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Your Fantasy Football Results Might Have a Few Tax Consequences, Tough Guy

Posted on by Greg Kyte

Face it. Fantasy football is Dungeons & Dragons for people who used to beat up people who played Dungeons & Dragons.

Now I don't think there was much crossover between future accountants and D&D enthusiasts in high school, but I do think they all sat at the same lunch table.

But now those jocks — the ones who said you were gay and stripped you naked in the locker room and snapped you with wet towels to demonstrate that they weren't gay — are spending an estimated $15 billion on a hobby that's pretty gay.1

32 million Americans spend $467 per person, or about $15 billion in total, playing [fantasy sports].

Of the 32 million who play fantasy sports, only about 6 million are women. It’s like the Beach Boys song “Two Girls For Every Boy,”2 just boys and girls are reversed and the gender disparity is increased by a factor of 2.17.

The thing that makes fantasy football a real man’s game of play pretend is the money.3 If you’re competing in a prize league, you could win anywhere from $200 to $5,000. And if you’re making cash like that, you’ve got to include it on your 1040. But many fantasy sports enthusiasts don’t know how because taxes are hard. Who’s wishing they hadn’t snapped me with a wet towel now?

Two formerly naked and towel-snapped CPAs wrote a post for the AICPA about how to properly report fantasy sports related income and expenses. And, man, you won’t believe how much it’s exactly like reporting income and expenses from any other activity.

The main issue is whether or not taxpayers “are actively involved in fantasy sports leagues to the extent that their activities rise to the level of a trade or business.”

Although the Code and the Regulations do not provide a definition, the Internal Revenue Service has defined "trade or business" as “an activity carried on for livelihood or for profit. For an activity to be considered a business, a profit motive must be present and some type of economic activity must be involved. It is distinguished from an activity engaged in purely for personal satisfaction.

If fantasy football provides you with your livelihood, not only do you have to report your revenue and expenses on Schedule C, you should also consider paying your mom some rent for her basement.

But clearly, the main tax consequence of playing fantasy football is the high probability of your filing status being "single."

1Men who are constantly in search of men who perform better than the men they already have. Sounds a little gay.
2Relax, Stamos. The song’s actually “Surf City” by Jan & Dean.
3Any man’s man knows that engaging in an activity purely for personal satisfaction is for pansy little bitches.
 

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Jon Kyl Has His Money on a Two-Year Extension of All Tax Cuts

Does the Arizona Senator know how to pick a long shot or what?

Americans know they are facing a large tax increase on Jan. 1 unless Congress prevents it. President Obama wants Congress to raise taxes on wealthier Americans (including many small businesses). Republicans oppose raising taxes on anyone, especially in this weak economy. Democrats ducked the issue until after the election. The result is that Congress must act in a post-election session; and while economists tell us that permanent tax policies are best, the most likely scenario in this divided Congress is a temporary extension of current rates for all Americans, probably for two years.

Politics is a tricky game. You can’t do away with all the tax cuts since that would result in hell fire raining down all across the land. And extending all the tax cuts indefinitely is a sure fire way to bring back the torches and pitchforks. It doesn’t take a Kennedy School grad to figure that one out.

But Kyl is realistic and that’s not the worst thing in the world. He simply wants to get to a point where we can reform the tax system ans that, dare we say, is a good thing.

Would we prefer him to go off on a wild-ass tangent about how the expiration of tax cuts will mean an uprising of Founding Father proportions? Of course. But we’re talking about a U.S. Senator. Everyone knows the craziest of crazies are in the House. Unless some IRS abolitionist finds his way into the upper chamber. Or a witch. That could ratchet things up a notch.

A Growth Agenda for America [WSJ]

Tax Amnesty Programs: A Gold Mine for States or Bad Policy?

More news out of the land of Quakers, as Pennsylvania has announced a tax amnesty program for delinquent taxpayers. The program allows tax deadbeats to pay their back taxes but all the penalties and half of the interest will be waived. Pennsylvania’s will begin on April 26th and be open for 54 days.

The AP reports that the state could generate an additional $190 million in revenues for the state which, like pretty every state, is in a dire need of revenues.


For those that participate in the amnesty program, they’ll have to be on good behavior going forward, “participants who fall into delinquency again within two years may be required to pay the full penalties and interest that had been waived. Also, once the amnesty period ends, a special, ‘nonparticipation penalty’ of 5 percent will be levied against delinquent taxes, penalties, and interest not paid in full.”

Participants will also not be eligible for future amnesty programs. Sounds like a novel idea right?

Well, maybe not.

Our resident tax guru, Joe Kristan, is not a fan of tax amnesty programs saying, “they become an expectation and they make chumps of compliant taxpayers.”

Joe’s home state of Iowa passed a tax amnesty program back in 2007 and his sentiments haven’t changed since then, “[Iowa is] adding more loopholes targeted tax incentives to its tax law while doing nothing to lower rates or broaden the tax base.”

But Joe, being the silver lining-type, also notes, “those of us who charge for tax work by the hour, it truly helps our economic development during an otherwise slow time of year.” So tax pros will take those new clients despite the bad policy that encouraged them.

Regardless of the bump in off-season revenues, the Tax Policy Blog (who Joe cites) noted that these programs are of little value if reform doesn’t accompany it, “if lawmakers decide to implement tax amnesty programs, they should be accompanied by fundamental tax reform that makes the tax code simpler and easier to comply with.”

So it appears that tax amnesty is nothing more than a duct tape solution from a policy stand point but it certainly makes good pandering fodder in an election year.

Pa. will offer tax amnesty [AP via Philadelphia Inquirer]

Just Because You Support Tax Cuts Doesn’t Mean You’re a Fiscal Conservative

Since the the stench of last-minute pandering to voters is in the air today, Howard Gleckman points out over at TaxVox that while many candidates are quick to launch in with “I will cut taxes!” or “I believe in smaller government!” to catch some of the hot Tea Party action, these candidates (and many of the Tea Party types themselves) don’t really qualify as fiscal conservatives (if you go by the Wikipedia definition) who support balanced budgets and deficit reduction:

They are plainly interested in tax cuts—a core belief that appears repeatedly on Websites, position papers, and speeches throughout the movement. And while tea partiers say they favor smaller government, many in fact propose to shrink it in only trivial ways—by cutting earmarks or waste and abuse. Candidates elected on platforms supporting very large tax cuts and small spending reductions are likely to oppose aggressive efforts to reduce deficits, not back them. While some analysts see the tea partiers as the 21st century progeny of Ross Perot’s fiscal conservatism, nothing could be further from the truth.

One of Gleckman’s examples is Sharon Angle who claims to be the “one true conservative” (presumably that means a fiscal conservative) and is running for the Republican nomination in Nevada to face off against Harry Reid. Here is one of her ads:

There’s the mantra: “Limited Government!” “Lower Taxes!” As Mr Gleckman notes, Ms Angle would “abolish the Internal Revenue Code but doesn’t quite say how she’d finance government.” That’s a bit of a problem, especially since she says in her “On the Issues” page under healthcare that “the government must continue to keep its contract with seniors, who entered into the system on good faith and now are depending on that contract.”

Since this essentially represents the Tea Party’s position on healthcare we’ll agree with Gleckman when he says, “This view makes deficit reduction a challenge at best, especially when paired with big tax cuts.”

The point here is this – if you’re beating the drum of tax cuts and limited government to pander to a hot political movement but if you’re going to largely continue to spend tax dollars with the same fervor as George W. Bush, that doesn’t make you the second coming of Ross Perot.