It’s just about that time again, tax time, and if you have won prizes this year through sweepstakes you will want to read this post. I wrote this last year and it is still valid this year. I just updated it a bit with new information
Maybe you have questions like this one on paying taxes for prizes you won through sweepstakes.
Taxes on Sweeps?
Will the companies be sending me a 1099 or some form for taxes? or do I just tell the cpa? I don’t even know if I have to claim for a small laptop and tickets to Ellen? What do you think? Does it go by your income and how much you won?
Disclaimer: I am NOT a tax expert. These are just my experiences from years of entering sweepstakes and winning prizes. If you ever have a question about claiming prizes at tax time visit the IRS site or consult with your local tax professional or CPA for tax help.
The quick answer for the first question is yes. The sponsors should send you a 1099 for prizes you won over the value of $600. Not every sponsor does this (although they are supposed to) but that does not get you off of the hook for claiming that prize on your taxes. You should still claim the prize value on your taxes as other income. Sponsors may report smaller prizes to the IRS but do not send you paperwork.
From the IRS website:
Subject to certain exceptions, the cash value of prizes or awards won in a drawing, quiz show program, beauty contest, or other event, must be included on the tax return as taxable income.
Taxpayers must also report the fair market value of merchandise or products won as a prize or award, as taxable income.
For example, both a $500 cash prize and the fair market value of a new range won in a baking contest must be reported as other income on Form 1040, Line 21.
So, the U.S. government DOES require that you claim each and every prize on your tax return. It is up to the individual if they follow these rules or not.
Disputing the Value of a 1099
If you look at the official rules for any sweepstakes you will see that they include the ARV or Approximate Retail Value of a prize that could be won. That doesn’t mean that prize actually IS that value when you receive it. In some cases, there are things you can do to claim a lower value on your taxes.
Example: The trip is valued by the sponsor for $5,000. You receive a 1099 at the end of the year in which you took the trip for a value of $5,000. But the trip actually only cost $3,400. You can claim $3,400 instead.
Here are some things you need to do to claim a lower amount on prizes where the 1099 comes in higher than the real value:
On Trips: You need to do this while you are on the trip or soon after you go on the trip as airline, gas, and other travel expenses fluctuate over time and trying to get accurate values a year later when it is time to file your taxes will be hard to do.
- Keep all receipts when you go on the trip for food, gas, whatever the sponsor is paying for
- Request a copy of the hotel bill when you check out
- Get an estimate of what the airline or travel would cost before you go and print out that information
You only have to claim a trip prize on taxes AFTER you have taken the trip. When we won the France trip back in 2001 we didn’t actually take the trip until 2002 so we claimed it on our taxes in April 2003. That sure helps.
Other Prizes: You can also claim a lower value for a prize such as a computer or TV by finding that exact model online and printing out that information with the date showing on the paperwork as proof that this item was cheaper at the time you won it.
Remember you really need to gather the information on higher priced prizes when you win them. You may not have such good luck proving a lower value if you get the values when you try to do your taxes. Technology prices go way down over time and trying to prove that a TV you won only cost the sponsor $200 when it was worth $500 when you won it is not easy to do.
Many times you can work with the judging agency or sponsor to get them to lower the 1099 value. We have done this several time. The key to getting this done? BE NICE! Rude people do not get what they want. Always remember you are dealing with another human being and yelling and screaming will not get you the result you want.
Another reader, Mila, asked What if you win a trip but for some reason you can’t go on the trip. Do I still have to pay the tax on that or claim it as other income?
If you do not accept the trip you would not be going on it so then, no, you would not claim it on your tax return and would not have to pay taxes on it.
If you accepted the trip and then could not go on the trip for some reason there is a possibility that you could have to claim it on taxes. You would need to work with the sponsor or judging agency in that case.
And, however, if you are offered and accept something in place of the trip like cash you would have to claim that on taxes.
Claiming Sweepstakes supplies as deductions:
When you buy stamps to mail-in entries, buy envelopes or postcards for entries, pay for newsletter subscriptions, and other sweepstakes supplies, keep the receipts Why? When you win you can claim them on taxes as an expense if you are itemizing your taxes. You may need to produce those receipts if you get audited. If you are not willing to keep the receipts then do not claim expenses on your taxes.
On a side note, when you buy lottery tickets and lose, KEEP ALL OF THEM. Why? When you win you can claim them on taxes as an expense but only in the same year of the winnings.
This is why you need to keep good records and why I like using Excel for tracking sweepstakes wins and expenses. If you don’t enter mail-in sweepstakes you may not have as many expenses and therefore may have nothing to itemize.
Now, I don’t know if you can claim your Internet access cost if you win an online sweepstakes so I will leave that one up to you. I have never tried it. I believe that would be a hard one to claim because you use your Internet for so many other things.
If anyone has something to add about taxes on sweepstakes please feel free to email me or fill out my contact form. I will update this article with new information and give you credit for the new information as long as it is correct.
Claiming prize winnings on your tax return has nothing to do with your income.
So, remember, according to the IRS you must claim all sweepstakes prize winnings on your tax return. We have actually turned down prizes because we did not want to pay taxes on them and the prize wasn’t that special to us.
The IRS has a free program called Free File available on their website you can use to file your taxes online too. This is only available for those who have an adjusted gross income is $57,000 or less in 2009.
If you win small prizes like a music download or a hat the sponsors are probably not going to claim them under your individual name on their taxes or send you tax paperwork so the government wouldn’t know you won. They are probably going to claim the lump sum it cost them for all of those smaller prizes so your name wouldn’t individually be submitted to the government. However, if you win something that requires you to fill out an affidavit you definitely have to add that to your tax form.
thanks so much for posting this.
I had no idea about the $600.00 thing so you really helped out.
What if you win a trip but for some reason you can’t go on the trip. Do I still have to pay the tax on that or claim it as other income?
Mila, if you do not go on the trip you will most likely turn the prize down so no, you don’t have to claim it on taxes.
If you accepted the trip and then could not go on the trip there is a possibility that you could have to claim it on taxes. You would need work with the sponsor or judging agency in that case.
If, however, you are offered something in place of the trip like cash you would have to claim that on taxes.
Wendy
We won a hotel stay at disney in august and its under my mother in laws name, they now want her SS# for the 1099. My MIL does not file taxes as she is on disability. How will this affect her? Should we cancel this trip? The travel agency posts this trip as worth about a thousand dollars.
Thank you for any info,
Melissa
Whether the value of the income is counted against your MIL’s income depends upon what kind of disability benefits she gets. If she receives social security disabilit (SSD) benefits, she only has to declare it if she meets the income guidelins for declaring income taxes. If she receives Sopplementsl Security Income (SSI), that is a “means tested” program and she is only allowed to have a maximum of $2,000.00 in assets in any calendar month. Since both programs are administered by the social security administration, any money that is reported by anyone as income on your social security number will be questioned by the SSI caseworker, if it is SSI that your MIL RECEIVES. SSI does not usually deam on trip prizes unless you trade them in for the cash equivelent. IF She wants to accept cash for the prize, she can simply just be disqualified for that particular month’s SSI benefit if she goes over the $2,000.00 assets/income limit. The following month, after the money has been spent, she will be fully reinstated.
As an example:
I am the parent of a child who was 100% disabled since birth. I was a single mom. My child received SSI (means tested program) and I entered snail mail sweeps for more than 20 years. Sweepstaking was the lifeline that I needed to raise a disabled child and be able to survive. I won many trips and the SSI lady never counted even one of them because we never received cash. None of the smaller prizes like cash under $600. Ever reported anything. The lady never counted my child’s computer prize. Or many other smaller prizes. I learned the hard way how to accept a car prize. I accepted the car at a judging agency declared value in a higher amount than I could have gone to the dealer and haggled the price down to. I did end up declaring what I considered to be the FMV ( fair market value) but it was still higher than if I had taken the cash equivelent that had been offered to me by the j.a. (because the ja was stating a higher ARV). I later learned from the SSI case worker that if I had accepted the cash for the car, that they would only have cancelled my child’s SSIbenefits for that one month, if I spent it all by the end of the month. So, with the Marlboro train trip, I made sure to spend the $6,000.00 cash ( on paper) by the end of the month. The thing you most want to be sure to avoid if your MIL is truly disabled and needs to be Medicaid eligible (as do all people with severe disabilities) is that the trade off of losing SSI income also means losing full Medicaid benefits. I happened to make that mistake one month. I miscalculated by one day and mistakenly went into the first of another month. On the 30th of the month, my child had emergency heart surgery. I was on the hook for $25,000.00 in uncovered medical bills! The best take away that I can give you here is to simply call the social security (SSI only) and ask what would be the best way to accept the prize. They will work with you. When my child turned 18 and became an adult with my income no longer being counted, the once rather stern caseworker began talking to me and asking me how she could win all the orizes that I had won and how she could enter sweepstakes. It seems she had been wondering about it for years but was not allowed to ask me. Once I no longer counted against my child’s income, she held nothing back. Just remember that SO ial Security disability and Supplemental Security Income are two different disability programs and the rules are entirely different. That is really what you need to ask your MIL before you ask if your trip will be counted against your MIL. You need to know which program she is on. Now that my child’s other parent has retired, my child receives SSI ( program based on worker paying into the system) which is NOT a means tested program and wins have no bearing on this program other than just regular income tax guidelines that apply to everyone.
This is long but I hope it helps. I would NOT stop sweeping just because someone receives SSI. However, I would call your SSI caseworker before you accept a substantial prize and ask what would be the best way that you would be able to accept it without losing benefits.
I goofed and meant to say that my child now receives SSDI (Social Security Disability Insurance), which is based on a worker’s contributions into the soc. Sec. System throughout their working career. SSDI is NOT a means tested program. (I goofed and said SSI, which IS a means tested program). Sorry
I don’t know if this is a second goof or the description of the SSDI program is, but when you said the other parent “retired” and the benefits began, that’s generally SS (just plain old social security based on the that parent as the claimant) that a child has to become enrolled in but can’t until waiting TWO YEARS after they are re-qualified as disabled by that agency. Once the other parent files for SS, the child/disabled adult child will get that notice in the mail and they will ask for the medical records and/or make appointments for that person to go to their doctors to make sure they are disabled (stupid, but it happens every time). Then, immediately upon approval from SS (NOT SSDI… IT’S SS Office of Disability), the child/adult child gets their percentage of that parent’s family amount for retirement, and if it’s under the current SSI MAXIMUM, then SSI will make up the difference to make sure that child gets at LEAST what they used to get in SSI dollars. SSDI would be correct if the other parent was DISABLED and filed for disability before retirement age! You can’t get SSDI after you retire! Once you retire, you are then only getting what your normal retirement benefits would have been! Nobody after retirement age gets SSDI…they’re moved instantly to the money they otherwise would have gotten (likely less) when they filed for retirement. It likely won’t be the reduced “at 62” benefit because you can stay on SSDI until your normal retirement age.
Realizing this conversation is nearly 3 years old, I wanted to mention that in no way should your child have been removed from MEDICAID of any kind just because there was ONE MONTH in which there was any kind of income that put them over the monthly limit. What happens in that case is you lose the SSI for that month, and if you let it go into the second month (as happened here) and didn’t spend down the money, you have until the end of the second month to spend down the money BUT IT DOES NOT OBLITERATE THE MEDICAID. Now, on the THIRD MONTH — that’s the key — if the money has NOT BEEN SPENT DOWN during that third month and the money in in their possession/bank on the FOURTH MONTH, then MEDICAID WOULD STOP AFTER THE THIRD MONTH of having money that puts you over the limit THREE MONTHS IN A ROW. You have to have THREE IN A ROW to be throw noff both the SSI AND MEDICAID. However, you’re still in the “system.” For the next year or so, at any time should the person become ELIGIBLE for SSI again (meaning you finally spent down that money), you instantly can go back onto the SSI and continue to claim WITHOUT A NEW APPLICATION AT ALL. After that year or so (can’t recall the exact number of months), should the person continue to not be eligible because of the resources, then a new application must be filed in the future should they be eligible again for the benefits. There is NO WAY that being on SSI and having resources over the limit for 1 or 2 months throws you off the MEDICAID. The MONEY, YES! BUT NOT THE MEDICAID. They actually should have sent a letter stating that you’re going to be off it and you have 90 days to “wrap it up” and be prepared to either a) get other insurance, or b) apply for medicaid BASED ON INCOME, MEANING THE CHILD CAN GET MEDICAID BY APPLYING DIRECTLY WITH MEDICAID (NOT THROUGH SSI ANY LONGER) AND HOPING TO BE APPROVED BECAUSE THEY ARE DISABLED AND HAVE LOW INCOME (NOT RESOURCES). I don’t know who told you that you were on the hook for $25K for having that little bit of money ONE MONTH and for being off SSI for that ONE MONTH, but that is totally incorrect that Medicaid can stop overnight for ANYONE in that situation. There is ALWAYS a tapering off period, and it’s 90 days.
Melissa,
That is a question I cannot answer as it is too specific for my knowledge. I would suggest that you call someone in your area like a H&R Block store or maybe Jackson Hewitt and ask them that question over the phone. It shouldn't cost you any money to ask them a question.
Unfortunately though, unless she gives them her SSN she will not be able to take the prize.
I do know that if you make under a certain amount of income each year you do not have to file taxes so if she doesn't file now a $1,000 prize shouldn't be a problem. But, as I stated, I am not an expert and for this topic I would definitely contact someone who is.
Good luck!
Wendy
Wendy,
I interpreted Melissa’s question to be more about maintaining her MIL’s eligibility for disability benefits rather than asking about paying income taxes on it. Maybe she was asking both. In any event, a $1,000.00 prize would not have much impact on regular taxes but it could potentially disqualify a person from being eligible for SSI disability benefits if it puts the person over the $2,000. Assets limit. Melissa did not state whether her MIL receives SSI or SSDI. Or even worker’s comp or what specific disability program she is on. Different disability programs have different eligibility guidelines. SSI (a means tested program) is more concerned with prizes that are either cash or can be traded for cash. A trip only counts if you accept the cash equivalent. They do not care too much about prizes that you win and just use up.
Mary.
I have a question! If you buy a new computer to enter online contests ( I have won a few so far and desperately need to upgrade from my 10 year old computer) can I deduct a new computer or computer upgrades off my taxes that I use to enter to win these contests I have won?
Hello Wendy
I won concert tickets in the Budweiser sweeps. I understand about claiming the value on my taxes but am I able to deduct the $15.00 parking from the $94.00 value since it is impossible to attend the concert w/o paying the parking fee?
I would think you could claim the value of the parking. Just keep the receipt.
What happens if you don't pay the taxes for the prizes you win on blogs!
And how are you going to know if you need to pay taxes on the things you want to win but you have not won them yet!
Thanks!
email me at:
[email protected]
Question:
Are your chances of winning greater when you check "yes" to sign up for product news, emails, etc.?
I seen you on the Tyra show and I was impressed. Contesat are my hobby and me and my kids win stuff every month. I have one a car, 3tvs, hotel stays everything possible you name it. I keep it all in a book people say I'm lucky I just say that's what I do for fun but I'm consistent. I just want to win enough money to get out of debt and live comfortable.
Serena H, Columbus, Oh
When you have claimed a trip, did you claim the cost of airline tickets at the time the trip was booked or at the time of travel? I don't know if I can backtrack to find the cost at booking vs. the cost now.
Thanks for post. Great to hear personal experiences.
When you win a big prize like a trip you will get a 1099 from the sponsor or judging agency. If that 1099 appears to be a higher value than the actual trip or airfare was you can write in a lower value but if you get audited you will need proof. When you go on a trip you should print out current airfare quotes from airlines to keep with your paperwork to prove it was lower. You really can't backtrack because airfare changes so much. You need to do this when you take the trip so you have current information. If you think the value should be lower than the 1099 you get you can always claim a lower price. The only problem comes if you get audited.
You only have to claim a trip prize on taxes AFTER you have taken the trip. When we won the France trip back in 2001 we didn’t actually take the trip until 2002 so we claimed it on our taxes in April 2003.
Hi Wendy,
Do you have the IRS publication to your statement above? I won a $5,000 spa trip in 2009 but will take it this year. My tax accountant said it’s the same as receiving income in 2009 but not cashing the check until 2010, it’s still considered income in 2009. Can you please share the tax law on this I can share this information with him/ I would sure love to claim this trip on my 2010 tax return.
Thanks for any advice you have to share.
Did you receive the 1099 already for this trip? If not you can call and ask the judging agency if they are going to send you a 1099 for 2009 or 2010. When you file depends on what year you get the 1099
Thanks Wendy for the update. Yes, I received the 1099 for 2009 but I am taking my trip this year.
do i need to claim my $10 win from wendys, $15 from coke or just the bigger things – $100 or more?
According to the Federal government you are supposed to claim everything. It is up to you if you claim the smaller items. The companies who give them are probably not going to claim them using your name. They will probably just claim the whole cost of the promotion they did. That would mean your name would be associated directly with a $10 price. I just have to tell you what the government requires.
I won the Walt Disney Time Share for 50 years. We now have to pay taxes which disney is helping with. I may be way off base with this, but can we deduct from out taxes the cost of traveling to the time share in Disney world for the next 50 years? The gift is valued at $108,700.
No, you can’t deduct travel because it was not part of the prize. Wow, that sure is a huge prize!
Yes, its huge and we are super excited because we go to Disney every year. We will totally get a lot of use of out. Thanks for the response.
Hi Wendy,
What if we win a phone worth approx 500 bucks. Do we have to claim it too for taxes?
Thanks,
No matter what you win you are supposed to claim it on taxes.
Last year I won a pair of tickets to a professional soccer game and a free t-shirt, the second place in a contest sponsored by Volkswagon. I got a letter in the mail saying in order to send me the tickets, I needed to sign an affidavit and I would be issued a 1099 form for the value of the tickets. I sent them an email back saying the total value was less than $100, certainly under the $600 threshold. I got the tickets in the mail without any additional questions and without a tax form and enjoyed the game.
I won $1000 by calling a radio station in early December, 2009. I was required to send them an affidavit as well as a W-9. I did not receive my $1000 until Jan 2010, nor did I receive a 1099 Misc from the radio station. Am I correct that I do not have to claim my $1000 winnings until I file my taxes for 2010? Thanks!
What about coupons? I’ve always wondered about how coupon winnings are taxed. The coupons themselves have no value (or I guess 1/100 of a cent value, usually…). Did I win the coupons, thus making my tax liability 0? Or did I win the things I get with the coupons, thus making my tax liability the face value of the coupon?
I really don’t know about coupon. If it is a free item it might be taxable but personally I wouldn’t worry about those too much. Winning a coupon would be no different than getting a free coupon in a magazine or directly from a company and you don’t pay tax on them, only tax on the item when you get it at the store.
erm I’m 18, do not file taxes, and have no idea about those kinds of things….I read your article but its kinda confusing
if you make no income at all (im in college) then do you still have to go through the file taxing process????? sorry just new to this :\
ive gotten w9’s but never did anything with them -__- is that bad???
I believe you still have to file taxes whether you are a student or not because it is considered income when you win a prize that has a value over $600, especially if they give you a 1099. That means the company who sent it claimed it on their taxes and the government knows you won it. It is considered “other income”, very similar to if you won money from the lottery. Did you actually win any large prizes where they sent you a 1099 at the end of the year? You may want to ask a tax professional about it though because maybe you are exempt because you are in college full time. I really am not sure.
nyappy…
Being a student you still have to file taxes. You receive financial aid or student loans those dispersement have to be stated on your taxes. You also get tax credits for being in college and can deduct any interest paid on those loans during that year. If you have not done so I suggest you go back and do your taxes with those W9’s. You can go back 7 years to do or re-do taxes. The longer you wait to do so the larger the penalty and fines will be. There was a point in time I too didn’t work, but was going to college full time and still had to do taxes, the college sent me paperwork ever tax season to do so. Write off the costs of your books, traveling, parking, dorm if you have one… anything related to you going to college is a tax deduction.
Hi! On the flip side, let me know if you can help with this: My step-son is hosting a local race. All participants pay $100 to enter. The winner will get back all of the entry fees. (Ex. If there are 30 racers, the winner will win $3000). My question is, is my step-son required by law to give the winner a 1099, or some type of tax form? If he doesn’t, wouldn’t he be responsible for that money that is paid to the winner?
Thanks!
I don’t know the answer to this. You probably should call a local accountant and ask them. I think he actually has to get a permit or something to even run a giveaway like this.
C Wiles..
if the race is for a charity or to benefit a charity he can file a form with the IRS stating the cost, deductions associated with the race. There are no taxes on charitable races, but you must have the proper forms to do so.
If he is just hold a race to have a race and let people win money he has to put that on his taxes as he organized the race, the income brought in, and the expenses put out (hence the purse) so the revenue and costs will zero each other out. He should give the winner a 1099 for the winning purse. Any accountant can help get together a 1099 for someone. The winner has to claim those winnings on their taxes as other income.
I’ve had to claim 1099G’s for a few years now from casino income, but never knew I had to claim prizes I won too. I knew money I won yes, but not physical prizes.
Do i Have to Claim taxes on each indivual thing..like i won 2 moviephone.com tickets..quicken loans $10 giftcard..$20 hsn gift code? or with the small prizes is it total of $600 bucks? kinda confuseing to me..sorry and thanks for help1
Can expenses incurred in the process of winning an amount of cash on a game show be deducted for federal income tax purposes (for example, round-trip travel expenses between your home and the site of the game show, and lodging and meal expenses on the trip)? If the expenses are deductible, is the deduction subject to a threshold (such as having to be over a certain percentage of adjusted gross income)? Also (if the expenses are deductible), what is the proper form to report them on? Is it Schedule A?
Tim, you will need to get the advice of a tax expert as I do not know the answer to your specific questions.
hi sweetie,
what about claiming your blog on taxes? I have a blog, but I do not make any money off it because I don’t charge for ads or anything. I do some reviews and giveaways though. Do I need to claim all the stuff I get for my reviews? It does not add up to $600 and I blog for a hobby.
Erica, I am not sure about the things you get to review. If you made money with ads on your blog then definitely, you would have to claim those but for now I think you are okay not claiming the review items.