- Starting in 2022, $600 and over in Fantasy Football gambling winnings must be reported to the IRS.
- As part of the new rule, more people will be receiving 1099-K forms in 2023.
- The extra steps added to your taxes could help you later in life as long as you aren't underreporting, expert says.
In the past, winnings from your Fantasy Football league may have been fine to leave off of your tax return, but, starting in 2022, the IRS is paying closer attention to how much you make from your bets.
Prior to 2022, payment platforms, like Venmo, Cash App, or PayPal, were only required to issue a 1099-K tax form if a person made at least $20,000 and had at least 200 transactions. That amount has since been lowered to $600 with no minimum amount of transactions, according to the IRS.
This new rule means you could be receiving a 1099-K in 2023 depending on the stakes of your Fantasy Football league. Although it's another step added to your taxes, there are benefits of reporting the $600-plus you're making on the side.
The IRS defines a 1099-K form as an "IRS information return used to report certain payment transactions to improve voluntary tax compliance." The payment transactions include those from third-party payment networks.
Tax expert Eric Bronnenkant explained to the Washington Post the detriments of hiding your income from the IRS.
"Loan providers want to see copies of your tax returns, and if you're understating income, you're hurting yourself because you're not really showing all of your income," Bronnenkant said.
For those interested in purchasing a home, tax returns are typically used to verify your income. This means underreporting how much you made could earn you a lower loan amount at a higher interest rate.
Your Social Security benefits are also on the line. According to the Social Security website, you earn one Social Security or Medicare credit for every $1,510 in covered earnings each year, and you must earn $6,040 to get the maximum four credits allowed in a year.
It takes at least 40 credits to qualify for Social Security benefits. But, it's all about "the average of your earnings over your working years" when it comes to determining the amount of your monthly payments.
Whether you're five years or five decades away from retiring, accurately reporting your earnings will serve you well as a retiree.
It's not just gambling income that can and should be reported. Bronnenkant said even Etsy shop owners should be reporting their earnings if they want to contribute more to their pension.
"The more earned income you have, the more contributions you can make," Bronnenkant said to the Post.