Latest news with #Form1099-MISC
Yahoo
5 days ago
- Business
- Yahoo
How sports betting taxes work and what you might owe
Sports betting only became legal in the United States in 2018 after the U.S. Supreme Court struck down a 1992 federal ban and ruled that states could individually determine what forms of gambling were legal within their boundaries. This opened the floodgates for various state legislatures to decide whether to allow sports betting. Currently, 40 states and the District of Columbia authorize the practice, and 34 permit online sports betting, according to the American Gaming Association. This has tax implications for millions of gamblers — who are also taxpayers. There is no ambiguity here, according to tax experts. 'Broadly, winnings from sports betting are taxable income,' said April Walker, senior manager for Tax Practice and Ethics with the American Institute of CPAs. Sports betting winnings are taxed under the Internal Revenue Service's designation for gambling income and losses. If your winnings total $600 or more and are at least 300 times the amount wagered, then a payer, such as a casino, is required to issue you a Form W-2G. While supplying the form is the responsibility of the payer, Walker noted, you are still liable for reporting and ensuring taxes are paid on those sports betting winnings, whether or not you receive the form. If you're dealing with a mobile sports gambling provider, like DraftKings or FanDuel, the reporting standards are a little different, according to New England-based accounting firm Baker Newman Noyes. If you reach net earnings above $600 or 300 times your original wager, you can also receive a Form 1099-MISC from an online sports wagering organization that will report your net earnings from the previous tax year. Net earnings would be calculated as your cash winnings minus any cash entry fees and adding any cash bonuses received from the platform. Individual tax filers must report total gambling income as 'Other income: gambling' on line 8b of Schedule 1, 1040. The only exception is if you are filing as a professional gambler, meaning someone 'engaged in sports betting primarily for profit rather than only as a hobby,' per the Journal of Financial Planning. In this case, the filer would use Form 1040, Schedule C to report profit or loss from a business, and they would note winnings as revenue and be able to deduct their losses directly. Self-employed filers — in this case, professional gamblers — must pay self-employment tax, which is 15.3 percent, half of which is subject to deduction, for Social Security and Medicare. This embedded content is not available in your region. To answer the tax rate question, we must work backward. Taxpayers whose winnings exceed $5,000 and 300 times the amount wagered will automatically have 24% of their total payout withheld by the payer, according to Walker. This rate could be higher in states that have additional income tax, in which case the 24% federal rate would be withheld on top of the state's personal income tax rate. Still, when it comes time to file your income taxes, this withholding doesn't ensure you've paid the required amount of tax. Rates range from 10% to 37%, depending on your total income, so based on what tax bracket you end up in at the end of the tax year, you'll either get a refund or have to pay out a higher amount from your winnings. Read more: How tax withholding works Perhaps the most pivotal — and confusing — part of understanding how to report gambling income on your federal income tax return is factoring in your losses. The correct method, according to Walker, comes down to what the IRS refers to as 'sessions.' This philosophy comes from a 2015 IRS notice on slot machine play, indicating that total wins and losses need to be calculated by the day they were made. Each day counts as an individual session, so rather than net your total losses against your total winnings, you will need to calculate the end amount of each session, or day, and determine which days were a loss and which days ended with winnings. Still, the only way that losses can be offset against gambling winnings is if you itemize your deductions rather than take the standard deduction, which is $15,000 for single tax filers on 2025 taxes. Using the session method, you could add your total losses on Schedule A, line 16 as gambling losses. Whether you can itemize your deductions to offset your winnings when it comes to state income tax depends on which state you're filing in. Nine states, including North Carolina, Connecticut, and Rhode Island, do not allow itemized deductions for gambling losses, per an article in the Journal of Financial Planning. Even professional gamblers can only offset their total winnings with their losses and get to zero. There is no tax refund for losses that exceed the total amount of winnings, Walker said. To minimize sports betting taxes, the key is having a demonstrable record of all of your wagers, where and when they occurred, proof that they occurred (like receipts and tickets), and evidence of your total amount of winnings and losses. This will be particularly useful if you find yourself audited by a tax authority. 'Gambling has been around for quite a while, and so the rules on that have not changed,' Walker said. 'The difference is that there might be more people who are doing it on a regular, daily basis, and I would encourage them to understand how important it is to do their bookkeeping so they are not having to scramble after the fact and if they are able to itemize, and take advantage of all of their losses.'
Forbes
14-04-2025
- Business
- Forbes
Trump Signs Crypto Reporting Repeal But Thorny Tax Issues Remain
DeFi -Decentralized Finance on dark blue abstract polygonal background. Concept of blockchain, ... More decentralized financial system Since 2014, the IRS focus on the tax treatment and tax reporting issues for crypto has grown and become more intensity. The IRS has been forced to confront digital assets and has introduced a number of reporting requirements for holders, exchanges and others. Now, President Trump has taken a step off the required and looming reporting by signing H.J. Res. 25. The new law repeals a set of regulations introduced by President Biden in 2024 that required decentralized finance brokers to report their gross proceeds from cryptocurrency sales to the IRS using a new variety of IRS Form 1099, the Form 1099-DA, 'Digital Asset Proceeds From Broker Transactions.' The new form and requirements were controversial from the start, in part because the filing of this form would reveal the identity of the digital asset's recipient to the IRS. Any Form 1099 reporting income—such as Form 1099-MISC and Form 1099-NEC—does just that, with the recipient's Social Security Number so that the IRS computers can crosscheck against their tax returns. Everyone must report their income, and that includes income from crypto transactions. However, many privacy-minded taxpayers are reluctant to disclose more information to the government. Some in the crypto community are particularly concerned about this issue. Brokers are still susceptible to an audit of their crypto sales, including via a John Doe Summons, which was widely used by the government with Coinbase, Kraken and other exchanges. The idea is to get account holder details from the exchanges directly. A big advantage the government sought to reap from Form 1099 reporting is the ease with which reporting can be verified via computer matching. If amounts reported on Form 1099 don't match amounts on tax returns, discrepancies can quickly be identified. The Congressional Joint Committee on Taxation estimated that the rollback of these regulations could add up to $3.9 billion to the federal deficit over ten years. It is possible that this long-discussed reporting requirement could be revisited in later administrations. However, the bill was passed under the Congressional Review Act, which prevents the IRS from issuing a new, substantially similar rules to replace the repealed ones without first going through Congress. Until Congress moves away from its current deregulatory stance, it is unlikely we will see similar reporting requirements introduced. But that doesn't mean crypto tax reporting is gone or is easy. The IRS announced in 2014 (Notice 2014-21) that, for tax purposes, cryptocurrency is not currency, it is property. Since crypto is treated as property (e.g., stocks or real estate), taxpayers pay taxes if they realize a gain, but may also be able to claim losses when they are realized. As property, taxpayers must know when they bought the crypto, how much they paid and what they received for it. For stocks and real estate, this may be simple. For crypto, it can be much more difficult. The IRS's FAQs state that all income, gain or loss involving crypto must be reported regardless of the amount and regardless of whether you received a Form W-2 or 1099. If you can't prove your basis to the IRS, the IRS will assume that your basis is zero. Many crypto investors make purchases at multiple times and over many years. Don't forget the IRS question near the top of tax returns either. IRS tax returns ask this basic question, with appropriate variations tailored for corporate, partnership or estate and trust taxpayers: 'At any time during [tax year], did you: (a) receive (as a reward, award or payment for property or services); or (b) sell, exchange, or otherwise dispose of a digital asset (or a financial interest in a digital asset)?' The question must be answered by all taxpayers. Normally, you must answer "Yes" if you: For frequently asked questions and other details, visit the Digital Assets page on No matter what the transaction, you may have a gain or a loss, something quite apart from the income tax impact on the person you are paying. Take paying for services. Say you pay someone as an independent contractor with crypto. To report the payment, if you are in business and the payments during the year reach $600, you'll need to issue them an IRS Form 1099. Whatever the type or amount of crypto you use, the IRS will say you paid them the current market value of the crypto on that day. When you pay an independent contractor and issue a Form 1099, you can't enter a number of bitcoin on the form. You must put the value in U.S. dollars as of the time of payment. The contractor you pay might keep the crypto, or might sell or transfer it the same day, but that doesn't impact your taxes. How about wages paid to employees? Wages paid to employees using crypto are taxable and you must withhold taxes. That means withholding on other cash, or paying them partly in cash so you can send the cash to the IRS. It can be complex.
