1099s Required for Fantasy Sports Prizes (Private League)?

There are many different issues raised by your post, but as far as I understand it, the liability in not filing a 1099 consists of two parts:

1) There is a small $50 to $100 penalty per 1099 they fail to file. 2) They have liability to pay taxes on any 1099 income they failed to report. And as I understand it the IRS may put the burden of proof on the business that failed to report the income to prove the tax was paid. In a situation like what you describe the business might not get cooperation of the people it pays to show their tax returns, so they would be in a tough spot.

If you are paying a parent or friend or close business associate, and you know for sure that a) the tax due is going to get paid and b) that the party in question would be fully cooperative with you later on in proving that the tax was paid, then maybe you could have minimal liability in failing to file the 1099. If you are paying substantial amounts to strangers, why would you take on that liability for their tax bill?

nish

(balance snipped.)

Here we have a private club who choose their own members. It is not a trade or business, hence no 1099's need be issued.

The fact that they are CPA's doesn't matter, and a complaint to state accountancy board will get no where.

ChEAr$, Harlan Lunsford, EA n LA

I don't think that's so clear. The OP said that they are secretive about how they calculate the prize amounts, so it is possible that the organizers are making a profit. If that's the case, it's a business.

Bob Sandler

The OP ws hoping for "By-The-Book Accountants". Based on a history from reading your opinions, I believe that, when you are sober, you are a perfect fit for that job description, mon ami. HOWEVER, as we are well aware, the answer is "It depends". In the pencil sketch provided here, my estimate of the prize pool is a minimum of $2500 to $5000. So depending on the entry fee, we're looking at 50 to 200 participants. Thus, there may well be a profit motive involved and this may may well be a business.

That really depends on which State Board as some are notoriously slack and other are notoriously rigid. And no, I will not give examples except to say that I would not want to have to explain my behavior on any matter to the North Carolina Board of CPA Examiners.

As for the OP's question of "How did you compute the prize pool: If you have ever seen the movie "Guys and Dolls", you should recall the character of "Big Julie from Cicero, Illinois" who brought his own dice to Nathan Detroit's floating Crap game. The dice had no spots. So after each roll, Big Julie's blank dice that have had the spots removed, allowing Big Jule to call them anyway he wants,

My point is that being involved in a pool wager lacking full disclosure of how the payouts are calculated is analogous to letting Big Julie call the dice anyway he wants. If you disagree with me, I would be happy to take your action on any sports bet where, after the game is over, I will tell you either the amount of the wager or the number of points you gave me! You will not need a 1099, but I will issue you a receipt for your losses signed by a CPA.

Dick

yes, very well could be. I'm guessing that they've no EIN, though.

C$, HL

The "uncollected tax" penalties apply to 1099-MISC box 7 amount (non-employee compensation). This is due to the temptation for employers to mis-classify their employees as independent contractors.

I don't think it applies to 1099-MISC box 3 amount.

Shouldn't they be issuing W-2G forms anyway, which have their own specific rules for withholding? It's not clear to me that this is gambling, but it sounds like it, and Dick Adams' reply implies such also.

-Mark Bole

Thank you all for feedback.

The CPAs who run this enterprise/league take the position "hey it's just (13) good friends getting together to enjoy baseball and the fantasy aspects of a long season. Not gambling at all".

The annual prizes are paid out of a co-mingled personal account.

As stated requests for detail (the funding base-components: entrance fees, transactions fees, other misc. sources of pay-ins to the pool) about how the prizes were computed are usually ignored or "responded to" with a clearly "you're insulting me by asking" utterance.

Most other participants don't ask or don't care, either out of "friendship" with the organizers--several are co-workers and subordinates of one of the CPA/organizers--or out of concern that they will "not be invited back" (a separate issue not addressed by the otherwise extensive rule book).

It is clear that I am on a very short leash--or worse--because I again requested a detailed break-down about the precise prize pool for 2009.

One year when I asked, the organizer said "it would be too much trouble" for him to do that computation--either an outright lie, or further indication that commingled nature of funds would in fact would make it difficult for him to isolate gambling funds.

The enterprise has a 25+ page rulebook governing most, but not all, aspects of this long-established operation.

Most troubling is the lack of definition about the roles/ responsibilities of the two organizers whom I feel are acting in fiduciary, (rather than dictatorial) capacities as well as my rights/ remedies if they (without any legal authority) boot me because I am way too much of a pain in the butt, or on some other pretext.

Frustrating..so thanks again for the feedback.

I may reach out to IRS for an opinion about 1099 and or EIN responsibilities under these circumstances. Without naming names...for now.

Mike,

Obviously you have a personal issues unrelated to the tax law impact on this enterprise. You want to know how they compute stuff and they won't tell you. My advice is to go somewhere else to play fantasy football.

Regards, Bill

Can you conceive of having personal issues AND being concerned with the tax law and related legal ramifications all at the same time?

It's both my money and the sweat equity I put into this every year that makes me continue to insist on an accounting from purported fiduciaries. It has been refused.

I reach out here asking for feedback as to possible legal, administrative and tax remedies, to not only attempt to get the accounting--where did the money go?-- but to to see if there are protective measures I can invoke to try to avoid having the initial dereliction (failing to account for significant monies upon request) compounded by vindictive, retaliatory measures ("you're out of the league"). If protective measures are not feasible I do not plan to simply "go play elsewhere". OK?

Most responders here have been helpful. Sorry if I take it "personally" under circumstances such as these. Also sorry that the last "kind" responder does not understand the MANY possible tax law ramifications.

My net gambling winnings, if any (I also go to casinos and make several person-to-person sports bets most years) are reported to the best of my limited ability given no 1099s/W-2Gs or even an EIN for the fantasy gambling enterprise are prepared or issued.

But know this, personal or not: if I have legal remedies for a perceived wrong I will pursue them.

Let triers of fact (civil and/or criminal if crimes have occurred) and/ or governmental tax (IRS), non-tax (postal or local prosecutors) and/ or regulatory (oversight Boards for Accountants) authorities decide if these guys do or do not have exposure. My sense is they do.On many fronts.