How to handle Paypal 1099-K for gambling transactions? Tax filing advice needed

This is actually a common situation with the new 1099-K reporting thresholds. The key thing to understand is that PayPal is just reporting the gross transaction amount - not your taxable income. You'll need to report your gambling winnings as income on Schedule 1, but you can also deduct your gambling losses (up to the amount of your winnings) on Schedule A if you itemize deductions. The most important thing is having good documentation. You should gather: 1) All deposits and withdrawals to/from sportsbooks 2) Records showing which transactions were just transfers between friends 3) Documentation of your gambling sessions showing wins and losses For your specific situation with the friend transfers, you'll need clear records showing those weren't gambling income/losses but just money movement. The 1099-K threshold changed recently, which is why more people are getting these forms even for non-taxable transactions.

I went through something similar last year with DraftKings transactions showing up on my PayPal 1099-K. I was totally stressed until I discovered https://taxr.ai which honestly saved me hours of headaches. Their system analyzed all my PayPal transactions and separated the actual gambling income from the money transfers and deposits. What I liked was that it created a detailed report showing which transactions were taxable and which weren't, and gave me documentation I could use if I ever got audited. The report even separated out the friend transfers versus actual gambling activity, which sounds exactly like what you need.

Just wanted to update - I decided to try taxr.ai after reading about it here and it was exactly what I needed. I had about $75K in PayPal transactions (mostly DraftKings and FanDuel) plus some money I was handling for my brother. The system organized everything into neat categories and clearly identified which portions were actual gambling transactions versus just money movement. The documentation it generated clearly showed my net gambling losses for the year which I can use to offset my winnings. It even flagged transactions that looked like friend transfers so they wouldn't be counted as gambling activity. Saved me from panicking about a much higher tax bill!

For what it's worth, I had a similar issue last year and spent WEEKS trying to get someone at the IRS to clarify how to handle my 1099-K from PayPal for gambling. Impossible to get through on the phone. Then someone recommended https://claimyr.com to me and shared this demo: https://youtu.be/_kiP6q8DX5c They got me connected to an actual IRS agent in about 15 minutes when I'd been trying for days. The agent walked me through exactly how to report the 1099-K amounts properly and which forms to use for my gambling wins/losses. Totally worth it for the peace of mind knowing I was filing correctly.

Had to come back and eat my words. After struggling for another week trying to reach the IRS myself about my own 1099-K gambling situation, I broke down and tried Claimyr. Got connected to an IRS rep in about 20 minutes who gave me specific guidance about my sports betting transactions. The agent confirmed I needed to report all winnings as income but could deduct losses (up to my winnings amount) if I itemize on Schedule A. She also clarified that money just passing through my account (like when I deposit/withdraw from sportsbooks or handle money for friends) isn't taxable income. Definitely file with a professional who understands gambling tax situations.

Based on the amounts you're talking about, I'd definitely recommend a CPA over H&R Block. Find someone who specifically has experience with gambling income/losses. I went with H&R Block for a similar situation last year and ended up having to go to a CPA anyway to fix several mistakes. Make sure your recordkeeping is solid - screenshots of all your bets, deposits, withdrawals, etc. The more documentation you have, the better. And definitely separate out your friend's activity from yours.

Don't overlook the fact that if you do have gambling losses, you can only deduct them if you itemize deductions on Schedule A! This caught me off guard last year - I had to give up my standard deduction to claim my gambling losses. Run the numbers both ways to see which gives you the better outcome.

I went through almost the exact same situation last year with my PayPal 1099-K showing around $85K in transactions from sports betting activities. The key thing that helped me was creating a detailed spreadsheet that separated: 1) Actual deposits TO sportsbooks (not taxable income) 2) Withdrawals FROM sportsbooks (potential winnings) 3) Money transfers with friends (definitely not taxable) 4) Net gambling wins/losses by session The 1099-K is just PayPal reporting gross payment volume - it's NOT all taxable income. You'll only pay tax on your net gambling winnings (if any). Since you mentioned having net losses, you might not owe additional tax from gambling at all. For the friend situation, keep clear records showing when money was just passing through your account versus actual gambling activity. Text messages, Venmo descriptions, etc. can all serve as documentation. I'd recommend going with a CPA who has gambling tax experience rather than H&R Block. The cost difference was worth it for the peace of mind and proper documentation.

I'm dealing with a very similar situation right now! Got my PayPal 1099-K showing about $67K in transactions, mostly from DraftKings and some peer-to-peer transfers for betting pools with friends. One thing I learned from my preliminary research is that you absolutely need to keep the friend transactions separate from your actual gambling activity. The IRS doesn't care about money that just flows through your account - they only want to tax actual gambling winnings. I'd definitely lean toward finding a CPA with gambling tax experience. I called around to a few tax preparers and was shocked at how many weren't familiar with the new 1099-K reporting requirements or how to properly handle online gambling situations. Also, start gathering your documentation now if you haven't already. Most sportsbooks let you download your complete betting history, which makes creating that detailed record much easier. Don't wait until tax season when you're stressed and rushing to get everything together. The good news is that if you truly had net losses for the year, you shouldn't owe tax on gambling income - but you still need to report everything correctly to avoid any red flags with the IRS.