Question on taxes on prizes

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PuNK45S

CAGiversary!
I know that if the prize is worth more than like $500 you have to pay taxes, but I was wondering what exactly the taxes are.

Is it basically just a sales tax, or does it go towards income tax?
 
its more than $600 so anything below $599.99 is tax free.

And to answer your question: (From answers.com)
I recently won a contest on a website, and won $1,000. I was required to fill out a W-9 and fax it to the company before they could send the check. Am I supposed to claim this as income?

Answer
This is income to you. It will go on line 21 of the form 1040 and is also taxable to your state if you have a state tax.
Click to expand...
 
I had to report a $500 gift certificate as income last year, so I don't think the $600 cutoff cited above is correct. You simply report it as income: the amount of tax paid depends upon your tax bracket. Remember to consider both Fed and State taxes, though.
-Eric
 
What if you are under 18? What do you do then?

Also, what if you win $500 worth of items over an extend period of time. Say I win something worth $200 in January, and then a $400 prize in November? Do taxes apply?
 
Ok guys, ANYTHING you win is income. As a CPA, I can promise you that anything you get as a prize to a contest is suppose to be reported as income on your income tax return. Just like we are suppose to be paying use tax on all of the games, systems and TVs we buy from amazon to our municipality. Do people actually do this? Not usually. Does that make it legal? Nope.

And you only pay tax on it at your marginal rate, which I imagine for most high school and college students would be under 20%, if you even are required to file a tax return at all. Since the standard deduction is over $5,000, you need to have at least that much income before you have to pay federal tax. You have a filing obligation for a return, but normally it is only to report no tax due.
 
Listen to tnote827, that is one smart combination of letters and numbers. I believe the number is over $100 from a single source requires tax reporting, but I could be totally wrong on that. Realistically, you should be ponying up tax on ebay sales and the like as well, but that's been a nice grey area for most people.
 
General rule, if the company doesn't send you a tax form, that means they didn't report, so neither do you have to. Sure you SHOULD, but that would be unamerican, wouldn't it?
 
$600 is the cutoff not $100 or ny other bs people are making up. Also to the person who had to report the $500 he was probobly required to do so under the terms of the contest and not federal law.

cheers,
Mike
 
[quote name='tnote827']Ok guys, ANYTHING you win is income. As a CPA, I can promise you that anything you get as a prize to a contest is suppose to be reported as income on your income tax return. Just like we are suppose to be paying use tax on all of the games, systems and TVs we buy from amazon to our municipality. Do people actually do this? Not usually. Does that make it legal? Nope.

And you only pay tax on it at your marginal rate, which I imagine for most high school and college students would be under 20%, if you even are required to file a tax return at all. Since the standard deduction is over $5,000, you need to have at least that much income before you have to pay federal tax. You have a filing obligation for a return, but normally it is only to report no tax due.[/quote]

Please re-read this, as it's a well put summary of the law. And to clarify one more point explained above... there is no cut off for what you have to report. The cut off people are thinking of may be for the people supplying the prize - they may have to collect tax information and file a 1099 (to tell the IRS that they gave you money and make sure you report it) before giving you the prize. As tnote827 noted you're not excused from your reporting obligation regardless of the amount.
 
ebay sales are only income to the extent what you made is greater than what you paid for it, plus any associated costs of the sale (ebay fees, shipping, etc...). The fact of the matter is the government is not likely to come after an infrequent ebay or stubhub seller, much like they are not likely to come after somebody who won a $100 gift card from a website.

all i am saying is that if you are not below the income threshold for filing a tax return, that $100 should make it onto your tax return. Would I report the gift cards I won on protrade or from doing online surveys? Probably, but I also have my CPA license at stake, which is something I am not all that interested in losing for a quarter of my prize.
 
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