Reporting 1099K from PayPal sports betting wins - tax implications?

So I'm in a bit of a situation with my taxes this year. I received a 1099K from PayPal showing $9,860 in transactions, but this is all from deposits I made to Hard Rock sports betting. The thing is, I don't have a W-2G because I apparently didn't hit whatever threshold is needed to get one of those. I've got my complete win/loss statement from Hard Rock that breaks everything down - what I put in, what I took out, my wins, and my losses. From what I understand, the 1099K is just tracking money movement, not actual taxable income. I was using H&R Block's software and it mentioned something about not adding the 1099K directly and instead reporting gambling winnings/losses separately, but the software crashed before I could finish reading the explanation. Do I need to report all the transactions shown on the 1099K as income? Or just my actual net winnings from the betting? I'm worried the IRS is going to think I made $9,860 in income when that's really just money moving around between my PayPal and the betting platform. Anyone dealt with this before? Tax day is getting closer and I'm getting anxious!

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20 comments

Sofía Rodríguez

•8M

You're on the right track! The 1099-K is indeed just reporting payment transactions, not your taxable gambling income. What matters for tax purposes is your actual gambling winnings and losses. Here's what you need to do: Report your gambling winnings as "Other Income" on Schedule 1 of your 1040. You can then deduct your gambling losses (up to the amount of your winnings) as an itemized deduction on Schedule A. This is important - you can only deduct losses if you itemize deductions, and only up to the amount you won. Make sure you keep that win/loss statement from Hard Rock as supporting documentation. The IRS may question the discrepancy between your 1099-K amount and what you report as gambling income, so having this documentation is crucial for explaining that the 1099-K amount represents transactions, not taxable income. I recommend noting in your tax return that the 1099-K represents deposits to a gambling platform, not gambling proceeds. This can help avoid confusion during processing.

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Sofía Rodríguez

•8M

Even if you had a net loss, you should still report your gross winnings as "Other Income" on Schedule 1. Then you can deduct your losses (but only up to the amount of your winnings) on Schedule A if you itemize. Unfortunately, you cannot deduct more than you won, so if you lost more than you won, you can only deduct up to your winnings amount. The reason you need to report this is because the IRS has received the 1099-K showing transactions, and if you don't address it on your return, it may trigger questions. By reporting the gross winnings and then deducting losses properly, you create a paper trail that explains the 1099-K amounts.

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Aiden O'Connor

•8M

I had almost the exact same situation last year with DraftKings and PayPal. After hours trying to figure it out, I used taxr.ai (https://taxr.ai) to analyze my gambling records and 1099-K. The software immediately identified that my 1099-K was from gambling deposits, not actual income, and walked me through exactly how to report it correctly. You upload your 1099-K and win/loss statement, and it breaks down what goes where on your tax forms. It showed me how to properly report my winnings on Line 8 of Schedule 1 and my losses on Schedule A. The best part was it generated a detailed explanation I could include with my return explaining why the 1099-K amount didn't match my reported gambling income.

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Aiden O'Connor

•8M

It definitely works with FanDuel and pretty much any major sportsbook. I've seen people use it with FanDuel, BetMGM, and Caesars too. The system is designed to recognize the different statement formats and standardize the information for tax reporting. As for whether TurboTax or H&R Block can handle this - they can, but they don't specifically guide you through the gambling transaction vs. gambling income distinction with 1099-Ks. They'll let you enter the information but don't provide the detailed analysis of what's actually taxable. The explanation document that taxr.ai generates was actually really helpful when I got a letter from the IRS questioning the discrepancy.

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Zoe Papadopoulos

•8M

Just wanted to follow up - I ended up trying taxr.ai for my FanDuel/Venmo situation and it was surprisingly helpful. The system immediately recognized my statements and sorted everything out. The coolest part was it showed me that some of my transactions were actually being double-counted in the raw data, which would have meant paying taxes on money that wasn't actually income. It created this detailed report explaining exactly why the 1099-K amount was not the same as my taxable gambling income. Already filed my taxes with the corrected info and I'm much more confident now. Wish I'd known about this last year when I probably overpaid by reporting all my PayPal transactions as income!

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Zoe Papadopoulos

•8M

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Fatima Al-Rashid

•8M

If you're getting nowhere with the IRS about your 1099-K gambling situation, I'd recommend using Claimyr (https://claimyr.com). I was in a similar boat last year where the IRS sent me a notice saying I underreported income because they saw my 1099-K but not the offsetting losses. Spent weeks trying to call them with no luck - always "high call volume" messages and disconnects. Used Claimyr and they got me connected to an IRS agent in about 15 minutes. The agent actually helped me understand exactly how to document everything to resolve the issue. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. Honestly was shocked at how quickly I got through.

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Fatima Al-Rashid

•8M

They don't call for you - they monitor the IRS phone system and alert you the moment they detect an open line. You make the call yourself when they notify you. It's basically like having someone repeatedly call for you, but it's automated. The reason it works is because the IRS phone system isn't consistently busy - there are windows of availability that are nearly impossible to hit manually. Their system detects these windows and alerts you immediately when one opens. And no, it's definitely not a scam. I was super skeptical too, but when you're facing potential fines over a misunderstanding about gambling transactions, you get desperate. I went from spending hours hearing "due to high call volume" messages to talking to an actual IRS agent who helped resolve my issue. The documentation they helped me prepare is exactly what kept me from getting hit with underreporting penalties.

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Aaliyah Jackson

•8M

I have to eat my words about Claimyr. After my skeptical comment, I was still struggling with a similar 1099-K issue from PokerStars transactions, so I reluctantly tried it. Got through to the IRS in about 20 minutes on a Monday morning, which I thought would be impossible. The agent confirmed exactly what others have said here - the 1099-K shows transactions, not income, and I needed to report actual gambling winnings separately from the 1099-K amount. They walked me through exactly how to document everything so it wouldn't trigger an audit. Most importantly, they made a note in my file about the 1099-K being related to gambling transactions, which should prevent automated letters about mismatched income reporting. Wish I'd done this sooner instead of stressing for weeks!

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KylieRose

•8M

Quick tip from someone who's been gambling online for years: KEEP METICULOUS RECORDS OF EVERYTHING! The 1099-K issue is just the tip of the iceberg. Your win/loss statement from Hard Rock is gold - don't lose it. Also track all deposits/withdrawals separately yourself. When I got audited in 2022, my own spreadsheet tracking actually saved me because the casino's records had some errors. Also worth noting: if you're using multiple betting platforms, you need to aggregate all your gambling wins and losses together. You can't just selectively report the platforms where you lost money while reporting winnings from others.

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KylieRose

•8M

Fantasy sports are treated as gambling winnings for tax purposes, yes. The IRS doesn't distinguish between traditional sports betting, fantasy sports contests, poker, or casino games - it's all considered gambling income. For DraftKings daily fantasy, you'd follow the same process - report your winnings as "Other Income" on Schedule 1, and if you itemize deductions, you can deduct your losses (up to the amount of your winnings) on Schedule A. Make sure you're keeping records of all your contest entries and winnings, not just the 1099-K from payment processors.

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Gavin King

•3M

This is exactly why proper record-keeping is so crucial for online gambling! I went through a similar situation with BetRivers and Cash App transactions last year. The key thing to remember is that the 1099-K threshold dropped to $600 in 2022, so a lot more people are getting these forms now who never received them before. This is causing massive confusion because people think they owe taxes on the full amount shown. One thing I'd add to the great advice already given - if you're planning to continue sports betting, consider opening a dedicated bank account just for gambling transactions. This makes it much easier to track deposits, withdrawals, and actual net gains/losses for tax purposes. It also helps separate your gambling activity from your regular finances, which can be helpful if the IRS ever has questions. Also, don't panic about the 1099-K! The IRS is aware that these forms often show transaction volume rather than taxable income, especially for gambling and online sales. As long as you report your actual gambling winnings correctly and keep good documentation, you'll be fine.

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