If you live in the United States, the IRS wants its share of your sweepstakes wins. Even non-monetary sweepstakes prizes are classified on your taxes as "Other Income." Here are the steps you'll need to follow to pay your sweepstakes taxes.
Time Required: Learning about your sweepstakes taxes takes about 10 minutes
- Record Your Wins and Expenses
Good record keeping will make paying taxes on your sweepstakes wins so much easier. Keep a ledger where you track information including detailed information about wins, including the name and sponsor of each contest, the date you expect to receive the prize, the date the prize actually arrived, and the ARV.
More about How to Track Sweepstakes Prizes
- Collect 1099 Forms from Sponsors
If you had any wins with a prize value of more than $600, you will receive a 1099-MISC form from the sponsor at the end of the year, and many sponsors will send 1099-MISCs for smaller prizes as well. You will need to include the information from these forms on your taxes, and you'll want to keep copies for your records. By law, sponsors must mail these forms by January 31st.
What to Do if you Don't Receive a 1099 Form
- Check the Fair Market Value of Your Wins
Remember that you pay sweepstakes taxes on the Fair Market Value (FMV), not the sponsor's ARVs. If you have tracked the FMVs of all of your wins, use this amount on your taxes.
More about Disputing ARVs on Your Taxes
- Total the Value of Your Wins
There's a common sweepstakes myth that says you only have to report prizes worth $600 or more. This is not true -- all prizes, large and small, are legally required to be reported on US taxes.
- Enter the Prize Total under "Other Income"
Once you have the total FMV of all of your sweepstakes wins, enter the value on line 21 of your 1040 form, in the section called Other Income.
Read instructions on filling out the "other income" section of the 1040. Prizes and awards are mentioned on page 34.
- Itemize Your Expenses
If you are planning to itemize your expenses as a hobby or as a small business, you should do it here. Speak with your tax consultant about whether this is a good idea for your circumstances.
Can You Deduct Sweepstakes Expenses On Your Taxes?
- Let a Tax Professional Review Your Work
To be certain that everything is correct, ask a tax professional to review your filing. Sweepstakes taxes can complicate a return, and you want to be sure that you have not made any errors.
More about How to Find a Tax Preparer
- Submit Your Sweepstakes Information with Your Regular Taxes
Finish filling out the rest of your 1040 form and submit as usual with your regular income tax return.
More about How to File Your Taxes
- This is general information, not intended to be taken as tax advice. For specific information about your individual circumstances, contact the IRS or consult with a tax professional.
What You Need
- Good records of your sweepstakes wins
- Tax forms from the IRS
- Tax professional to review your work