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


M

Michael

The organizers of a Fantasy Baseball League (private parties, not CBS
Sportsline type league) are CPAs. League has been in existence for
many (10+) years.

Each year they pay out (based on various methods of funding the
winner's pool) prizes to the Top 3 finishers in the League. First
place prizes run between $1,500 and 2,000. Third Place is usually
closer to $400-$650 (on average) each year.

They resist/ignore requests for "how did you compute the prize pool"
basically indicating members do not even have a right to ask. Members
should just "trust them" because they are "The Commissioners". No
accountings are provided.

1009s have never been issued by them (they totally control the
operation of this League).

Do these CPAs and organizers of this Fantasy Baseball League have any
exposure, with a Federal or State authority (taxing, or other
regulatory/investigatory and/or with the governing body for
accountants) on any level for their adamant failures to issue 1099s or
for any other aspect of this operation/association?

Sounds trivial but there is decent $ involved, I have numerous
complaints/concerns, but don't know all the ramifications, if any. Can
this be reported to State Accounting Boards?

Guidance appreciated (especially from by-the book accountants).
 
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N

nish

Michael said:
The organizers of a Fantasy Baseball League (private parties, not CBS
Sportsline type league) are CPAs. League has been in existence for
many (10+) years.

Each year they pay out (based on various methods of funding the
winner's pool) prizes to the Top 3 finishers in the League. First
place prizes run between $1,500 and 2,000. Third Place is usually
closer to $400-$650 (on average) each year.

They resist/ignore requests for "how did you compute the prize pool"
basically indicating members do not even have a right to ask. Members
should just "trust them" because they are "The Commissioners". No
accountings are provided.

1009s have never been issued by them (they totally control the
operation of this 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
 
H

HLunsford

nish said:
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:
(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
 
B

Bob Sandler

HLunsford said:
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.
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
 
D

Dick Adams

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

HLunsford

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

C$,
HL
 
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M

Mark Bole

nish said:
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.
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
 
M

Michael

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.
 
B

Bill Brown

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
 
M

Michael

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.
 
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I’m just a lurker here but your message hit me in a way that made me register and post.

It is just my opinion, but you seem to be expending way, way too much time and energy on this. It’s obviously almost to the level of a personal vendetta. I mean, just what do you expect to get out of this? Surely you are not going to prove that they are making a mistake not inviting you back to their little club. In fact, you seem to be proving their point with your posts here.

Honestly, this seems like just an attempt to get revenge because they won’t let you back in a club you wanted to return to. If I’m in a group that no longer wants me, then fine, I’ll leave. But to stew over it and seek some kind of retribution just doesn’t seem like the rational thing to do here. You can couch this in any terms you like about justice or legalities, but you clearly have a lot of personal anger here, and that seems to be the bottom line.

You don’t like the way they run their club? I think the answer is to find another that suits you better or even start one of your own. Frankly, to be brutally honest, after reading your posts I'm not sure I'd want to be in the same club with you either. I sincerely apologize so sounding so blunt, but it just seems time to take a deep breath and move on, imo. The IRS has better things to do and I’d hope that you do as well.

This just isn't healthy for you to get so worked up over a fantasy baseball club. I hope you take this in the spirit in which it is offered, which is honest concern.
 
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