How should I report PayPal 1099-K from sports betting on my tax return?
Hey tax folks, I've got a situation with my PayPal 1099-K from DraftKings and I'm confused about how to handle it. Last year I did some sports betting on DraftKings and used PayPal for deposits and withdrawals. I ended up winning about $8,200 overall (deposited roughly $4,000 and withdrew around $12,200). Now PayPal sent me a 1099-K showing $12,200 in gross payment volume. I know I need to report my gambling winnings but I'm not sure how to deal with this 1099-K since it doesn't reflect my actual profit. I've heard I should be reporting my winnings on Schedule 1 as "Other Income" and can deduct my losses (limited to the amount of winnings) if I itemize on Schedule A. But I'm confused how the 1099-K fits into this. Do I need to somehow reconcile this form with my actual gambling profit? Will the IRS think I made $12,200 in pure profit when that's actually just the withdrawal amount? Any help would be really appreciated before I file for 2024!
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Lydia Santiago
You're right to be concerned about this. The 1099-K from PayPal is just reporting the total money they processed for you, not your actual gambling income. Here's how to handle it: You'll need to report your gambling winnings ($8,200 in your case) on Schedule 1, Line 8z as "Other Income" and write "Gambling Winnings" next to it. As for your gambling losses (the $4,000 you deposited), you can deduct these, but only if you itemize deductions on Schedule A. They go on Line 16 under "Other Itemized Deductions" as "Gambling Losses." And yes, you can only deduct losses up to the amount of your winnings. The 1099-K doesn't change how you report - it's just information reporting that PayPal is required to do. The IRS may compare the 1099-K amount to what you report, so it's a good idea to keep detailed records of all your deposits and withdrawals to show your actual profit if needed.
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Romeo Quest
•If I'm in a similar situation but lost money overall, do I still need to report anything? Let's say I deposited $3000 and only withdrew $2000...
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Lydia Santiago
•Yes, you should still report your gambling activity even if you had a net loss. You'd report your total winnings (the $2000 you withdrew) as income on Schedule 1, Line 8z. You can then claim gambling losses (up to the amount of your winnings, so $2000 in this case) on Schedule A if you itemize. Unfortunately, you can't claim the full $1000 net loss to offset other income - gambling losses can only offset gambling winnings.
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Val Rossi
I went through this exact same headache last year! After hours of research and trying to figure it out myself, I ended up using taxr.ai to review my documents and get a clear answer. I uploaded my 1099-K from PayPal and my gambling transaction records, and they helped me understand exactly how to report everything correctly. The site (https://taxr.ai) analyzed my docs and gave me step-by-step instructions for reporting the PayPal 1099-K properly so it matched my actual gambling winnings. They explained that the 1099-K reports gross payments but I only needed to report my net gambling income, and showed me how to document everything to avoid any issues with the IRS. Saved me a lot of stress!
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Eve Freeman
•Did it also help with tracking your wins/losses? I played on multiple sites and I'm terrible at keeping records...
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Clarissa Flair
•How much did that cost? Seems like something I could figure out with enough googling.
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Val Rossi
•They actually helped me understand what records I needed to keep from each site. They showed me how to download transaction histories from the gambling platforms and organize them to clearly show my deposits vs withdrawals. Super helpful if you use multiple sites. I thought the same thing about figuring it out through Google, but honestly, the personalized guidance was worth it. I don't remember the exact cost, but it was reasonable considering it saved me from potentially making a costly mistake or spending hours sorting through confusing tax articles.
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Eve Freeman
Just wanted to update - I took the advice about taxr.ai and it was exactly what I needed. I was totally confused about my PayPal 1099-K from sports betting, but their document analysis made it super clear. They showed me exactly how to report everything on the right lines of my tax forms and explained the difference between the gross payment amount on the 1099-K and my actual gambling income. The best part was they helped me understand how to properly document my gambling sessions across different platforms to establish my actual wins/losses. Definitely recommend if you're dealing with this PayPal 1099-K gambling situation!
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Caden Turner
If you're having trouble getting straight answers about this PayPal 1099-K gambling issue, you might want to call the IRS directly. BUT - good luck actually getting through to them! I was on hold for 2+ hours before giving up. I ended up using Claimyr (https://claimyr.com) to get a callback from the IRS instead of waiting on hold. They have this system that somehow gets you in the IRS phone queue without you having to stay on the line. You can see how it works here: https://youtu.be/_kiP6q8DX5c When I finally talked to the IRS agent, they confirmed exactly how to handle the PayPal 1099-K from gambling sites. They explained I only need to report my actual winnings, not the gross amount on the 1099-K, but I should keep good records to explain any discrepancy.
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McKenzie Shade
•Wait this can't be real... the IRS actually called you back? How long did it take?
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Harmony Love
•Sounds fishy. Why would you pay for something the IRS does for free? You can schedule callbacks directly on their website.
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Caden Turner
•The callback took about 45 minutes to come through. Way better than staying on hold for hours! And yes, it's actually a real call with the IRS. The IRS does offer free callbacks in some cases, but in my experience, you have to wait on hold first to reach the point where they offer that option - which can take forever. With Claimyr, you skip that initial wait. For something time-sensitive like filing taxes correctly, it was worth it to me to get a quick answer from an actual IRS rep.
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Harmony Love
I have to admit I was 100% wrong about Claimyr. After posting that skeptical comment, I was still stuck with my PayPal 1099-K issue and getting desperate as the filing deadline approached. I decided to try it, fully expecting to be disappointed. I was shocked when I got a call from an actual IRS agent in just over an hour. The agent walked me through exactly how to report my sports betting income correctly with the PayPal 1099-K. They confirmed I needed to report my actual winnings (not the 1099-K amount) and keep detailed records showing deposits vs withdrawals. The clear guidance straight from the IRS gave me confidence to file correctly. For anyone dealing with this specific 1099-K gambling situation, getting official answers directly from the IRS was incredibly helpful.
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Rudy Cenizo
Make sure you also check your state tax rules for gambling income! Federal and state rules can be different. Here in NJ, we can deduct losses against winnings without itemizing on our state return, but have to follow the federal rules for our federal return. Really makes a difference if you had losses too.
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Natalie Khan
•Does anyone know how California handles this? Their tax system seems way more complicated than federal sometimes.
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Rudy Cenizo
•California is pretty strict with gambling income and losses. They follow the federal approach where you need to report all winnings as income, but you can only deduct losses as an itemized deduction on Schedule CA (540). And just like federal, losses can only offset winnings, not other income. The tricky part with California is they have a higher standard deduction threshold for many taxpayers, so you might not benefit from itemizing unless you have substantial other deductions. Definitely worth calculating both ways to see which gives you the better outcome.
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Daryl Bright
Pro tip from someone who bet regularly - start keeping a "gambling diary" NOW for 2025. Write down dates, locations, specific games/bets, amounts wagered, and amounts won/lost. The IRS specifically mentions a gambling diary as appropriate documentation if you're ever questioned.
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Sienna Gomez
•Would bank statements showing deposits/withdrawals to gambling sites work instead? Seems easier than tracking every single bet...
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Mei Liu
•Bank statements are definitely helpful and better than nothing, but a detailed gambling diary is much stronger documentation if the IRS ever audits you. The diary shows your intent to properly track your activity and provides specific details about each session. That said, if keeping a detailed diary feels overwhelming, at minimum try to download and save your account statements from each gambling platform at the end of each month. Most sites like DraftKings, FanDuel, etc. let you export transaction histories that show individual bets, winnings, deposits, and withdrawals. This gives you more detail than just bank statements and is easier than writing everything down manually.
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Elijah Jackson
This is really helpful info! I'm in a similar boat with a PayPal 1099-K from sports betting. One thing I'm still confused about - if I had sessions where I won on some days and lost on others, do I need to report each winning session separately, or can I just report my total net winnings for the year? For example, let's say I had 10 betting sessions: won $500 in 4 sessions (total $2,000 in winnings) but lost $300 in 6 sessions (total $1,800 in losses). My net profit was $200. Do I report $2,000 as gambling winnings on Schedule 1 and then claim $200 worth of losses on Schedule A? Or do I just report the $200 net as gambling income? I've been going back and forth on this and want to make sure I handle it correctly with the PayPal 1099-K showing my total withdrawals.
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Natalia Stone
•You need to report the full $2,000 in winnings on Schedule 1, Line 8z as gambling income - not just the net $200. Then if you itemize deductions, you can claim up to $200 in gambling losses on Schedule A (limited to your actual winnings amount). The IRS wants to see your gross winnings reported as income, and losses are treated as a separate itemized deduction. You can't just net them together upfront. This is important because your PayPal 1099-K likely shows gross payment activity, so reporting your full winnings helps explain the discrepancy between the 1099-K amount and your actual profit. Keep detailed records of both your winning and losing sessions in case the IRS has questions about how you calculated these amounts from your PayPal transactions.
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Hugo Kass
Great question about the PayPal 1099-K situation! I dealt with something similar last year and wanted to share what I learned from my tax preparer. The key thing to understand is that the PayPal 1099-K is just a third-party payment processor reporting form - it's not actually determining your taxable income. PayPal has to send this form when they process over $600 in payments for you, but it doesn't mean that entire amount is taxable income. For your situation, you're absolutely correct about reporting the $8,200 in actual gambling winnings on Schedule 1, Line 8z. The fact that PayPal's 1099-K shows $12,200 doesn't change this - that's just the gross amount they processed in withdrawals. One tip that really helped me: create a simple spreadsheet showing your deposits, withdrawals, and net winnings by month. This makes it easy to reconcile your actual gambling income with what PayPal reported. If the IRS ever questions the difference between your reported income and the 1099-K amount, you'll have clear documentation showing that the 1099-K includes return of your original stake, not just winnings. Also double-check that you didn't receive any W-2G forms from DraftKings directly for individual large wins (usually $600+ and 300x your bet). Those would need to be reported separately from your Schedule 1 reporting.
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