STATS Reporting Prizes To IRS In 2015

[Greg Ambrosius]

NFBC owners should note that in 2015 STATS will be altering the way it reports prize winnings to the IRS. After much consultation, we will now report total prize revenue minus the entry fees from the leagues where you earned those prizes. You will still need to itemize any additional expenses from your year of play, but at least this first part is done for you by STATS.

Here's the official wording I received from STATS Accounting:

"STATS will be reporting 1099's on a "Net Basis Method". Under this method the payor totals up the gross amounts credited to a player’s account during a year and subtracts the entry fee from each tournament from which the player received some kind of prize. Entry fees for tournaments where a player does not receive a prize, however are not a return of capital and cannot be subtracted for purposes of this reporting requirement. In addition, the entry fee will only be netted from the player that actually paid the fee."

So this will be done for all principle owners. If you have further questions, feel free to ask me or consult with your accountant. Thanks and great job this year everyone.

[Potter]

Greg,

You reference entry fees from the"leagues". The official wording you pasted references "tournaments". So if I enter three leagues in the Main event, how much is gonna be subtracted from winnings? One entry fee or three? Would it matter if the prize money was a league prize vs an overall prize? Thanks.

[Gekko]

LOL

More later

[KJ Duke]

Excellent ! Much easier on us.

[bill1car]

In 2015 I played in 2 $2,500 NFBC Super leagues. I received $5,000 from one league and nothing from the other. So my net winnings were zero. I paid $5,000 in entry fees and received $5,000 in payouts. In the past, in this example STATS would report to the IRS that I had $5,000 in income even though clearly I made no profit. The problem is that some of us my need to use the standard deduction and are unable to deduct the entry fees. Or if you can itemize deductions you still can not deduct 100 percent of the entry fee. Or if you take the deductions as a business expense there could be some question with the IRS whether playing fantasy sports is really a business.

I have been very upset that STATS reports our income this way. I almost stopped participating because of this problem. I decided that even though the income reporting by STATS was very unfair to many of us I enjoyed the leagues too much to stop. I brought this issue up a few years ago with Greg. He told me that the accounting firm they use recommended that they continue to report income this way. It is a nice improvement that a change is finally being made. I was hoping that STATS would add up entry fees from all leagues and subtract this number from our payouts, and only report net winnings (just like Fan Duel does) As I understand the change, the entry fee from leagues that did not win money will not be subtracted from the payouts of winning leagues. So in my example last year, STATS will still report I had $2,500 in income even though I made no profit. Bottom line, a nice improvement has been made. But would be great if only net winnings from all leagues was reported as income. If I include my NFBC and NFFC leagues in 2015, I lost money overall. But even with the new change, STATS is still going to report to the IRS that I made a profit.

[whipsaw]

I was hoping that STATS would add up entry fees from all leagues and subtract this number from our payouts, and only report net winnings

While that would simplify life for a number of players, that reporting method may not be consistent with the tax code and IIRC they looked at this for quite awhile before making the change.

[Gekko]

I was hoping that STATS would add up entry fees from all leagues and subtract this number from our payouts, and only report net winnings

While that would simplify life for a number of players, that reporting method may not be consistent with the tax code and IIRC they looked at this for quite awhile before making the change.

From my understanding, subtracting all entry fees from all winnings is the way FanDuel does it. Anyone know about draftkings and FFPC?

[Greg Ambrosius]

In 2015 I played in 2 $2,500 NFBC Super leagues. I received $5,000 from one league and nothing from the other. So my net winnings were zero. I paid $5,000 in entry fees and received $5,000 in payouts. In the past, in this example STATS would report to the IRS that I had $5,000 in income even though clearly I made no profit. The problem is that some of us my need to use the standard deduction and are unable to deduct the entry fees. Or if you can itemize deductions you still can not deduct 100 percent of the entry fee. Or if you take the deductions as a business expense there could be some question with the IRS whether playing fantasy sports is really a business.

I have been very upset that STATS reports our income this way. I almost stopped participating because of this problem. I decided that even though the income reporting by STATS was very unfair to many of us I enjoyed the leagues too much to stop. I brought this issue up a few years ago with Greg. He told me that the accounting firm they use recommended that they continue to report income this way. It is a nice improvement that a change is finally being made. I was hoping that STATS would add up entry fees from all leagues and subtract this number from our payouts, and only report net winnings (just like Fan Duel does) As I understand the change, the entry fee from leagues that did not win money will not be subtracted from the payouts of winning leagues. So in my example last year, STATS will still report I had $2,500 in income even though I made no profit. Bottom line, a nice improvement has been made. But would be great if only net winnings from all leagues was reported as income. If I include my NFBC and NFFC leagues in 2015, I lost money overall. But even with the new change, STATS is still going to report to the IRS that I made a profit.

Thanks Bill. As you know, this is a subject that I've pursued with STATS' Accounting Department for years. You helped push us for more action through the years and others have asked the same questions. Reporting earnings to the IRS is a serious matter and not something that Tom and I can just manipulate. This is serious stuff for a company the size of STATS and I trust it is important for everyone in the industry to follow the advice of their auditors and advisers.

STATS did a great job recently of pushing for more clarification and guidance on how we report earnings and our Accounting firm looked at the legal language and came back with this guidance. We are now reporting earnings for the full year minus entry fees paid in the events that you earned those winnings. We realize that you still would have to itemize any remaining entry fees and expenses when you do your taxes, but this is the guidance we've received. You still have work to do with the other contests that didn't win money, or in your case Bill it doesn't help enough, but this is the advice we've received. If Fanduel or anyone else reports earnings differently then they are getting other advice. We have to do what we've been told.

This is an improvement and we will continue to seek guidance on possibly reporting all entry fees as expenses, but for 2015 earnings that's not going to happen. Dialogue is the best guidance here, so if other industry companies are doing things differently please forward that information to me and we'll look into it. We certainly don't want our customers to be at a disadvantage here, but we also can't skirt the rules of the tax laws and right now we feel we are following the letter of the law. And our auditors and advisers feel the same way.

Thanks all and best of luck in 2016. We're making progress and hopefully more progress is ahead.

[Deadheadz]

From my understanding, subtracting all entry fees from all winnings is the way FanDuel does it. Anyone know about draftkings and FFPC?

If you ever wind up discussing this with a tax lawyer or the IRS itself, I'd be curious how they would answer this question:

"If I paid for all my NFBC leagues with one check, say $15,000 as a round number, wouldn't that check the be one receipt as to my expenses and therefore all winnings would be deducted from that one amount of $15,000?"


It could make a difference.

[Cocktails and Dreams]

This change does no good whatsoever. It is actually a pain in the ass when done like this. Now we have to go in and figure out exactly what leagues did or did not cash and figure out what we still need to claim on our own. If it isn't going to be done correctly, then why change it at all? This is horrible. I am going to need you guys to send me a printout of how my 1099 amount is derived. Thanks in advance.

[Gekko]

This change does no good whatsoever. It is actually a pain in the ass when done like this. Now we have to go in and figure out exactly what leagues did or did not cash and figure out what we still need to claim on our own. If it isn't going to be done correctly, then why change it at all? This is horrible. I am going to need you guys to send me a printout of how my 1099 amount is derived. Thanks in advance.

Some owners need to also worry about how this impacts partnerships