Major Tax Reporting Changes Coming in 2024 That May Affect You

If you’ve collected $5,000 or more in total payments during the preceding calendar year, the IRS now requires payment apps like PayPal and Venmo to issue a 1099-K form reporting these payments as possible income.

Whether you hold prize money for the NCAA bracket pool you run with friends, or win your annual ESPN fantasy league and get paid electronically, you need to prepare for increased reporting requirements for the 2024 tax year. Make sure you don’t get caught off guard by taking action now.

Starting January 2025, all payment processors (credit card companies), online marketplaces (eBay, Etsy), or third-party payment apps (PayPal, Venmo) will be required to send to you and the IRS a 1099-K form reporting all payments received during the previous calendar year (2024). The requirement is triggered upon receiving $5,000 or more in total payments.

The reporting requirement was first introduced in 2012 to ensure that income from providing services or selling items online did not go unreported. It is generated by the company through which the payments were collected. For example, if you received payments via PayPal and via CashApp, you will receive two different 1099-K forms.

The IRS is gradually decreasing the amount of money you have to receive in order to trigger the 1099-K requirement. Starting in 2024, it’s $5,000, but it will eventually go down to $600 over the next few years. Reporting thresholds may also vary by state, so please consult your tax advisor for regulations as they pertain to your individual situation.

This change means that people who collect payments will have to do more work when they file their taxes. You’ll need to explain to the IRS why any payments you received shouldn’t be counted as taxable income.

Bypassing the Headache of 1099-K Reporting

Splash Sports, our real-money gaming platform in the same family of apps as RunYourPool and OfficeFootballPool, is licensed to run fantasy contests and games of skill, such as Survivor and PickX. Because entry collection and payouts are entirely automated, you not only save yourself the hassle of collecting payments and tracking things manually but also don’t have to worry about the 1099-K reporting requirements. 

Each year, Splash Sports will automatically total your winnings, subtract deposits and losses, and issue you a 1099-MISC if you have profited $600 or more. Splash Sports does not issue a W2-G, as it does not offer any sports betting or other gambling.

1099-K Reporting FAQs

Is the money I received from running a fantasy league or game of skill considered taxable income?

We cannot give you tax (or legal) advice; however, in general, any money received in the pursuit of profit or providing a service is taxable income and should be reported on your tax return. Additionally, online sports betting and paid fantasy sites will also send you a Form W2-G, 1099-G, or 1099-MISC should you win more than $600 in a calendar year. There is really no getting around reporting your winnings.

Does the 1099-K include all electronic payments I receive, even from friends?

Money received from a friend for a gift or reimbursement should not be included in a 1099-K form. Unfortunately, many electronic payment platforms still do not have a way to distinguish between non-taxable personal payments and taxable income or sales.  All payments are still lumped together on the 1099-K, and it’s your responsibility to sift through the report and provide proof that certain payments should not count as taxable income.

How about the payments that I send? Will those be subtracted (netted out) from the payments I receive?

The 1099-K reports a gross number and only includes payments you receive. It does not deduct payments you send out or refunds you might give. For example: you are the commissioner of your fantasy football league and collect $6,000 via PayPal from your league members. Even after paying out the entire $6,000 at the end of your season, you will still receive a 1099-K reporting $6,000 in payments received.  

What happens if I don’t pay taxes on my winnings or total payments?

We are not your accountant or lawyer and can’t provide specific advice; however, not paying taxes on income that the IRS already knows about is likely to invite scrutiny and increase your chances of being audited. 

So if I keep good records of all payments I receive and the prizes paid out for my leagues or pools, I can just tell the IRS that my earned income was $0 and I’ll be fine, right?

It’s always advisable to keep good records! But while your diligence and honesty would please the IRS, other state gaming regulators could still give you a hard time. It’s worth noting that in many states, you would need a license to operate a fantasy contest, pool, or sports betting operation; and operating any of these without a license might expose you to civil or criminal penalties. 

Remember: It’s important to stay on top of tax reporting requirements for electronic payments. 

With the 1099-K reporting threshold decreasing, those managing prize pools or fantasy leagues need to be extra vigilant. The good news is that we’ve got a great solution: Splash Sports, our trusted platform within the RunYourPool family, ensures you’re covered when it comes to 1099-K requirements, so you can focus on having a great time while enjoying peace of mind in the face of changing tax requirements. 

Check out Splash Sports today and stay ahead of the game!

Ready to Move? We’ll Make it Worth Your While!

You’ll not only enjoy peace of mind when it comes to taxes – Splash Sports will offer you a bounty to move your group over! Click here to connect with our team and learn more about all the ways Splash Sports can benefit you and your group and how much you can earn by making the move!