Tax Insights

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Fantasy Sports Tax Obligations

One week fantasy football leagues like Fan Duel and Fantasy Kings are taking the 2015 football season by storm. It seems like we can’t watch a commercial break during an NFL game without seeing a fantasy football advertisement airing with “real people” claiming how much money they bet which resulted in how much money they’ve won. We can’t help rolling our eyes when they tell us they win millions of dollars with one $200 bet on Fan Duel for one Sunday’s worth of work. The truth of the matter is that those winnings do happen; a few lucky people are actually winning very large sums of money overnight! As a tax accountant, this raises eyebrows as to what the tax implications may be for these people winning big. Here are a couple things to consider about fantasy sports tax implications if you are an avid one week fantasy player.

  1. When making the decision ‘I want to play Fan Duel or Fantasy Kings all season and make bank!’ consider keeping logs on the time and money spent picking your final rosters. If the right documentation is kept, there could be a chance that you can make the claim on being a professional gambler. This would allow you to fill out a Schedule C on your 1040 and you can deduct all related expenses.
  2. If you just play for fun, consider consulting a CPA to help manage your winnings. Winning the big $1,000,000 prize will more than likely put you in the highest tax bracket of 39.6%. Making 3rd and 4th quarter estimated payments (because football starts in September) is a good way to break up the large tax obligation that is ultimately owed in April.

Before choosing the million dollar lineup consisting of Cam Newton at quarterback, Julio Jones at receiver and Gary Barnidge at tight end, make sure to keep taxes in the back of your mind. Winning big money means paying big taxes!

By Daniel Blackwell

Comments

  1. John Garrison says:

    Are the fantasy sites issuing 1099 and W-2G forms like the casinos? Or are they exempt since they are not gambling?

    • admin says:

      John –

      Thank you for your question and interest in our blog. Profitable players receiving at least $600 from daily fantasy sports sites should be receiving a 1099-MISC. Remember, any 1099s that are issued to individuals are also issued to the IRS for matching purposes.

      Daniel T. Blackwell