a win can be quite taxing?

S

shadowddx

New member
I'm new to sweeping and haven't won anything yet. (keeping my hopes up) But i have heard that when you win big prices or money you are expected to pay taxes on your earnings. Has anyone handled something like this yet? How does it work, how much are the taxes usually for and What can I expect (when it comes to money I'll spend or paperwork to fill out) in case I win?

Thanks so much for your time!!
 
Per the IRS, you must report "ALL" prizes that you win.

It's reported as "Other Income" on your tax return. I have been online sweeping for 13 years and have won a lot through the years, so we're used to reporting our wins every year. However, you only report the FMV (fair market value, actual value which you must document for proof) of the prize and not the ARV (approximate retail value).
 
None of us can tell you what the amount or percentage of tax will be because it varies with your income. And of course if you win a large prize you'll be in a higher tax bracket then you normally are. If you win big I recommend consulting an accountant before accepting to see if you'll be able to afford the taxes. Also for wins over $600 you'll be expected to fill out a "affy" (affidavit) that will include your SSN for tax reporting purposes. Sometimes you'll be asked by the sponsor to do them for smaller prizes and they are within their rights to do that. Even for a t-shirt or a DVD. Sometimes they'll want you to fill out an affy for a small prize but they are ok if you dont' complete your SSN.

Does that make sense?
 
Oh and if you fill out an affy you'll get a tax form in the mail in January. I believe it's a 1090-Misc or something like that. As lidarkside pointed out you only have to pay taxes on the fair market value of your prize.
 
anikka said:
Oh and if you fill out an affy you'll get a tax form in the mail in January. I believe it's a 1090-Misc or something like that. As lidarkside pointed out you only have to pay taxes on the fair market value of your prize.
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Form 1099 will come to you in January.
 
I don't think you have to worry unless you win something over $600 or so?????? I have won little things- they just sen d it to you- no SS# required, so it is not required to be reported???? For heavens sake.. I hope not.
 
destiny907 said:
I don't think you have to worry unless you win something over $600 or so?????? I have won little things- they just sen d it to you- no SS# required, so it is not required to be reported???? For heavens sake.. I hope not.
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Yes, "ALL" prizes are required to be reported whether the sponsor reports it themselves or not. You are on the honor system for those they do not report for you. The IRS does not make any exceptions on this.

I have the link the the IRS page that outlines this. I have no idea where it's under, but Amy might be able to find it and post it. She's better at finding things here than I am! :laughing:

The IRS only requires that prizes $600.00+ be reported by the sponsor, but the sponsor can report any size prize if they so wish even if it's a small prize since all prizes are reportable anyway; and they most certainly do require social security numbers and/or notarization, at times, even on small prizes like a dvd, etc. I have had to do it many, many times through the years for small prizes.
 
lidarkside has spent much time researching the tax issue and consulting with her tax professional on the issue. She always gives the best suggestions to keep us out of trouble. Being a newbie, I would encourage you to find a competent tax professional who has experience with prize income.

best of luck to you.
 
reright said:
When you combine State and Federal tax, it can be as high as 40% of value .
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Ours has never been close to that high. Remember, you are reporting the FMV not the ARV. For example, we won eight trips that all had an FMV of less than half of the stated ARV. Plus, it all depends on what tax bracket you are in after adding in "Other Income". More times than not, unless you won something big like a car, house, boat, etc., you will probably find that you are still in the same tax bracket. :)
 
lidarkside said:
champagne said:
....When you say "taxable", does that mean a "write off"? or actually paying on them? And, do you "really" keep every little paper you get with your wins? even the ones that where per-say, a limited edition disney pin?
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It means you are required to pay taxes on all prizes. Anything you win that did not have a 1099 submitted, you have to keep track of.

The information is on the IRS' site, but they don't get into specific details or categories. They simply state that people are responsible to pay taxes on the fair market value of any prize they win.

That legally encompasses "all" prizes.

http://contests.about.com/od/taxesfinances/tp/payingtaxes.htm

http://contests.about.com/od/taxesfinances/ht/sweepstakestax.htm
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You are so smart for asking. All of the advice is good on this site. I work for CPA's so I am aware of the ramifications. Always check the rules for the prize. Most sponsors will issue you a 1099-MISC. IRS requires one if prize is over $600. Some sponsors will issue one to get the write off even if it is less. As Lidadarkside said, the IRS expects you to report all income. Rules will make it clear if a 1099 will be issued. For example, I won a trip for 5 to from Glamour, got a 1099-MISC for value of $8,000 that was true to the the ARV as I checked all of the separate components, air, hotel, etc., it can vary, per se, depending on where you fly from, how many people actually go. Some sponsors will pay taxes on the prize, again you must check the rules. I have won alot of other things and I never received a 1099.

The amount of taxes you pay on a prize really depends on your tax bracket in any given year. So you would be wise to speak with a tax person if you receive a large prize. Hindsight is 2020. Send me a message when you win a prize over $600, a smaller one would not be a big deal in taxes either way. A tax projection can be done that will let you know. Problem is if you win a trip for an event that will be taking place right away, you need to respond to them in just a few days, so be pro-active and contact a tax person at the same time. Best wishes for many wins! :wave:
 
Most people get tax refunds, so on most prizes there would not be any additional liability -- just a reduced tax refund. However, my rule of thumb for anything that you can't sell if needed, is "if it's something I wouldn't buy for myself at half price, don't enter it." The other thing I watch for is ridiculous luxury trips; there was one that had an ARV of $250,000! I'd hate to "win" that tax liability....

You could also put aside a little each month for potential taxes for sweepstakes wins. Then, at the end of the year, you've won a big sweepstakes or you get to enjoy your savings. Either way, you're a winner.
 
bullcity said:
The other thing I watch for is ridiculous luxury trips; there was one that had an ARV of $250,000! I'd hate to "win" that tax liability....
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On those, double check that the prize is actually a trip. Usually, it's a creative presention like the Redbook Magazine one running right now called "The Romantic Getaway". The prize is a check for $250,000! :sunny:
 
TY LDS :love: - I don't look at the 1x's :nono:

RedbookMag.Com - The Romantic Getaway Sweepstakes New
Enter to win Grand Prize Winner will win $250,000. Grand Prize Winner will be notified via phone, e-mail or postal mail, at Sponsor’s discretion, on or about March 1, 2012. (24) First Place Winners will receive $1,000 each.
Restrictions : 18+ US | Limit : 1 Per Person | Added : 10-21-10 | Expires : 01-31-2012 | Hits : 268 | Rules

Entry Category : One Entry Sweepstakes

HOWEVER - this is a daily:

Limit (1) one entry per household and per e-mail address per day
 
No, this one was definitely for an actual trip worth $150,000 -- no cash option that I recall. It's actually at the same place my husband and I went on our honeymoon (we spent a lot, but not quite that much!), but it includes a personal chef, personal butler for two weeks & a two-week rental of a mansion on the resort.
 
bullcity said:
No, this one was definitely for an actual trip worth $150,000 -- no cash option that I recall. It's actually at the same place my husband and I went on our honeymoon (we spent a lot, but not quite that much!), but it includes a personal chef, personal butler for two weeks & a two-week rental of a mansion on the resort.
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When entering for trips, I usually figure and take into account that the trip isn't even going to be half the stated ARV. It's very rare a trip actually comes out to or near the actual stated ARV. All eight trips we won, were actually less than half the stated ARV. You just need to keep an exact accounting documented for tax time to prove the actual costs; or, before entering, you can do a guesstimate of the actual costs by looking them up online ahead of time. The distance you have to fly and the airline used, the time of year you travel, and how many people are travelling can make a big difference in costs. :)
 
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