fantasy sports

Football and some fantasy sports games are back

By Bankrate

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

taxes-blog-fantasy-football-and-sports-games-are-back-getty-mst

The 2016 Summer Olympics are underway, but fans of American football — not the soccer being played in Rio — also are celebrating.

The National Football League kicks off its 2016 season this week with preseason games across the country.

That also means that fantasy sports leagues are shaping up. And there’s some good news for players of the daily fantasy games.

More states are saying the daily games are good to go within their borders.

Fantasy sports comeback

In 2015, daily fantasy sports, or DFS, came under fire from most states’ attorneys general. The states’ top legal officers generally contend that DFS represent illegal gambling, not games of skill as the fantasy sports operators argue.

In many states, the game companies stopped accepting players from those locations.

DraftKings and FanDuel, the two biggest DFS operations, took their cases to state legislatures and are seeing some success.

So far, 12 states — Colorado, Indiana, Kansas, Maryland, Massachusetts, Mississippi, Missouri, New York, Rhode Island, Tennessee, West Virginia and Virginia — have legalized daily fantasy sports. Legislation to do the same has been introduced in most of the other states across the country.

Those pending bills could pick up steam now that New York, the state that thrust the DFS-gambling controversy into the spotlight last year, has officially sanctioned the games. Before DraftKings and FanDuel pulled out of the Empire State, there were more New York daily fantasy players than in any other state, according to research firm Eilers & Krejcik Gaming.

Fantasy sports’ state payoff

Some lawmakers remain concerned about the cost of problem gambling. A 2011 Baylor University study found that each additional pathological gambler costs society more than $9,000 per year.

Anti-gambling groups argue that assembling virtual line-ups of athletes in order to win money on the fantasy teams is tantamount to gambling.

But other lawmakers see how popular sports and betting are with their constituents. Viewed from a cold, fiscal perspective, these legislators see how this convergence presents financial potential for their states.

Where DFS have been legalized, there is corresponding regulation. The states will issue permits and collect licensing fees from the operators.

Many state treasuries also will collect, or at least try to, taxes from the winners of DFS games. Like other gambling proceeds or prize winnings, the Internal Revenue Service and most state tax collectors view fantasy sports payouts as taxable income.

Given the state of many state budgets, look for fantasy sports to continue to make inroads.

Do you play fantasy sports? Has your participation been curtailed by your state? Most importantly, do you pay taxes on your winnings?

Paul S. Herman CPA, a tax expert for individuals and businesses, is the founder of Herman & Company, CPA’s PC in White Plains, New York.  He provides guidance and strategies to improve clients’ financial well-being.

Daily fantasy sports and real taxes

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

By Bankrate

taxes-blog-daily-fantasy-sports-wins-losses-taxes

Virginia says it’s OK. New York is still fighting it in the courts. And Texas reached a legal settlement over it.

“It” is fantasy sports. Defenders say the activity is a game of skill. Opponents say chance dominates the outcomes, making it a way to place illegal bets on sporting events.

And it is heading into high gear this month in conjunction with March Madness, the annual tournament to crown the best men’s college basketball team in the United States. Conference tournaments are now underway, with the Big Dance invitations going out on March 13.

Lots of money involved

While there’s disagreement as to whether fantasy sports are gambling or just clean sports fun, there’s no argument that the games are a collective cash machine.

Fantasy Sports Trade Association research found that 56.8 million people in the United States and Canada played fantasy sports in 2015, spending an average of $465 each on their online game-related activities.

Outside research firms estimate that daily fantasy sports games generated around $2.6 billion in entry fees in 2015 and will grow 41% annually, reaching $14.4 billion in 2020.

That money is a key reason why some states are trying to kick fantasy sports out of their jurisdictions and others are welcoming the games.

A provision in the Unlawful Internet Gambling Enforcement Act of 2006 defines fantasy sports as games of skill, not chance, thereby making them legal, at the federal level, to play online. But states still have the final say on what is and isn’t gambling within their borders.

State-by-state fantasy sports fights

New York launched the highest profile fight against fantasy sports last November, when the Empire State attorney general filed suit against industry leaders DraftKings and FanDuel.

The state contends the games are no different than Vegas bookies, offering players “a way to bet on existing sporting events, nothing more.”

New York also wants the sites to compensate players in the state for all the money they’ve ever lost on fantasy games. The total, including fines, could top $4 billion. The games are continuing, pending a hearing expected this spring.

Texas’ top lawyer filed similar actions against the fantasy sports leagues and has had more immediate success. FanDuel recently agreed to cease operations in the Lone Star State by May 2.

In Virginia, however, the fantasy games are welcome. On March 17, the Old Dominion’s government signed a law that officials there say will protect consumers and legitimize businesses such as FanDuel and DraftKings.

Virginia’s Fantasy Contests Act takes effect in July and applies to any online fantasy sports games, both season-long and daily competitions, that charge an entry fee. Fantasy sports companies will have to pay Virginia a $50,000 registration fee to be in compliance.

Regardless, winnings are taxable

In addition to the money from the companies, Virginia also will be collecting taxes from fantasy sports players whose fake teams pay off.

Actually, even in states that contend the games are illegal gambling, fantasy sports players still are supposed to pay taxes on all their winnings.

Ditto for folks who pocket a little extra cash in the less formalized office pools that will be popping up as soon as the NCAA’s annual men’s college basketball championship tournament brackets are set.

You would think March Madness would be a boon for the Internal Revenue Service and state tax departments. You would be wrong.

The FBI estimates that more than $2.5 billion is illegally wagered on March Madness each year. And while proceeds from illegal activities are taxable — remember, that’s how they put Al Capone in Alcatraz — the reality is that the tax collector gets very little — OK, none — of the taxes due on winnings from illegal wagers.

That lost tax revenue is the tournament’s one sure bet.

Do you play fantasy sports? Do you report all your winnings on your taxes? Most importantly, do you have any special insight or inside info on which team will be the 2016 NCAA champ?

Paul S. Herman CPA, a tax expert for individuals and businesses, is the founder of Herman & Company, CPA’s PC in White Plains, New York.  He provides guidance and strategies to improve clients’ financial well-being.

Fantasy sports cutting into casino tax revenue

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

By Bankrate

taxes-blog-fantasy-sports-cutting-into-casino-tax-revenue

Lots of states have gambled on casinos as a way to raise revenue needed to help balance budgets and pay for new projects. For years, that’s been a good bet.

The latest data from the American Gaming Association shows that casinos paid $8.6 billion in taxes to states and local communities in 2012.

But the times are changing, primarily because of these kids today.

Stateline, a publication of The Pew Charitable Trusts, reports that casinos across the nation are suffering from a generation gap as young people turn to electronic games they can play on smartphones.

Entertainment generation gap

Traditional casino options, such as slot machines, are preferred by older gamblers. These types of games also depend largely on luck.

Millennials, however, tend to favor things that require more skill and decision-making, such as fantasy sports. These also are games they can play anywhere on an app.

Casinos are scrambling to come up with new ways to satisfy the younger generation’s entertainment preferences and keep the tax money flowing. They’re betting on hybrid games that combine traditional gambling games of chance with the skills associated with younger players’ online favorites.

Fantasy games, real taxes

Meanwhile, as fantasy sports participation grows, tax collectors must make sure they collect the very real taxes due on the money paid out by the games’ organizers.

There are nearly 57 million fantasy sports players in the United States and Canada, according to the Fantasy Sports Trade Association.

One of the reasons that fantasy sports has exploded is that it can be quite lucrative, at least according to the commercials the companies run continually during real televised sporting events.

Those fantasy payouts also have very real tax implications.

Hobby, not gambling, income

No, they are not gambling winnings. A provision in the Unlawful Internet Gambling and Enforcement Act of 2006 notes that fantasy sports are considered games of skill, not chance, thereby making them legal to play online.

Rather, the IRS typically considers money received from fantasy sports as hobby income that should be reported, along with all other earnings on the players’ annual tax returns.

But unless a player gets a fantasy league check of $600 or more, there’s no way for the IRS to know of the earnings. Payouts of less than that don’t require the issuance of a 1099-MISC form, meaning the tax collector must rely on the honesty of the player to report the money.

So the IRS wishes you much success in your fantasy league play, enough so that it will get word on all your big, taxable winnings.

Do you play fantasy sports? Do you report all your game income to the IRS?

Herman and Company CPA’s proudly serves Bedford Hills NY, Chappaqua NY, Harrison NY, Scarsdale NY, White Plains NY, Mt. Kisco NY, Pound Ridge NY, Greenwich CT and beyond.

 

 

Any U.S. tax advice contained in the body of this website is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.