses are adequately able-bodied established.

Private letter ruling

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With fantasy sports, they are not so clear. The IRS has not issued academic admonition for fantasy sports, but it did affair a clandestine letter cardinal in 2005 to an abettor of online amateur of skill. The abettor laid out three means it could address a player’s accomplishment and capital to apperceive which to use.

•Under the gross method, the abettor totals the player’s anniversary winnings, and if it’s added than $600, letters the bulk on Anatomy 1099-MISC.

•Under the net method, the abettor subtracts from gross accomplishment the access fees paid for acceptable contests only. If this net bulk is added than $600, it’s reported.

•Under the accumulative net method, the abettor subtracts from gross accomplishment all access fees paid during the year, from amateur both won and lost. If it’s added than $600, it letters the amount.

The IRS said the abettor should use the net adjustment and address it on Anatomy 1099-MISC.

Dueling 1099s

But clandestine letter rulings “are alone accurately bounden for the aborigine who requested it,” said Donald Zidik, a administrator with Marcum LLP. They cannot be acclimated as a antecedent by added taxpayers.

Other taxpayers may or may not chase them, depending on their alone affairs and the admonition of their tax advisers.

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In practice, fantasy armpit operators abide to use all three methods.

FanDuel, like best circadian fantasy sites, uses the accumulative method. It issues 1099s alone to those who accept won $600 or more, afterwards adding all access fees.

DraftKings would not acknowledge which adjustment it uses but says on its website it issues Anatomy 1099-MISC to “customers with reportable assets of at atomic $600.”

Head2Head Sports letters gross winnings, its accepted administrator Stacie Stern said.

So what are players to do?

The IRS hasn’t said. But bold they are arena fantasy sports as a amusement and not a business, “it would be reasonable” to amusement their accomplishment and access fees as amusement assets and expenses, said David Baldwin, a Phoenix CPA who wrote an commodity in the Journal of Accountancy on this accountable with Zidik.

If they followed the clandestine letter ruling, players would report, on Band 21 of Anatomy 1040, their accomplishment bare access fees for acceptable amateur only.

If they catalog deductions, they could abstract access fees from accident amateur — forth with accompanying expenses, such as subscriptions to fantasy-sports publications. These costs would go on Band 23 of Schedule A, forth with added Assorted Itemized Deductions. Best bodies get no account from these assorted deductions because they are added up and alone the bulk that exceeds 2 percent of adapted gross assets is absolutely deductible.

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(Gambling losses are deducted differently, on band 28 of Schedule A. They are not accountable to the 2 percent limitation.)

Players who get a 1099-MISC should amount out what access fees, if any, were subtracted from winnings. If the armpit acclimated the net method, and subtracted fees from acceptable amateur only, players would ample out their tax acknowledgment as declared above.

If the armpit acclimated the accumulative net or gross method, they’ve got a dilemma. If they appetite to chase the clandestine letter ruling, they could ask the armpit to affair a adapted Anatomy 1099, application the net method. But they apparently won’t get one.

If they still appetite to chase the clandestine letter ruling, they would accomplish adjustments to Band 21 and Schedule A to accommodate to the net method, Baldwin said.

Or they could avoid the cardinal and artlessly put what the aggregation appear on Band 21.

“The IRS computer is activity to be appealing blessed if what is on the acknowledgment matches the 1099 and won’t attending abundant further,” Luscombe said.

If this IRS doesn’t like this, it could affair some bright admonition for fantasy sports.

Kathleen Pender is a San Francisco Chronicle agents columnist. E-mail: [email protected] Twitter: @kathpender

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