The IRS requires that you pay taxes on all prizes, big, small, and everything in between whether or not the sponsor reports it to them.  When reporting your prizes as "other income" you submit the fair market value of the prize (FMV), what it's really worth, not the approximate retail value (ARV).  You need to have documentation on file proving it's true value though.  On trips, make sure you print up the actual costs of the exact flight and seat, hotel room, and other expenses as your backup documentation.  Trips almost always have the most inflated ARV's.

You never pay taxes on anything you don't receive.  That would be like paying taxes on money you never got.

When keeping documentation on trips, you need to do some of it beforehand.  As soon as you get your itinerary, look up the exact flight and section for the pricing.  As for everything, use the lowest price you can find on the internet and print it up.  Do the same for the hotel.  Anything during the trip that the sponsor is paying for make sure you get a pricing on paper.  You should do this with the hotel also as the sponsor may get a far cheaper rate than you will find on the internet.  Just be honest and let them know that you need it for tax purposes.

We've won at least seven trips, each trip ended up costing more than 50% LESS than the stated ARV, and all but one sponsor already had the price readjusted down on the 1099.  With the other one, we called them up; and they readjusted the 1099 down.  They had just failed to communicate the proper costs to those who handled the paperwork.