Post
by HarryTheK » Thu Apr 02, 2015 7:40 pm
My recent tax experience aligns with what I am hearing from others on this thread. I will share my recent example as I did a few months back with Greg and Tom. Keep in mind that I am not a big time player but enter a few NFBC contests per year and also play some daily gaming through Draft Kings. For 2014, I entered 3 NFBC tournaments - $1300 AL Auction, $400 DC, $350 Rotowire Online ($2050 in entry fees). I won a total of $1500 on the DC league which I was issued a tax form. Even though I had a net loss in the NFBC for 2014 of $550, as far as the government is concerned, I won/earned $1500.
My tax liability for the $1500 was limited, but only because I itemize my taxes. By doing so, I was able to claim the associated expenses up to my $1500 in winnings. If I had ended with a net earnings, I would have also been able to claim additional entry fees, professional subscriptions and even my trip to Vegas. But obviously you can not claim expenses to the point of showing a loss. Keep in mind these expenses are subject to the 2% of AGI. Because of this, I did not have to pay federal taxes on the $1500. However, from a state of Ohio standpoint, these deductions don’t come into play. With a state rate of 2.88%, I paid $43 in taxes to Ohio on the $1500.
Consider, however, the impact to a player that does not itemize their taxes, using my case as an example. If I did not itemize, I would not be able to claim any associated expenses. At a 15% tax bracket, I would have paid $225 to the federal government while still paying $43 to the State of Ohio. Collectively, $268 would be a HUGE penalty to someone that in reality lost $550 in NFBC competitions. Thankfully, my tax liability was only the $43. This is why issuing tax statements only on net winnings is so crucial. I also played DFS on Draft Kings and won over $600. I was issued a 1099 and had no problems paying taxes on those earnings.
I know that Greg and Tom are looking into this and taking the matter seriously. They are currently saying that their CFO is advising them that they are properly reporting things to participants as simply earned income (and not earned net income). I echo everyone's sentiments as to why the seasonal leagues would differ from the daily ones. This is the primary question that needs to be answered. If the NFBC is reporting things properly, then are DFS sites reporting things improperly? As the industry continues to grow, dealing with taxes will continue to be a primary issue. I just don't want to see participants pushed away from seasonal fantasy leagues due to paying taxes, especially if they are truly deemed unnecessary.