sole proprietorship and w2g

[rwm221]

I have a client that in 2024 started a new job which is unusual. This is how she explains it to me. She works for a casino "I write letters to their sweepstakes I get paid 5$ per a letter in coins that I convert to real money and cash out from their sweepstakes" So she gets casino coins as payment and cashes them in. AT the end of the year, she will receive a W2G for her earned income. How would I report the income and expenses?

[TaxGuyBill]

She is not gambling and should not be receiving a W-2g. I don't understand the sweepstakes part (is she writing TO the sweepstakes or is she writing a letter FROM the sweepstakes to a potential winner?), but if she is working for a company she should be receiving a W-2 if she is an employee or a 1099-NEC is she is a contractor.

If she incorrectly receives a W-2g, I would just enter it and back it back out as non-gambling income. Then report it correctly, either on a 4852 for a substitute W-2 or on Schedule C as her business.


If she is somehow entering a sweepstakes or something weird, it could be different, but from what I am reading of what she is a worker, not a gambler or sweepstakes winner.

[DoubleO]

I hope the OP clarifies, but it sounds to me as if the TP is writing letters to enter the sweepstakes. The casino pays out $5 to each entrant hoping the entrant will gamble the chips, thus getting the money back and presumably more bets. The $5 is taxable and reportable on W2g. Sounds akin to those ads for the online football betting platforms where you bet $XXX, and get a credit for $XXX.

Many states have rules for providing alternative ways to enter sweepstakes with a letter to whoever is offering the sweepstakes being one of them. The details are in the fine print.

[rwm221]

This is what she does

https://sendit.academy/ppl.php?user=Starlizze166

She paid for a class on how to do this and she pays them $25 a month.

If I report her income on a schedule C won't she receive a letter from the IRS for not reporting gambling winnings from the W2G?

[New York Enrolled Agent]

$25 a month - sounds like an unnecessary expense. Here's one author's opinion on the tax implications.

Writing Letters To Sweepstakes Casinos: Guide & Templates 2024 ? SweepsCasinos.US

[Lion]

Oh, WOW !!!!

[rwm221]

Will she ba able to write off expenses? Class fees. stamps, envelopes and her monthly $25 to the academy. She was told by them to start an LLC but I don't see how or why

[DoubleO]

So then W2g would not be appropriate, but 1099MISC would? Sounds as if it it would be treated as prizes awarded, not gambling. And no, I don’t think there would be deductible expenses against the income, but others should chime in.

[TaxGuyBill]

Will she ba able to write off expenses?

You'll need to make the determination if this is merely a "hobby" (gross income on Schedule 1) or if it rises to the level of a "business" (Schedule C, with deductions). Your original post said "job", which seems to indicate you think it is a business rather than a hobby, but you'll need to look into that further.

[Lion]

Her class to learn how to get into this "profession" would NOT be deductible. Classes to keep or improve her skills once she's in this "profession" would be deductible IF it rises to the level of a trade or business.

From the casino's POV, it's probably gambling. But for your client's taxation of this activity, it's a hobby or a business.

[rwm221]

For my client's perspective it would be better to put W2g as gambling winnings so it would not have se tax. But if she wants to put the w2g into a schedule c where would I put the w2g. I can put in a 1099misc and a 1099nec within my schedule c but what about a w2g. I would not want my client to get a letter indicating that she did not include gambling winning on her tax return.

[Lion]

Better? Or, accurate? Is she gambling? You called it a job. Posters have explained to you how to deal with Form W-2G if it's inaccurate. Or, you could use Form 8275.

[FEDUKE404]

I do not see any way this income @ $5 per event could be "wages" and thus reported on a W-2.
Is there really "gambling" occurring? (I doubt it.) But if such a W-2G document arrives, the only way to deduct "expenses" is to claim them, up to the amount of gambling income, by itemizing on Schedule A.
(I don't see how a Sch C would be possible, to include the for-profit issue.)

I read over some of the links posted above. Thought the entire scenario was a joke, not unlike "envelope stuffing" scams. Doubt if I would sign my name to any tax return with this type of income unless / until I did some research and found out what is really going on, AND I saw the 2024 tax documents that show up.

NOTE TO OP: The proper place to report any income from a W-2G is on line 8b Part I of Schedule 1.

FE

[Lion]

One of the links required that the "free" chips be wagered at least once before cashing in. So, some or all of the chips could be lost, or could be increased by winnings. And, $25/month for the privilege. Limits to how many "free" chips per month. And, weeks before receiving each cash out. It's starting to sound like a gamble, in the every-day use of the word. The house always wins!

[FEDUKE404]

So exactly what happens to the "approved" hand-written letters?
(I think P T Barnum would take note of this "investment" scheme!)