NFBC Message Boards

Can anyone help out with advice on doing taxes? When you get a 1099-MISS from nfbc, my accountant is telling me I CAN'T write off the winnings because it is considered a prize not gambling wins. I thought I could write off the expenses like the entry fees etc. Any advice?

Your accountant is correct.

Mr.October wrote:Can anyone help out with advice on doing taxes? When you get a 1099-MISS from nfbc, my accountant is telling me I CAN'T write off the winnings because it is considered a prize not gambling wins. I thought I could write off the expenses like the entry fees etc. Any advice?

Maybe it's the way you are phrasing the question - you can't write off the Winnings BUT you can write off all the expenses incurred against the winnings - entry fee, travel expenses, site subscriptions etc.

Or you need a new accountant

I wanted to write off the expenses like the entry fees etc but he says since the 1099-MISC has the box other income checked, this is considered a prize not gambling. Prizes are like any sweepstakes or raffle you win where you have to pay taxes and there is no write off. How do you actually write it off than? On what form?

Mr.October wrote:I wanted to write off the expenses like the entry fees etc but he says since the 1099-MISC has the box other income checked, this is considered a prize not gambling. Prizes are like any sweepstakes or raffle you win where you have to pay taxes and there is no write off. How do you actually write it off than? On what form?

Schedule C

I would think the accountant would know about Schedule C; it is what I use.

Schedule C is profit and loss for business. There are specific rules about whether or not certain activities may be treated as a business, so be careful.

However, I have heard that rather than "prizes", it could be treated as a "hobby".

You can deduct hobby expenses up to the amount of your hobby income. Expenses that are more than the income you made from your hobby are nondeductible personal losses. Deduct hobby expenses as itemized deductions on Schedule A as part of your miscellaneous itemized deductions. You can only deduct your total miscellaneous itemized deductions if they’re more than 2% of your adjusted gross income (AGI).

Some guidance may be from Internal Revenue Code Section 183 (Activities Not Engaged in for Profit) which generally limits deductions that can be claimed when an activity is not engaged in for profit. IRC 183 is sometimes referred to as the “hobby loss rule.”

See if any of this makes sense with your accountant.

From the IRS on what constitues a business:

In order to make this determination, taxpayers should consider the following factors:

•Does the time and effort put into the activity indicate an intention to make a profit?
•Does the taxpayer depend on income from the activity?
•If there are losses, are they due to circumstances beyond the taxpayer’s control or did they occur in the start-up phase of the business?
•Has the taxpayer changed methods of operation to improve profitability?
•Does the taxpayer or his/her advisors have the knowledge needed to carry on the activity as a successful business?
•Has the taxpayer made a profit in similar activities in the past?
•Does the activity make a profit in some years?
•Can the taxpayer expect to make a profit in the future from the appreciation of assets used in the activity?

The IRS presumes that an activity is carried on for profit if it makes a profit during at least three of the last five tax years, including the current year.

Just FYI.

I have gotten a ruling from the IRS that Fantasy Winning are treated as Hobby. you can deduct expenes up to your winnings, but cannot carry over loeses from a previous year. Hope this helps..

From a VERY reliable source - As long as you consider it a "hobby" and you don't claim "net loss", then you should be fine. Otherwise you might be audtited.

BK METS wrote:From a VERY reliable source - As long as you consider it a "hobby" and you don't claim "net loss", then you should be fine. Otherwise you might be audtited.

Unless you are one of the big winners, your winnings will end up being chump change to the IRS. $1000 winnings with $800 expenses means $200 in income and $20 to the IRS. Now Potts and other large winners could end up on the irs's radar.

Which brings me to my favorite IRS story told to me by my CPA a couple of years ago, the basic IRS auditor will not take a excel worksheet from the tax payer/CPA because they don't know how to use Excel.

It seems we have a few answers. Hobby income(Schedule A) or Business expense (Schedule C).
Stinks that the answer is not more black and white. Makes it more confusing

Mr.October wrote:It seems we have a few answers. Hobby income(Schedule A) or Business expense (Schedule C).
Stinks that the answer is not more black and white. Makes it more confusing

Confusing is exactly how the IRS wants it as confusing is to the blood-suckers advantage. Good luck!

There is no definitive answer. You can get one IRS employee to tell you one thing and another IRS employee to tell you another.

I have filed a Schedule C the past few years as I have been fortunate enough to have more winnings than expenses.

I am also a Registered Income Tax Preparer.

But you didn't hear any of this from me.

CCsDesperados wrote:

Mr.October wrote:I wanted to write off the expenses like the entry fees etc but he says since the 1099-MISC has the box other income checked, this is considered a prize not gambling. Prizes are like any sweepstakes or raffle you win where you have to pay taxes and there is no write off. How do you actually write it off than? On what form?

Schedule C

I'm working on my taxes today. Schedule C-EZ should work right?