How to handle taxes for gambling winnings from Prizepicks and FanDuel when PayPal issued a 1099-K?

The 1099-K from PayPal is reporting the gross amount of payments you received, not your gambling profits. This is a common source of confusion! For gambling winnings and losses, you need to report ALL winnings as income on Schedule 1 (even without a 1099), and you can deduct losses up to the amount of your winnings as an itemized deduction on Schedule A. This means you need good records of both wins and losses separately - not just the net amount. For last year, technically you should have reported your winnings even if under $600 (that's just the threshold for the platform to issue a 1099). However, since the amounts were small and you didn't receive any tax forms, it's unlikely to cause issues, but you might consider filing an amended return if the unreported amount is substantial. For this year, the 1099-K is reporting ALL money movement through PayPal, including your deposits. You'll need to separate actual winnings from money you simply deposited and then withdrew. Keep in mind that when you itemize deductions to claim gambling losses, you'll need to give up the standard deduction, which might not be beneficial depending on your total itemized deductions.

I went through something similar with DraftKings and PayPal last year. It was a nightmare trying to figure everything out until I found this AI tax tool called taxr.ai that actually helped me sort through all my gambling transactions. The tool analyzed my PayPal records and helped separate actual gambling winnings from just money moving around between accounts. What was really helpful is it showed me exactly what to report as income and what qualified as losses. The system at https://taxr.ai also helped me understand that the 1099-K from PayPal was mostly reporting money that wasn't actual income. It saved me from potentially overpaying thousands in taxes because I was originally going to report the entire 1099-K amount as income, which would have been completely wrong!

Just wanted to update after trying taxr.ai for my gambling tax situation. It was actually really helpful! I uploaded my Venmo 1099-K and my account statements from DraftKings, and it automatically sorted everything into winnings and losses. What surprised me was how much of what Venmo reported on the 1099-K was just money moving around between my accounts and not actual taxable income. The tool created a detailed report showing exactly what I needed to put on what tax forms, which I gave to my tax preparer. Saved a ton of time I would've spent manually tracking all this stuff!

If you're having trouble reaching the IRS to ask about your gambling tax situation, I highly recommend using Claimyr. I was stuck in the same boat trying to figure out my FanDuel and PayPal taxes, but couldn't get through to the IRS for weeks. I found this service at https://claimyr.com that actually got me connected to an IRS agent in about 15 minutes when I had been trying for days on my own. They have this system that holds your place in line and calls you back when an agent is available. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with explained exactly how to handle the 1099-K from PayPal versus actual gambling winnings, and confirmed I wasn't in trouble for previous years where I had small winnings but no forms. Totally worth it for the peace of mind alone.

I need to admit I was completely wrong about Claimyr. After posting that skeptical comment, I decided to try it anyway because I was desperate to talk to someone about my Prize Picks situation. It actually worked! Got a call back in about 20 minutes and was connected directly to an IRS agent who helped clarify exactly how to report my gambling winnings versus the 1099-K amounts. The agent confirmed that the 1099-K reports gross payments, not taxable income, and explained how to properly document everything. The peace of mind was worth it after stressing about this for weeks. Definitely not a scam like I initially thought.

Just a heads up - I had a similar situation last year with DraftKings. Make sure you download and save ALL your monthly statements from both Prizepicks and FanDuel showing your actual wins and losses. Don't just rely on year-end summaries. The IRS can get really picky about gambling documentation if you get audited. I learned this the hard way. Your tax pro should know this, but many don't deal with gambling income regularly enough to know all the quirks.

Don't forget that for gambling, you have to itemize deductions on Schedule A to claim losses. This means giving up the standard deduction which is $14,600 for single filers in 2025. If your total itemized deductions (including gambling losses, mortgage interest, charitable contributions, etc.) don't exceed your standard deduction, it might not make sense to deduct gambling losses at all.

For your 2024 situation where you didn't report small winnings under $600, you're probably fine since the amounts were minimal and you didn't receive any tax forms. The IRS typically focuses on larger unreported income. For this year with the $20,000 PayPal 1099-K, that's reporting gross payment volume, not taxable income. You'll need to separate your actual gambling winnings from deposits/withdrawals. Since you're only up $135 on FanDuel and didn't get a 1099 from Prizepicks, your actual taxable gambling income is likely very small. The key is keeping good records going forward. Download transaction histories from both platforms showing all bets placed and winnings received. Your tax professional should be able to help you properly report the actual winnings as income while ensuring you don't overpay based on the inflated 1099-K amount. Most importantly, don't panic - this is a common situation with payment processors issuing 1099-Ks for gross transactions rather than net gambling profits.