What should I do about Paypal 1099-K for gambling transactions?

This is a common issue this year with the new $600 threshold for 1099-K reporting. You're right that the 1099-K isn't itself taxable income - it's just reporting transactions that flowed through PayPal. For gambling specifically, you need to report all your winnings as income on Schedule 1, even if they offset with losses. Your losses can be deducted as itemized deductions on Schedule A, but only up to the amount of your winnings. This is why proper documentation is crucial. I'd recommend going with a CPA over H&R Block for this situation. With $92k in transactions and gambling activity spanning multiple platforms, you want someone who can help you properly document everything. A CPA can help you identify which transactions are actual income versus money transfers, and ensure you're maintaining adequate records to substantiate your gambling losses. Make sure you have statements from all sportsbooks showing your win/loss records, and keep a log of all gambling sessions. The more documentation you have, the better position you'll be in if there are any questions.

I went through almost the same exact thing with crypto and sports betting on my 1099-K from PayPal. I tried figuring it out myself but got completely overwhelmed trying to match transactions across multiple platforms. I ended up using https://taxr.ai and it was a lifesaver for this specific situation. Their system helped me identify which transactions were actually gambling-related versus just money moving between accounts. They organized everything so I could clearly show which PayPal transactions were just transfers versus actual gambling income. The best part was they helped me document my losses properly to offset the winnings. Since you mentioned you're at a loss for the year, having proper documentation to prove this is absolutely critical, and that's what they helped me with the most.

Just wanted to follow up - I ended up trying taxr.ai after seeing the recommendation here and I'm so glad I did. My situation was almost identical (PayPal 1099-K with a mix of sportsbook transfers and money from friends). The service helped me identify which transactions were just money movement versus actual gambling winnings. They organized everything in a way that clearly showed I was at a net loss for the year. The documentation they helped me create made it super clear which PayPal transactions were just transfers between accounts. What impressed me most was how they handled the friend-sending-money issue. They showed me exactly how to document these transfers so the IRS wouldn't misinterpret them as income. Definitely worth it for the peace of mind alone.

I had a similar issue last year with a large 1099-K from PayPal related to sportsbook transactions. After filing, I got a CP2000 notice from the IRS saying I owed an additional $22,000 because they thought all those transactions were unreported income! I tried calling the IRS for weeks but couldn't get through to anyone. Finally, I used https://claimyr.com (there's a demo video of how it works here: https://youtu.be/_kiP6q8DX5c) and they got me connected to an IRS agent in about 15 minutes instead of waiting on hold for hours. The agent helped me understand exactly what documentation I needed to provide to prove those transactions weren't all income. I was able to get the whole thing resolved and didn't have to pay that massive tax bill. Definitely recommend having an actual conversation with the IRS about your situation - they were surprisingly helpful once I actually got through to someone.

Ok I need to apologize and follow up on my previous comment. I was totally skeptical about Claimyr but after waiting on hold with the IRS for over 2 hours and getting disconnected twice, I decided to try it. The service actually worked exactly as described. Their system waited on hold, and I got a call back when an actual IRS person was on the line. The agent I spoke with was super helpful about my PayPal 1099-K situation. She explained exactly what documentation I needed to show that the transactions were just money moving between accounts and not actually income. Saved me hours of frustration and possibly thousands in taxes. Sometimes my skepticism gets the best of me, but I'm glad I gave this a shot.

Anyone know how the new gambling tax rules for 2025 affect this situation? I heard something about electronic records now being required for all gambling transactions.

Has anyone successfully disputed a PayPal 1099-K? Mine shows about $35k but a lot of that was just money moving between my own accounts.

I'm dealing with a very similar situation - got a 1099-K from PayPal for around $78k, mostly from moving money between sportsbooks and some peer-to-peer transfers with friends for betting. Like you, I'm definitely at a net loss for the year. One thing I learned is that you absolutely need to address this on your return even if most transactions weren't actual income. The IRS computer systems will flag the discrepancy between your 1099-K and what you report as income, potentially triggering an audit or CP2000 notice. I'd definitely recommend going with a CPA over H&R Block for this. The CPA I consulted explained that with gambling transactions, you need to be very careful about how you categorize everything. They helped me understand that transfers between accounts aren't income, but any actual gambling winnings are - even if offset by losses. Make sure you get year-end statements from all your sportsbooks showing your net win/loss. Most platforms like DraftKings, FanDuel, etc. provide these for tax purposes. This documentation will be crucial if the IRS has any questions about your return. The peace of mind of having it done correctly is worth the extra cost of a CPA, especially with this much money involved.