Just won an amazing sweepstakes prize and wondering if you need to pay taxes on it? Unfortunately, there are many myths regarding sweepstakes and taxes. Some believe they only have to declare their sweeps wins if the prizes are worth over $600, but that’s far from the truth. In the US, you will have to declare your prizes on your taxes regardless of how much they may be worth. Read on to know more.
Where does the $600 myth about taxes and sweepstakes prizes come from?
$600 seems like a random number, so where exactly did it come from? Why do so many people believe that sweeps prizes need only to be declared if they are worth above $600? Here are the reasons:
1. Sponsors who host sweepstakes are required to report prizes that are worth $600 or more to the IRS.
2. Gambling institutions and casinos are legally required to withhold taxes if an individual wins above $600.
As you can now clearly see, these rules, while legal, do not apply to sweepstakes participants who win prizes through random promotions, contests, or drawings. If a sweepstake sponsor happens to report you as a winner (regardless of how much your prize is worth), but you fail to report the prize to the IRS, the discrepancy will likely be noticed and investigated. No one wants that, which is why it’s important that you report your winnings promptly.
If you are an active sweepstakes participant, you will likely realize that it is challenging to keep track of the prizes you win. That’s why it’s vital to stay organized when it comes to sweepstakes and maintain a record of not just the sweeps you enter but also the prizes you win.
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