Tax Reporting 1099K

[Temp20221104X]

My Fandule deposits into my paypal account are being reported as business income.

I will be getting a 1099 W-2G from Fandule gambling app.

This will cause the same income to be reported as taxable income twice

[IH1993]

Yes, serious problem. I'm in the same boat. Hopefully, an answer come. My CPA says the IRS has provided no guidance here and is very confused. He's been doing taxes for 25 years and owns an entire firm. Here is my scenario.

Hello, I have declared gambling winnings in the past and have kept meticulous track of my online casino winnings this year. I made $5909 with no losses to deduct through itemization (even though I did lose often. I kept very close track of my daily session per-game per -casino winnings and am claiming session wins and not deducting session losses) . I did not trigger a W2G the entire year.

However, this has zero correlation with my casino winnings. I often would deposit $400 to claim a casino bonus or something, and then withdraw the $400. Then I would play with the bonus money and account for it etc. Borgatta casino as the best because every Monday they would have a "deposit $400 get a 25% bonus." So I would deposit $400, get a $50 bonus, and withdraw the $400 after never using it, and wager with the $50 (of course with a 20x playthrough requirement.) But paypal is sending me a 1099-K for every withdrawal from the casino as if it is business income.

I can easily produce a paypal document that shows my deposits and withdrawals for the entire year. Actually it shows a profit of 3239.19 (which I'll claim even more winnings because I'm not deducting losses.) But is this an itemization of personal income tax, a business, or what?"

What I'm saying is that this is not a "take gambling losses as an itemized deduction" situation. This is just a tax form so the government can see all money moved through my PayPal.

What should I expect when I file taxes next month. PLEASE do not say "claim your winnings and itemize your deductions on Schedule A." I already know all this and have that intention. This is a secondary thing that shows money moving from Paypal to casino and back to Paypal and is not reflective at all of my wins/losses.

My CPA says they don't have any idea how they are handling the influx of 1099ks this year because the IRS doesn't even know how it will play out. Do you have any advice?

A last example that may also help me as I process... If I were to get a W2G for hitting a $5000 jackpot, then withdraw that money the IRS would get BOTH a W2G and a 1099k. How do you reconcile this?

[JessChap]

I am in the same boat.  Please someone answer and help us.

[PayPal_Meghan]

Hello @Temp20221104X, @IH1993, and @JessChap, 

Thanks for stopping by the Community and asking your question! 

I understand there has been some confusion about what's reported yearly by PayPal, and I apologize for the trouble it has caused. Starting this year, the IRS lowered the threshold for income that payment processors have to report. We are now required to report any income/sales once the account has reached a threshold of $600. This income excludes Friends and Family payments. I recommend contacting a tax professional to see how this will impact you and if you might need to provide anything additional. If you would like to download a statement of your PayPal transactions, you can do so by following the steps on our Help Center here: How do I download a statement report of my PayPal transaction history? You can also learn more about how PayPal reports sales to the IRS and what to do if you need a correction on our Help Center. 

I hope this information helps! 

- Meghan

[PayPal_Meghan]

Hi @Temp20221104X, @IH1993, and @JessChap, 

Sorry for the second post, but I’d like to provide a quick update. In my last post, I stated that we are now required to report income after the account has reached a $600 threshold. After some double-checking, it looks like the IRS update has been postponed to 2023, as described in the article I linked here: How PayPal reports sales to the IRS. As of the 2022 reporting year, we will still only report and issue a 1099K if you receive more than $20,000 USD in Goods and Services and more than 200 transactions. However, there are some exceptions laid out in that article for certain states.

Regarding the possibility of your income being reported twice by two different companies, I suggest downloading a transaction statement from both companies and supplying it to your tax professionals. Income received from gambling is considered a Goods and Services transaction, so we have to include it in our report. As I understand, you have contacted your tax professional already, @IH1993; I'm sorry that the situation has been so confusing. You may be able to gather more advice by contacting the IRS directly. 

Thank you for allowing me to provide additional information and clarify the misinformation I provided. I hope everyone has a wonderful weekend ahead. 

- Meghan

[105Km]

Why are these 3rd party transactions listed as “Goods & Services” for gambling payments? And why does PayPal not provide a report of deposits made to these casinos that obviously offset the payments? We are already receiving a W2G of these winnings & are able to show our losses there. It’s like we are being reported twice for the same transactions.