Fall means many different things for many different people. Fall means bonfires, falling leaves, pumpkin flavored EVERYTHING and football season! Football has become even more popular as a spectator sport in recent years because of the prevalence of fantasy football leagues. A 2012 Forbes article reports that over 32 million people participated in fantasy sports leagues in 2010, and this number continues to grow. Some of these leagues are just for fun, but a growing number of leagues are played for the chance to win a sometimes-substantial prize pool at the end of the season.
Winning money in your fantasy football league could give you some extra cash to pick up pizza for your Super Bowl party or buy season tickets next year, but did you think about the possible implications? It is possible that your winnings from your fantasy football league may be taxable. Learn a bit more about this possibility so you can better prepare for the “what-ifs” in case you find yourself picking a winning team this year.
So, you won – now what? Many people mistakenly believe that money that you win is not considered income. While there is no specific law in place that covers fantasy sports, in general if it is income of any type it should be reported, especially if you win a significant amount. One loophole that many try to exploit is trying to counter wins with years of losses. This does not work because each tax year is a separate entity in the eyes of the IRS. So, just because you lost your $100 entry fee the last 10 years, that $1000 you earned this year is still considered earnings.
It is vitally important that you check into any paperwork you are given from the person or organization that runs your fantasy football league. If you get any sort of document stating an amount you earned, you need to make certain that you claim this amount on your taxes. However this does not mean that you are “off the hook” if you do not receive paperwork. You should still look into claiming this income too. The last thing you want is to deal with the uncomfortable situation of an audit in the future!
So, you want to report this income, how do you do it? Fantasy football earnings do not really fall under the gambling earnings umbrella, so instead you will usually file this under a 1099-Misc. While this is not a hard and fast rule, it can be a good place to start when you are looking at the best way to report your fantasy football earnings.
Taxes are a complex matter – especially if you have miscellaneous earnings like those from fantasy sports. Don’t go at it alone. Taxbrain is a full-service online tax program that can help you every step of the way. In addition to offering online filing, we offer the most comprehensive tax support program on the web. Check out our service and get started today – or after you’re done watching the big game!