Tax Experts: Fantasy Leagues/1099-Misc/Deductibility

[Capital]

Fantasy Leagues and 1099-Misc

I received a 1099-Misc for the fantasy leagues I played (and won some of them) this year. My question is – can I deduct what is cost to play?

I do itemize deductions so I think it’s possible.

If the opinion is that I can take the deduction, then where to do place the entry cost (gambling, etc)?

Also, there’s a question about the different sports. With baseball, it’s easy because the sport begins and ends the same year. But with football, basketball and hockey, the expense and payment crosses calendar year.

For example, if I were to win 2 out of 4 basketball leagues – paying for the leagues in October 2005, but receive the winnings in 2006 – then the 1099M is received for tax year 2006. Could I take a deduction for all 4 (adding in my baseball deductions for losing in 2006)?

I hope some of the tax experts can help. I’ll be happy to clarify anything else.

I'm using tax cut software

[MrBigglesworth]

Yes, you can deduct the entry fees as itemized deductions on Line 27 of your Schedule A (http://www.irs.gov/pub/irs-pdf/f1040sab.pdf). You can only deduct losses up to the amount of your winnings.

If you didn't deduct the entry fees before, I would say you could deduct them now. I'm not sure if that is 'legal' or not, but it wouldn't be something that would trigger an audit, and on the extremely small chance that the IRS ever noticed it they worst they would do would give you a small penalty.

[CraigSca]

Wait a sec - did Mr. Bigglesworth just advocate doing something that's possibly illegal?

Before I did anything like that, I'd make sure I was on the right side of the law.

[Capital]

I don't think he was saying about anything illegal and I certainly wouldn't go back beyond this past year (although if I was itemizing in the past I probably could).

I'm using taxcut software and they have a field for gambling losses. I wouldn't call these fees losses because after the math is done, I am on the plus side. I would call them expenses. (although I don't like calling fantasy leagues gambling)

[Butter]

If winning a fantasy football league is considered "gambling winnings", then the fees you paid into a non-winning league could fairly be considered "gambling losses", I would say. But then, I'm not an accountant.

[MrBigglesworth]

Wait a sec - did Mr. Bigglesworth just advocate doing something that's possibly illegal?

Before I did anything like that, I'd make sure I was on the right side of the law.
Yes, I did. Taxes are all about staying in the grey area. If on the 1 in 1,000 chance you are actually audited, and it turns out to be wrong, you'd have to pay the back taxes and a tiny interest penalty. Therefore it's in your best interest to take any and all deductions that you could plausibly make a case for. It's not like you would go to jail if the IRS determines that you took the deduction when you shouldn't have.

Heck, I would go for more deductions. I would deduct a percentage of the Internet bill if the league was online, deduct any packages I purchased to watch the sport so I could keep track of my players, etc.

[wade moore]

Yes, I did. Taxes are all about staying in the grey area. If on the 1 in 1,000 chance you are actually audited, and it turns out to be wrong, you'd have to pay the back taxes and a tiny interest penalty. Therefore it's in your best interest to take any and all deductions that you could plausibly make a case for. It's not like you would go to jail if the IRS determines that you took the deduction when you shouldn't have.

Heck, I would go for more deductions. I would deduct a percentage of the Internet bill if the league was online, deduct any packages I purchased to watch the sport so I could keep track of my players, etc.
wow.

[albionmoonlight]

Is it common for fantasy leagues to send out 1099s?

Something tells me that Capital plays for a bit larger stakes than does yours truly.

[MrBigglesworth]

Is it common for fantasy leagues to send out 1099s?

Something tells me that Capital plays for a bit larger stakes than does yours truly.
There is some threshold you have to reach, then sites have to send them out. It might be like $600, the same as a contractor, but I'm not sure.

[Capital]

I believe that it is $600. The last couple of years, I have played in CBS Sportsline Platinum leagues - $99 for 1 league and $79 for subsequent and the winner gets $600. I happened to win 2 of those leagues last year (both basketball - baseball was not so luckY) so I received a 1099-Misc. I believe that I should be able to deduct the cost to play basketball and my loser baseball leagues.

Using tax cut software, gambling losses appear to be the line item - just to sure.

[CraigSca]

wow.

I second that "wow". I'm incredulous.

[lynchjm24]

I second that "wow". I'm incredulous.

I don't think it's that out of line. If it was income from self-employment you'd be able to deduct your expenses. I don't see why something like MLB.TV wouldn't be a deduction if you used it to earn the 'gambling' winnings.