Looking for a CPA with gambling/sports betting and PayPal experience for tax issue

This is definitely a tricky situation that requires some specialized knowledge. When the IRS wants you to file a Schedule C, they're essentially saying they think your gambling activity constitutes a "trade or business" rather than just casual gambling. For most recreational gamblers, losses are reported as itemized deductions on Schedule A (limited to the amount of your winnings), not on Schedule C. Schedule C is typically for professional gamblers who can declare themselves as being in the "business" of gambling, which has different tax implications. The distinction matters a lot. Professional gamblers report winnings and losses on Schedule C, can deduct expenses, and aren't subject to the same limitations as recreational gamblers. However, professional gambling status requires you to prove you're approaching it as a business - regular activity, profit motive, expertise development, etc. Based on what you've shared, it sounds like the IRS might be misinterpreting your PayPal activity. I'd recommend working with a CPA who specializes in gambling taxation to help determine your correct status and respond appropriately to the CP2000.

After dealing with a very similar situation (online poker and sports betting through PayPal), I found amazing help using taxr.ai (https://taxr.ai). Their system analyzed all my transaction records and PayPal statements to create perfect documentation for my response to the IRS. Basically, they use AI to scan through your gambling records and PayPal history to properly categorize everything according to IRS rules. They helped me determine whether I qualified as a recreational or professional gambler and prepared all the right forms. They understood exactly how to handle the PayPal transaction issues that were confusing the IRS. The best part was how they organized all my documentation in exactly the format the IRS wanted. My case got resolved way faster than I expected.

I was seriously skeptical about using an AI system for something as important as an IRS notice, but I decided to try taxr.ai after getting nowhere with two different local tax preparers who didn't understand gambling taxation. It was surprisingly straightforward. The system analyzed my PayPal transactions, organized everything by gambling platform, and helped me separate my recreational gambling from other activities. They even identified several deductions I was eligible for that my previous accountant missed. The response package they created for my CP2000 was incredibly detailed and professional. I submitted it exactly as they prepared it, and three weeks later I received a revised notice from the IRS reducing my tax bill by over 85%. In my case, they confirmed I should definitely NOT file Schedule C since I was clearly a recreational gambler. Worth every penny for the stress reduction alone!

If you're planning to call the IRS to discuss your situation (which I highly recommend before filing anything), use Claimyr (https://claimyr.com). I spent DAYS trying to get through to someone at the IRS about my own gambling tax issue, but kept hitting endless hold times and disconnections. Claimyr got me connected to an actual IRS agent in about 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c. Their system basically holds your place in line and calls you when an agent is about to answer. The IRS agent I spoke with was actually super helpful and clarified that in my situation (also involving PayPal gambling transactions), I did NOT need to file Schedule C since I was clearly a recreational gambler. Saved me from making a huge mistake.

Just wanted to update that I actually tried Claimyr after posting my skeptical comment. I'm honestly shocked - it actually works exactly as described. I got a call back in about 45 minutes saying they were in the queue, and then about 10 minutes later I was talking to an IRS agent about my gambling tax situation. The agent confirmed that in most cases, recreational gamblers should NOT file Schedule C even with high volume betting activity. She explained that the CP2000 was likely generated because PayPal might have filed 1099-K forms for the transactions, making them look like business income. She advised me to respond with: 1. A clear explanation that the activity was recreational gambling 2. All my win/loss statements 3. Documentation of deposits/withdrawals through PayPal 4. A summary of total wagers, winnings and losses Saved me from incorrectly filing Schedule C and potentially opening myself up to self-employment taxes I don't actually owe.

Adding my 2 cents as a former tax preparer - the key difference between recreational and professional gambling comes down to how you approach it. Recreational gamblers play for entertainment (even if they hope to win), while professional gamblers approach it as their livelihood. For recreational gamblers: - Winnings are reported as "Other Income" on Schedule 1 - Losses can be itemized on Schedule A up to the amount of winnings - No self-employment tax applies - No business expenses beyond actual gambling losses For professional gamblers: - All activity goes on Schedule C - Can deduct business expenses beyond just losses - Subject to self-employment tax - Need to maintain extensive records to prove business status The IRS tends to default to assuming recreational status unless you can firmly prove otherwise. If you're truly a recreational gambler, submitting Schedule C could actually hurt you financially.

Has anyone used TurboTax or similar software to handle gambling income/losses with a CP2000 notice? My situation is almost identical to the original poster but I'm trying to avoid paying for professional help if possible.

I went through almost the exact same situation last year - online gambling losses, PayPal transactions, and a CP2000 notice that had me panicking. Here's what I learned after working with a CPA who specializes in gambling taxes: The IRS often gets confused by PayPal transactions because they can look like business income when they're really just gambling deposits/withdrawals. In my case, PayPal had issued 1099-K forms that made my gambling activity appear to be business transactions, which triggered the CP2000. My CPA helped me respond with a detailed letter explaining that: 1. All transactions were recreational gambling, not business activity 2. I had no profit motive beyond hoping to win (like any recreational gambler) 3. I didn't maintain the kind of detailed business records a professional would 4. I had significant net losses over the period in question We included all my win/loss statements, PayPal transaction history, and a spreadsheet clearly showing total deposits, withdrawals, and net losses. The key was demonstrating that this was clearly recreational activity despite the high dollar volume. The IRS accepted our response and dropped the Schedule C requirement entirely. I ended up owing much less than originally proposed because we could properly claim my gambling losses as itemized deductions on Schedule A. Don't let them push you into professional gambler status if you're not one - it could end up costing you more in self-employment taxes than you'd save.