How to report net profit from PredictIt.org?

Question

I was fooling around with  for the first time this election cycle(there was a lot of free money waiting to be picked up).While I expected tax reporting, I was expecting to see my trades reported on 1099-B and then I'd flow that to Sched D, or perhaps to Form 6791 since  is a CFTC-regulated academic exchange.Instead, I've received a 1099-MISC with my net profit for 2020 being reported as Box 2 royalties.So how does that get reported on my return?  These "royalties" don't seem to be any of the sorts of royalties that the 1099-MISC or Sched E instructions talk about as they are not royalties *on* anything.

PIWinner2020 · Accepted Answer

TurboTax wants to carry it through to Schedule C, a money-making business that you are actively engaged in... and that does seem like an accurate enough description of the activity. You may end up paying self-employment tax depending on your your other sources of income (and this schedule C income is eligible for IRA contributions)

BUT: PredictIt also just emailed me a note saying that the 1099-MISC is in error and they’ll be sending me a corrected one soon.... and I wouldn’t be surprised to find that the error was reporting my profits in box 2.... so I’m going to wait and see the corrected 1099 and feed it through TurboTax before I do epanything

ira smilovitz · Answer

In general, royalties are reported on Schedule E, Part I. However, I wonder whether this income should have been reported in Box 3 and not Box 2 of Form 1099-MISC. Since Predictit.org is based in New Zealand, I wouldn't be certain that their tax reporting is accurate.

Ira Smilovitz, EA Leonia, NJ

Shannon · Answer

Did you receive the corrected 1099 and was it changed from MISC to B? It seems as if the earnings are capital gains and not income.

How to report net profit from PredictIt.org?

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