Reuqesting Help With Managing of Winnings

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Henry717
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Reuqesting Help With Managing of Winnings

Post by Henry717 » Tue Dec 04, 2018 9:06 am

Hi All,

Longtime follower and find this site extremely informative and the posters very knowledgeable. I am asking for your help with some recent winnings I had in online daily fantasy football (sites like Fan Duel and Draftkings).

Through the year I put in about 17K in my online fantasy sports account (I know very unBogleheads like). Over the last couple of weeks, I have hit a couple of large tournaments and won about 125K. The money is currently sitting in my online fantasy sports account. I am planning on setting up an ACH wire transfer of about 80K from my online fantasy sports account to my bank account and leaving the rest in the account to play with and I have a few questions.

Is there anything I need to do or think about before or after I set up this transfer (forms to fill out etc)? Do I need to report this 80K ACH transfer to anyone other than on my 2018 taxes or can I just do it without having to do anything else at this time? Should I transfer 80K at once or should I go smaller at first to make sure the first time transfer goes smoothly? Would it be considered structuring if I took out 40K and then 40k later or 20K times 4 with none of the deposits below 10K---I obviously want to do everything by the book, but somewhat nervous to do 80K at once.

Am I correct in assuming the taxes I would owe would be my total online fantasy sports account balance on the end of December 31, 2018 + any withdrawals to my bank account during the year minus the amount I put into the account (assuming my starting balance on Jan 1 of this year was 0)? Can I wait until the end of the year to determine my final winnings that I need to pay taxes on knowing my account balance will be going up or down from now till December 31? When is the latest I have to send in my taxes on these winnings without incurring penalties, late fees etc. at least from a federal perspective? I would like to pay them all on Jan 1, 2019 once I realize my final net or do I need to pay estimated taxes now? Are there forms I need to send in with my federal tax payment on these winnings now or can I just send an estimated tax payment online without any forms and when I do my taxes for the 2018 year, put my winnings on there?

Lots of questions, but I would appreciate any and all help!

Cheers!

Ace1
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Location: Twinsburg Ohio

Re: Reuqesting Help With Managing of Winnings

Post by Ace1 » Tue Dec 04, 2018 10:33 am

Henry,
Congrats on the gambling successes. I will address some of your questions.
Structuring has to do with cash transactions that start at $10k.
ACH or checks are no problem here. Transfer as much or as little as you want.
If you want to test the process, move 10k. When you see how it works, move the rest.
As to your taxes, gambling winnings are taxable. The cash you wagered with is your basis, or cost.
All your “bets” are costs. Account balance is immaterial. The tally of all this Dec 31 is what is used for tax purposes.
So your cost would be the total of all your wagers.
If you did nothing else, your taxable gain is the $125k, less your costs, which will be added on your 1040.
IF you itemize deductions, you can offset some/ up to all of the gambling winnings with gambling losses,
such as casino losses, lottery, or other forms of gambling.
Estimated taxes for the 4th quarter are due January 15.
You can get an ES1040 coupon from IRS.gov, or your tax software if you use Turbo Tax, HRBlock, Tax Act, etc.
Alternatively, you can create an account on EFTPS and do an ACH payment to the IRS.
Depending on your state, you likely will also owe taxes there as well, and might make an estimated payment to them.
There is a provision in the tax code that as long as your tax withholding/ payments is 100%/110% of your prior year total
tax liability, you would not have to pay estimates, and could just pay the total due with your tax return in April.
I suggest if you use tax software, pull out last years return and experiment with this.
If you use a tax professional, get in touch with him soon.
Ace

Henry717
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Re: Reuqesting Help With Managing of Winnings

Post by Henry717 » Tue Dec 04, 2018 10:56 am

Ace thank you for your reply. Just so I understand, I can do the ACH for 1 dollar up to 125K without having to notify anyone that I am transferring (especially in the later amount) that money other than the need to file taxes on my gambling winnings and pay the estimate by Jan 15?

My current account balance stands at 125K and I plan on playing more. If my account balance dips to say 117K at the end of the year (Dec. 31). My taxable net winnings would be 117K final balance minus 17K that I put in; 100K is the amount I would pay taxes on?

Thanks again!

michaeljc70
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Re: Reuqesting Help With Managing of Winnings

Post by michaeljc70 » Tue Dec 04, 2018 11:01 am

Structuring is making CASH deposits or withdrawals under $10k to avoid IRS reporting. Structuring doesn't apply to ACH transactions. Structuring is a pretty generic term, but I am using it in respect to avoiding filling out Currency Transactions Reports.

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Watty
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Re: Reuqesting Help With Managing of Winnings

Post by Watty » Tue Dec 04, 2018 11:11 am

It would be good to look up the "safe harbour" rules so that you do not have a penalty for underwithholding.

The tax impact can be hard to predict since in addition to the taxes on the winnings the additional income could also cause things like income based tax credits to be phased out. You may want to do a dummy tax return to see what the overall tax impact will be.

There is a wiki on how to manage a windfall if you have not seen it.

https://www.bogleheads.org/wiki/Managing_a_windfall

If you are not already maxing out your 2018 401k, or similar accounts it would be good to increase your payroll withholdings as much as possible for the rest of the year.

If your after tax winnings are something like $70K after paying taxes then leaving $45K in the gambling account sounds pretty excessive to me. You may want to reconsider that, one huge problem with winning like this is that it is easy to mistake luck for skill.

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BL
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Re: Reuqesting Help With Managing of Winnings

Post by BL » Tue Dec 04, 2018 11:21 am

As far as taxes/deductions are concerned, you might try Google:
https://www.accountingweb.com/tax/indiv ... ew-tax-law

I know nothing about this website.

Here is another:
You can deduct your losses…to an extent
You can’t deduct the cost of your wager from your winnings when determining how much you won, but you can deduct your gambling losses subject to certain rules.

You must itemize your deductions to claim your gambling losses as a tax deduction.
https://turbotax.intuit.com/tax-tips/jo ... /L7JNH7mjn

Olemiss540
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Re: Reuqesting Help With Managing of Winnings

Post by Olemiss540 » Tue Dec 04, 2018 11:34 am

Ace1 wrote:
Tue Dec 04, 2018 10:33 am
Henry,
Congrats on the gambling successes. I will address some of your questions.
Structuring has to do with cash transactions that start at $10k.
ACH or checks are no problem here. Transfer as much or as little as you want.
If you want to test the process, move 10k. When you see how it works, move the rest.
As to your taxes, gambling winnings are taxable. The cash you wagered with is your basis, or cost.
All your “bets” are costs. Account balance is immaterial. The tally of all this Dec 31 is what is used for tax purposes.
So your cost would be the total of all your wagers.
If you did nothing else, your taxable gain is the $125k, less your costs, which will be added on your 1040.
IF you itemize deductions, you can offset some/ up to all of the gambling winnings with gambling losses,
such as casino losses, lottery, or other forms of gambling.
Estimated taxes for the 4th quarter are due January 15.
You can get an ES1040 coupon from IRS.gov, or your tax software if you use Turbo Tax, HRBlock, Tax Act, etc.
Alternatively, you can create an account on EFTPS and do an ACH payment to the IRS.
Depending on your state, you likely will also owe taxes there as well, and might make an estimated payment to them.
There is a provision in the tax code that as long as your tax withholding/ payments is 100%/110% of your prior year total
tax liability, you would not have to pay estimates, and could just pay the total due with your tax return in April.
I suggest if you use tax software, pull out last years return and experiment with this.
If you use a tax professional, get in touch with him soon.
Ace
This is impressive. Thanks for spending the time to outline for the OP, your effort is what makes this site amazing.

OP,

Please consider getting out now. Speculating and gambling is not a hobby, and the mentality will very likely lead to an overall negative on your financial outlook. Congrats but cash the chips in and enjoy your amazing run of luck with a nice vacation IMO!
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.

clemrick
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Re: Reuqesting Help With Managing of Winnings

Post by clemrick » Tue Dec 04, 2018 11:41 am

Henry717 wrote:
Tue Dec 04, 2018 10:56 am
My current account balance stands at 125K and I plan on playing more. If my account balance dips to say 117K at the end of the year (Dec. 31). My taxable net winnings would be 117K final balance minus 17K that I put in; 100K is the amount I would pay taxes on?
NOOOOO!

Your account balance is for your information only. Whatever platform(s) you are using will probably send you a 1099-G for each win and each loss.

The IRS wants to know the TOTAL of ALL winnings! Add them ALL up and that is income and goes on Line 20 of whatever form they decide to finalize. So this will affect your AGI! Might want to look at your situation and see if the increase in AGI affects other tax credits or ACA (if you have it).

Then you can deducts your losses. Add all of those up and they go on Schedule A, up to the amount of your winnings. You can not take a loss on gambling, but you certainly can have taxable income.

OnTrack
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Re: Reuqesting Help With Managing of Winnings

Post by OnTrack » Tue Dec 04, 2018 11:49 am

-Be aware that not all states allow deducting gambling losses.
- You must itemize in order to deduct gambling losses on federal return
- There are very specific record keeping requirements in case of an audit

Henry717
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Re: Reuqesting Help With Managing of Winnings

Post by Henry717 » Tue Dec 04, 2018 12:01 pm

clemrick wrote:
Tue Dec 04, 2018 11:41 am
Henry717 wrote:
Tue Dec 04, 2018 10:56 am
My current account balance stands at 125K and I plan on playing more. If my account balance dips to say 117K at the end of the year (Dec. 31). My taxable net winnings would be 117K final balance minus 17K that I put in; 100K is the amount I would pay taxes on?
NOOOOO!

Your account balance is for your information only. Whatever platform(s) you are using will probably send you a 1099-G for each win and each loss.

The IRS wants to know the TOTAL of ALL winnings! Add them ALL up and that is income and goes on Line 20 of whatever form they decide to finalize. So this will affect your AGI! Might want to look at your situation and see if the increase in AGI affects other tax credits or ACA (if you have it).

Then you can deducts your losses. Add all of those up and they go on Schedule A, up to the amount of your winnings. You can not take a loss on gambling, but you certainly can have taxable income.
Yes, they said they give a final 1099 based on Winnings, bonsues etc. minuses losses and that final number is your winnings for the year. There are also entry fees for every game you are in. So it can get complicated.

So what you are saying, if you play 100 games for 9 dollars (900 dollars risked) and win 500 on one of those games and play a single game for 100 dollars and lose. You are down 1K in entry fees minus 500 win--down 500 total. In that scenario you would be required to pay 500 dollars in taxes? That doesn't make sense.

OnTrack
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Re: Reuqesting Help With Managing of Winnings

Post by OnTrack » Tue Dec 04, 2018 12:22 pm

Henry717 wrote:
Tue Dec 04, 2018 12:01 pm
clemrick wrote:
Tue Dec 04, 2018 11:41 am
Henry717 wrote:
Tue Dec 04, 2018 10:56 am
My current account balance stands at 125K and I plan on playing more. If my account balance dips to say 117K at the end of the year (Dec. 31). My taxable net winnings would be 117K final balance minus 17K that I put in; 100K is the amount I would pay taxes on?
NOOOOO!

Your account balance is for your information only. Whatever platform(s) you are using will probably send you a 1099-G for each win and each loss.

The IRS wants to know the TOTAL of ALL winnings! Add them ALL up and that is income and goes on Line 20 of whatever form they decide to finalize. So this will affect your AGI! Might want to look at your situation and see if the increase in AGI affects other tax credits or ACA (if you have it).

Then you can deducts your losses. Add all of those up and they go on Schedule A, up to the amount of your winnings. You can not take a loss on gambling, but you certainly can have taxable income.
Yes, they said they give a final 1099 based on Winnings, bonsues etc. minuses losses and that final number is your winnings for the year. There are also entry fees for every game you are in. So it can get complicated.

So what you are saying, if you play 100 games for 9 dollars (900 dollars risked) and win 500 on one of those games and play a single game for 100 dollars and lose. You are down 1K in entry fees minus 500 win--down 500 total. In that scenario you would be required to pay 500 dollars in taxes? That doesn't make sense.
I think he means you can't take a net loss on gambling.

trueblueky
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Re: Reuqesting Help With Managing of Winnings

Post by trueblueky » Tue Dec 04, 2018 12:43 pm

Henry717 wrote:
Tue Dec 04, 2018 12:01 pm
clemrick wrote:
Tue Dec 04, 2018 11:41 am
Henry717 wrote:
Tue Dec 04, 2018 10:56 am
My current account balance stands at 125K and I plan on playing more. If my account balance dips to say 117K at the end of the year (Dec. 31). My taxable net winnings would be 117K final balance minus 17K that I put in; 100K is the amount I would pay taxes on?
NOOOOO!

Your account balance is for your information only. Whatever platform(s) you are using will probably send you a 1099-G for each win and each loss.

The IRS wants to know the TOTAL of ALL winnings! Add them ALL up and that is income and goes on Line 20 of whatever form they decide to finalize. So this will affect your AGI! Might want to look at your situation and see if the increase in AGI affects other tax credits or ACA (if you have it).

Then you can deducts your losses. Add all of those up and they go on Schedule A, up to the amount of your winnings. You can not take a loss on gambling, but you certainly can have taxable income.
Yes, they said they give a final 1099 based on Winnings, bonsues etc. minuses losses and that final number is your winnings for the year. There are also entry fees for every game you are in. So it can get complicated.

So what you are saying, if you play 100 games for 9 dollars (900 dollars risked) and win 500 on one of those games and play a single game for 100 dollars and lose. You are down 1K in entry fees minus 500 win--down 500 total. In that scenario you would be required to pay 500 dollars in taxes? That doesn't make sense.
you don't pay $500 in taxes.

The $500 won would equal $491 in taxable income after subtracting out the return of that $9 bet. (unless you got $509 back on that.). The W2G should reflect that. You then have $491 in losses that can be deducted on Schedule A. Losses are allowed only to the extent of wins.

More people than in the past will find the standard deduction to be more advantageous than itemized deductions. If you use the standard deduction, the losses do not play in computing taxes.

The $491 win costs an extra $108 in the 22% bracket. Or if losses are deducted, it could cost nothing. Or it could impact some other part of your taxes by raising Adjusted Gross Income, even if not Taxable Income.

clemrick
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Re: Reuqesting Help With Managing of Winnings

Post by clemrick » Tue Dec 04, 2018 12:53 pm

Ok, I am wrong.

According to Kiplinger https://www.kiplinger.com/article/taxes ... xable.html

“Net profit” is calculated as prizes won minus entry fees, plus bonuses and goes on line 21.

They will be sending you a 1099-Misc to be entered on line 21. So it will still affect your AGI and you will have do some calculating to arrive at your net profit. Your account balance won't necessarily be the right number.

Henry717
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Re: Reuqesting Help With Managing of Winnings

Post by Henry717 » Tue Dec 04, 2018 1:12 pm

Thank you trueblue and clemrick for your responses. I am trying to understand this because having a 1099 that lists total winnings and total net winnings including entry fees where you lost would have a huge tax implication difference.

yes, on my web search I keep seeing, subtract your total entry fees (I assume this means even entry fees you lost) from your total winnings and that will give you your winnings for the year.

It wouldn't make sense to play in 100 9 dollar games, win one of them for 100 and have to pay taxes on that 100 dollars (or 91 dollars). Most people win a ton of games, but over the course of a year lose money, and they would be getting slaughtered if they had to pay taxes on the games they "won" eventhough they lost for the year. No one would play.

Henry717
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Re: Reuqesting Help With Managing of Winnings

Post by Henry717 » Tue Dec 04, 2018 1:49 pm

One other question. I just had an accountant tell me that since I would be making such a large payment to the IRS now for 2018, that they may charge me interest because I did not make those payments through the course of the year. I obviously did not know I would need to make those payments until recently. How do I let them know that?

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djpeteski
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Re: Reuqesting Help With Managing of Winnings

Post by djpeteski » Tue Dec 04, 2018 2:12 pm

With any kind of gambling the most important skill is bankroll management. You will have events and runs were you get extremely unlucky. Those times must not bankrupt you and your regular life. There are times were you get hot, like you just did. Some of it goes to the bankroll, some of it gets saved/invested/debt reduction so if you never win again, it will still be worth it.

gr7070
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Re: Reuqesting Help With Managing of Winnings

Post by gr7070 » Tue Dec 04, 2018 2:58 pm

This is from a very knowledgeable professional poker player whose blog i used to read. These are older books.

"There are two good books on taxes for gamblers: Margaret Johnston's "How to Turn Your Poker Playing Into a Business" (title does not match contents), and Scott & Chien "Tax Help for Gamblers." Both say that most accountants don't understand the specialized rules for gamblers"

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tadamsmar
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Re: Reuqesting Help With Managing of Winnings

Post by tadamsmar » Tue Dec 04, 2018 3:21 pm

clemrick wrote:
Tue Dec 04, 2018 11:41 am
Henry717 wrote:
Tue Dec 04, 2018 10:56 am
My current account balance stands at 125K and I plan on playing more. If my account balance dips to say 117K at the end of the year (Dec. 31). My taxable net winnings would be 117K final balance minus 17K that I put in; 100K is the amount I would pay taxes on?
NOOOOO!

Your account balance is for your information only. Whatever platform(s) you are using will probably send you a 1099-G for each win and each loss.

The IRS wants to know the TOTAL of ALL winnings! Add them ALL up and that is income and goes on Line 20 of whatever form they decide to finalize. So this will affect your AGI! Might want to look at your situation and see if the increase in AGI affects other tax credits or ACA (if you have it).

Then you can deducts your losses. Add all of those up and they go on Schedule A, up to the amount of your winnings. You can not take a loss on gambling, but you certainly can have taxable income.
I google 1099-G and that is not the right form. Maybe you mean a W-2G, but is apparently not right either.

Also, the OP mentioned Draft Kings. They send a 1099-MISC according to a web search.

And, it looks like they do report the net winnings on a 1099-MISC.

https://turbotax.intuit.com/tax-tips/ge ... /L75xYecdS

Not sure how net losses are reported.

Also, I am not sure that Fantasy Sports is considered gambling, it's a weird category. Here is a discussion of the tax treatment of actual gambling, it is different:

https://turbotax.intuit.com/tax-tips/jo ... /L7JNH7mjn

trueblueky
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Re: Reuqesting Help With Managing of Winnings

Post by trueblueky » Tue Dec 04, 2018 4:04 pm

Henry717 wrote:
Tue Dec 04, 2018 1:49 pm
One other question. I just had an accountant tell me that since I would be making such a large payment to the IRS now for 2018, that they may charge me interest because I did not make those payments through the course of the year. I obviously did not know I would need to make those payments until recently. How do I let them know that?
You can have payroll take more from your paycheck for the rest of the year. Payroll deductions for taxes count as if they were evenly distributed. You can make an estimated payment in January as well. Your accountant can help with this.

averagedude
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Re: Reuqesting Help With Managing of Winnings

Post by averagedude » Tue Dec 04, 2018 5:07 pm

I got a friend of mine who won several thousand dollars on fanduel 3 or 4 years ago. He won or placed on 2 different tournaments over a span of a month. He did get a 1099 and had to file it on his taxes. He plays daily, and hasn't won anything significant since. There is alot of luck involved in winning tournaments and i would think that less than 1 percent of players are profitable due to the high rakes charged in these games. The people who are profitable are using multiple types of information and entering it with their spreadsheets or other computer programs. They also are on top of all new information and have a system of producing new data quickly from the new information they collect. The winners are disciplined, intelligent, and spend alot of time at it. If you are a schmuck that watches alot of sports and uses your gut feelings to create lineups on your mobile phone, you are very likely to lose your shirt.

cherijoh
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Re: Reuqesting Help With Managing of Winnings

Post by cherijoh » Tue Dec 04, 2018 5:24 pm

trueblueky wrote:
Tue Dec 04, 2018 4:04 pm
Henry717 wrote:
Tue Dec 04, 2018 1:49 pm
One other question. I just had an accountant tell me that since I would be making such a large payment to the IRS now for 2018, that they may charge me interest because I did not make those payments through the course of the year. I obviously did not know I would need to make those payments until recently. How do I let them know that?
You can have payroll take more from your paycheck for the rest of the year. Payroll deductions for taxes count as if they were evenly distributed. You can make an estimated payment in January as well. Your accountant can help with this.
You are correct, but at this point in the year, changing withholding would only impact 1 (or at most 2) paychecks.

ClassySDLivin
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Re: Reuqesting Help With Managing of Winnings

Post by ClassySDLivin » Tue Dec 04, 2018 5:40 pm

I don't have any specific knowledge or advice; other than consider using a small % of your winnings to engage a competent tax advisor/preparer that can help you fulfill the reporting and paying requirements. One issue that sprung to my mind - if your online gambling platform is located "offshore" you may have a variety of information reporting requirements (e.g. FBAR, IRS Form 8938). These forms don't cause additional tax liability, but failing to file international information reporting returns can result in significant penalties. Congrats on the gambling success - enjoy the proceeds!

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grabiner
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Re: Reuqesting Help With Managing of Winnings

Post by grabiner » Wed Dec 05, 2018 12:18 am

Henry717 wrote:
Tue Dec 04, 2018 1:49 pm
One other question. I just had an accountant tell me that since I would be making such a large payment to the IRS now for 2018, that they may charge me interest because I did not make those payments through the course of the year. I obviously did not know I would need to make those payments until recently. How do I let them know that?
You need to fill out Schedule AI with your IRS Form 2210.

Normally, if you pay estimated tax, you must pay an equal amount for each of the four quarters; if you make your payment due April 15, 2018 in January 2019, you owe nine months' interest on that amount. However, the IRS recognizes that you can't realistically make a first-quarter estimated tax payment on money you didn't earn until the fourth quarter. Therefore, when you fill out Form 2210 to compute your penalty for not having enough estimated tax or withholding, you fill out schedule AI to break down your income by quarter. If you earned 10% of your income in the first quarter, you only need to pay 10% of the tax in that quarter, not 25%. If you didn't pay that much, the penalty is calculated only on the difference between the 10% and what you paid.
Wiki David Grabiner

mortfree
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Re: Reuqesting Help With Managing of Winnings

Post by mortfree » Wed Dec 05, 2018 2:06 am

Surprised people are letting OP go on leaving $45k in a gambling account. (125-80).

There’s such a thing as play money but $45k at risk would be high for me (equivalent to my cash EF)

Know when to fold ‘em

gr7070
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Re: Reuqesting Help With Managing of Winnings

Post by gr7070 » Wed Dec 05, 2018 7:58 am

mortfree wrote:
Wed Dec 05, 2018 2:06 am
Surprised people are letting OP go on leaving $45k in a gambling account. (125-80).

There’s such a thing as play money but $45k at risk would be high for me (equivalent to my cash EF)

Know when to fold ‘em
I've come close to commenting about it many times in this thread. A few have. I doubt someone posting their intentions to leave that much in is going to listen to us. Especially when they've already given away $17,000!! of their own money already!

They're going to have to learn the hard way. But I'm not sure someone who's already given away 17k! of their own money previously is open to walk away.

I'm a very knowledgeable and capable poker player, but I only play 1 or 2 times a year. I see a lot of the same people each time I play give away their time and money (lives from what little I know if them). It's a sad, scary thing.

I'm not sayting the OP has a problem, but many develop one.

I wish the OP well. If you're even slightly inclined I can't recommend enough to close your account and enjoy the fact you walked away from what many can't.

Henry717
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Re: Reuqesting Help With Managing of Winnings

Post by Henry717 » Wed Dec 05, 2018 10:45 am

Thank you all for your responses! I am appreciative that you took the time to share your thoughts and considerations.

Although my OP was focused on issues surrounded by winning this type of money with online daily fantasy sports, I am not leaving 45K in the account. My concern was primarily making sure I did everything correctly and by the book and to garner your advice. Thank you!

While luck certainly did play a part in me winning, skill was definitely involved as well. During the course of the year I had developed a statistical model to determine who the best plays would be on a given week. I also enlist the help of several online pay sites and use their data to help tweak this model. During the course of this football season, I had placed in the top 10% of large tournaments a number of times and was extremely close a half dozen times of winning significant money. Although the mentality was not right, I told my friends (who also engage in daily fantasy sports) that I am going to hit a significant pot at some point this year. If I were gambling in a casino, I would definitely say to someone walk away, but why would I walk away from something that provides enjoyment, challenges me and is intellectually stimulating? This is not pulling a lever on a slot machine. This is what people call a game of skill rather than chance, and while luck certainly plays a part, over a period of time skill wins. Could my model fall completely flat the rest of the way? Absolutely! That said, I am going to leave money in the account, that if I lost, I would chalk up to entertainment.

My finances are in otherwise decent order (max out 401k, 457b--do not do backdoor roth--bec I as you can tell I am a rather anxious person and want to do everything by the book). I do have student loans but those currently sit at 1.4% and I am in no rush to pay those off. I live in a modest home considerably below my means. In general, I live a Bogleheads life with a few exceptions, this being one.

FinancialDave
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Re: Reuqesting Help With Managing of Winnings

Post by FinancialDave » Wed Dec 05, 2018 11:53 am

Henry717 wrote:
Tue Dec 04, 2018 1:49 pm
One other question. I just had an accountant tell me that since I would be making such a large payment to the IRS now for 2018, that they may charge me interest because I did not make those payments through the course of the year. I obviously did not know I would need to make those payments until recently. How do I let them know that?
Your accountant is certainly true that they "may" charge you interest, but it can also come with an underpayment penalty for each quarter where you had large winnings and no withholding was taken.

I don't know anything about how fantasy football works but it seems like its basically the same as going to a casino and playing any number of games. I have done many tax returns from casinos and in most cases the casino will withhold (actually by law) on larger winnings. Is there any chance you can get this gambling site to withhold say x% of your winnings -- not your NET, x% of your winnings.

The tax here may technically be much larger than it seems based on what some might call the "churn" (more of a poker term) in your account. An example:

You bet 10 games (one per month) and did the following:

won $25k
lost $10k
won $10k
won $100k
lost $50k
won $50k
won $50k
lost $50k
won $50k
lost $50k

I am pretty sure the "cost of the bet" is included in the loss column. In other words you bet $10k and didn't win that is a loss. You bet $10k and it paid $35k on the bet, this is a $25k win.

If my math is correct this is a NET winning of $125k, but if you did the same thing in a casino the casino is going to report winnings of $285,000 and that is what you will pay tax on. On your itemized deductions you can deduct the $160k in losses, which if you have no other income or deductions would give you an AGI of $285,000, taxable income of $125,000 and if you are single then $24,290 in tax on your net winnings, plus any penalties if due from underpayment.

Dave
Last edited by FinancialDave on Wed Dec 05, 2018 12:02 pm, edited 1 time in total.
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FinancialDave
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Re: Reuqesting Help With Managing of Winnings

Post by FinancialDave » Wed Dec 05, 2018 11:59 am

cherijoh wrote:
Tue Dec 04, 2018 5:24 pm
trueblueky wrote:
Tue Dec 04, 2018 4:04 pm
Henry717 wrote:
Tue Dec 04, 2018 1:49 pm
One other question. I just had an accountant tell me that since I would be making such a large payment to the IRS now for 2018, that they may charge me interest because I did not make those payments through the course of the year. I obviously did not know I would need to make those payments until recently. How do I let them know that?
You can have payroll take more from your paycheck for the rest of the year. Payroll deductions for taxes count as if they were evenly distributed. You can make an estimated payment in January as well. Your accountant can help with this.
You are correct, but at this point in the year, changing withholding would only impact 1 (or at most 2) paychecks.
You could of course do the one 1040ES that is due in Jan. to cover the 4th quarter. That is better than doing nothing.

Depends how many W2G's are sent (if any) and what dates the winnings show up under.

Dave
I love simulated data. It turns the impossible into the possible!

Henry717
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Re: Reuqesting Help With Managing of Winnings

Post by Henry717 » Wed Dec 05, 2018 12:15 pm

From what I gather from online searches including a few links posted in this forum, it is

Winnings = All Winnings - Total Entry Fees which would be a significant tax difference compared to All Winnings.

All winnings doesn't make sense as no one would play because nearly every person that plays would owe taxes even if their net outcome was losing.

Playing 100, 10 dollar games and winning one of them for 500 would then result in that person losing 500 dollars net for that day but having to pay taxes on 490 dollars. I realize tax rules don't necessarily have to be intuitive, but it has to be all winnings - total entry fees. That said, I had no winnings until the last couple weeks (4th quarter) so I couldn't pay estimated taxes until now. Hopefully, in the end I will not get penalized. I think I need a better accountant. lol

gotester2000
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Re: Reuqesting Help With Managing of Winnings

Post by gotester2000 » Wed Dec 05, 2018 12:51 pm

gr7070 wrote:
Wed Dec 05, 2018 7:58 am
mortfree wrote:
Wed Dec 05, 2018 2:06 am
Surprised people are letting OP go on leaving $45k in a gambling account. (125-80).

There’s such a thing as play money but $45k at risk would be high for me (equivalent to my cash EF)

Know when to fold ‘em
I've come close to commenting about it many times in this thread. A few have. I doubt someone posting their intentions to leave that much in is going to listen to us. Especially when they've already given away $17,000!! of their own money already!

They're going to have to learn the hard way. But I'm not sure someone who's already given away 17k! of their own money previously is open to walk away.

I'm a very knowledgeable and capable poker player, but I only play 1 or 2 times a year. I see a lot of the same people each time I play give away their time and money (lives from what little I know if them). It's a sad, scary thing.

I'm not sayting the OP has a problem, but many develop one.

I wish the OP well. If you're even slightly inclined I can't recommend enough to close your account and enjoy the fact you walked away from what many can't.
+1

When you win in gambling, stocks, real estate etc. you think it is due to strategy, knowledge, algorithms etc. - underestimating plain old luck. So you keep on playing till you lose your shirt.
Data and knowledge is in vast supply today as never before, but that does not make you wise. Wisdom mostly comes from self experience not other's experiences - when the ego bubble bursts! ☺

FinancialDave
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Re: Reuqesting Help With Managing of Winnings

Post by FinancialDave » Wed Dec 05, 2018 1:05 pm

Henry717 wrote:
Wed Dec 05, 2018 12:15 pm
From what I gather from online searches including a few links posted in this forum, it is

Winnings = All Winnings - Total Entry Fees which would be a significant tax difference compared to All Winnings.

All winnings doesn't make sense as no one would play because nearly every person that plays would owe taxes even if their net outcome was losing.

Playing 100, 10 dollar games and winning one of them for 500 would then result in that person losing 500 dollars net for that day but having to pay taxes on 490 dollars. I realize tax rules don't necessarily have to be intuitive, but it has to be all winnings - total entry fees. That said, I had no winnings until the last couple weeks (4th quarter) so I couldn't pay estimated taxes until now. Hopefully, in the end I will not get penalized. I think I need a better accountant. lol
New 2018 tax rules have made it tougher on the gambler in this regard -- the standard deduction for MFJ is now $24,000. IF you are no where close to meeting that then your example where you had $490 net winnings and $510 losses leaves you with the sad fact that you do have to pay taxes on the whole $490 of winnings as no losses would be deductible.

Let's go a little more extreme as a MFJ taxpayer with $12,000 of deductions you must use standard deduction. You have $12,000 gambling winnings and $20,000 gambling losses. Sorry you have to pay taxes on the $12,000 and can't deduct any of the losses (well maybe you can think of it as being able to deduct the $12,000, but because the $24k SD now equals the $24k itemized deduction all of the $12k winning is taxable. :(

Dave
I love simulated data. It turns the impossible into the possible!

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Doom&Gloom
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Re: Reuqesting Help With Managing of Winnings

Post by Doom&Gloom » Wed Dec 05, 2018 1:37 pm

Henry717 wrote:
Wed Dec 05, 2018 12:15 pm
From what I gather from online searches including a few links posted in this forum, it is

Winnings = All Winnings - Total Entry Fees which would be a significant tax difference compared to All Winnings.

All winnings doesn't make sense as no one would play because nearly every person that plays would owe taxes even if their net outcome was losing.

Playing 100, 10 dollar games and winning one of them for 500 would then result in that person losing 500 dollars net for that day but having to pay taxes on 490 dollars. I realize tax rules don't necessarily have to be intuitive, but it has to be all winnings - total entry fees. That said, I had no winnings until the last couple weeks (4th quarter) so I couldn't pay estimated taxes until now. Hopefully, in the end I will not get penalized. I think I need a better accountant. lol
Be sure to check how your state defines winnings. A few states define it exactly like that and expect taxes to be paid accordingly. (Or at least they did a few years ago. Perhaps there have been recent changes that I am not aware of.) Also check with your accountant if you meet the criteria for declaring this a business rather than a hobby. You may very well qualify; if not this year, then within the next year or two--if you treat this as a business, ie, accurate record-keeping, showing a consistent profit, etc.

Good luck with your taxes and your future play!

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Re: Reuqesting Help With Managing of Winnings

Post by FinancialDave » Wed Dec 05, 2018 1:49 pm

I have to back peddle a bit since it appears these fantasy sites don't exactly report like a casino.

In this case it appears to be Net Winnings on a 1099-MISC that will end up on line 21.

If that is true then I don't see any itemized deductions showing up for losses as they have already been accounted for.


Dave
I love simulated data. It turns the impossible into the possible!

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Re: Reuqesting Help With Managing of Winnings

Post by Henry717 » Wed Dec 05, 2018 2:01 pm

Yes, it is not considered in the same pool as gambling and gets reports on a 1099-MISC form. The net earnings will be identified under Line 3 "Other Income" which gets transferred to line 21. The deductions for losses have been accounted for in that number from that specific site, unless of course you play on multiple sites and win on one and lose on the other. Then, you would have losses to deduct.

Doom and Gloom, lol I expected an entirely different type of post from you after reading your handle, but it was surprisingly sunshine and rainbows. Yes, state consideration is a very good point! Thank you!

averagedude
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Re: Reuqesting Help With Managing of Winnings

Post by averagedude » Wed Dec 05, 2018 2:42 pm

These games do have a level of skill, but your skill level has to go beyond the rake to be profitable. I gamble small stakes with my friends on fanduel, but i only play free head to head games and we pay each other off so no rake is taken. My friends know im good (have a system that takes me a couple of hours) because they usually lose and they dont understand why i dont play. I try to breakdown the math behind the rakes, and they think im stupid for even thinking of this. Some of my friends think they are making money, yet every month or so their account gets low, and they add new money to their account. I beg all of these guys to send me their history files so i can break down their wins,loses,rake, and profitably per sport, head to head, cash games, and tournaments, but no one will do it. This info could actually help them in the future by determining which games and slates to play, but i know it wont because they play everything because they have no discipline. OP, i would suggest that if are going to continue playing these games you should have a bankroll management system where you dont gamble but a fixed percentage per tournament or game and be disciplined and don't deviate from your bankroll strategy. There is a possibility that you could be one of the few disciplined, intelligent, and profitable players.

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BL
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Re: Reuqesting Help With Managing of Winnings

Post by BL » Wed Dec 05, 2018 3:30 pm

You may have checked this info, but if not, this may be helpful:
https://fantasyfootballers.org/law/tax- ... s-players/

trueblueky
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Re: Reuqesting Help With Managing of Winnings

Post by trueblueky » Wed Dec 05, 2018 6:12 pm

Henry717 wrote:
Wed Dec 05, 2018 12:15 pm
From what I gather from online searches including a few links posted in this forum, it is

Winnings = All Winnings - Total Entry Fees which would be a significant tax difference compared to All Winnings.

All winnings doesn't make sense as no one would play because nearly every person that plays would owe taxes even if their net outcome was losing.

Playing 100, 10 dollar games and winning one of them for 500 would then result in that person losing 500 dollars net for that day but having to pay taxes on 490 dollars. I realize tax rules don't necessarily have to be intuitive, but it has to be all winnings - total entry fees. That said, I had no winnings until the last couple weeks (4th quarter) so I couldn't pay estimated taxes until now. Hopefully, in the end I will not get penalized. I think I need a better accountant. lol
Horse racetracks have a take of 16%. On average, you can expect to get 84¢ back on every dollar bet. The track reports winnings over a certain amount to IRS. Winnings of $5,000 or more are subject to mandatory 24% withholding. It is up to the bettor to keep records on the losses. Many people are unable to use the Schedule A deduction for losses up to the amount of winnings. Still people bet on the horses.

I am surprised to learn fantasy sports operate any different. From what I am able to find on-line, it appears the IRS has not ruled on whether fantasy sports are gambling. In November, the NY Supreme Court ruled that DFS are not games of skill, and are gambling. Louisiana had a constitutional amendment on the ballot in November to legalize DFS gambling in all parishes. I don't know of any federal case on this. Although some skill is involved in DFS (and handicapping horses and Texas hold'em), my bet is that they end up being considered gambling unless Congress says otherwise.

Again, make an estimated payment by January 15 if you expect to owe a lot because of this.

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Re: Reuqesting Help With Managing of Winnings

Post by FinancialDave » Thu Dec 06, 2018 12:25 pm

BL wrote:
Wed Dec 05, 2018 3:30 pm
You may have checked this info, but if not, this may be helpful:
https://fantasyfootballers.org/law/tax- ... s-players/
BE CAREFUL with what is said on this page which is NOT IRS advice. It is in fact advice from the fox as to where the chickens should live!

This is just my personal opinion, and not tax advice, but after just a little bit of research, I believe the below is what is going on.

1. When a casino has a drawing or a tournament, winnings from this is reported on a 1099-MISC. This is what the fantasy league that this OP is talking about is doing, as well as the above link.

2. IMPORTANT -- A 1099-MISC can NOT be negative --- so you aren't going to be able to report or deduct any losses on the Schedule A, because you won't get a 1099-MISC if you only have losses from the "tournament site" you are signed up with.

It appears that at this point in time the IRS has not ruled as to whether these sites are considered gambling as opposed to a tournament. The distinction to me is if it was gambling they would be issuing a W2G, but since most issue a 1099-MISC or 1099K it is considered a tournament and the income from the 1099 must be listed on tax return and it is essentially "hobby income" from which no deductions are allowed.


Dave
I love simulated data. It turns the impossible into the possible!

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