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  #1  
Old 11-13-2009, 07:18 AM
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Default Question about sweeps

Was wondering "if" you won a sweeps, say $25,000. worth of "stuff", do ya pay taxes on the stuff or the $25,000 as a gift tax? I hope I said that right.
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Old 11-13-2009, 11:12 AM
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Quote:
Regular Gambling Withholding
You may be required to withhold 25% of gambling winnings for federal income tax. This is referred to as regular gambling withholding. Withhold at the 25% rate if the winnings minus the wager are more than $5,000 and are from:

Sweepstakes,

Wagering pools,

Lotteries, or

Other wagering transactions if the winnings are at least 300 times the amount wagered.


Do not withhold at the 25% rate on winnings from bingo, keno, slot machines, or any other wagering transaction if the winnings are $5,000 or less. However, see Backup Withholding below.

Regular gambling withholding is figured on the total amount of gross proceeds (the amount of winnings minus the amount wagered), not merely on the amount in excess of $5,000.

Report the amount you withheld in box 2 of Form W-2G. Also file Form 945, Annual Return of Withheld Federal Income Tax, to report all your gambling withholding.

Noncash payments. A noncash payment, such as a car, must be taken into account at its fair market value (FMV) for purposes of reporting and withholding. If the FMV exceeds $5,000, after deducting the price of the wager, the winnings are subject to 25% regular gambling withholding. The tax you must withhold is computed and paid under either of the following two methods.
The winner pays the withholding tax to the payer. In this case, the withholding is 25% of the FMV of the noncash payment minus the amount of the wager.

The payer pays the withholding tax. In this case, the withholding is 33.33% of the FMV of the noncash payment minus the amount of the wager.


If you use method 2, enter the sum of the noncash payment and the withholding tax in box 1 of Form W-2G and the withholding tax paid by the payer in box 2.
http://www.irs.gov/instructions/iw2g/ar02.html

Does that help??
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Old 11-13-2009, 11:16 AM
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Default Reporting Your Winnings On Your Tax Return

Generally, a prize giver is supposed to withhold taxes, but unfortunately, most of them do not do this. This leaves it up to you to report your prize earnings on your taxes as income received. If you have received a prize, the sponsor of the prize will send you a Form 1099-M. You will use that to determine what amount of taxes you have to pay on your prize. It is generally a pretty good idea to figger about 35% of your total winnings is what the IRS will get. SET THIS AMOUNT ASIDE, so that when you file your taxes, you will not be scrambling to come up with the required amount of taxes to pay in. In the event that you saved more than you need to pay in, consider it a bonus. However, if you think that the amount or value of your prize is not accurately represented on the 1099, then you will have some work to do to get it all straightened out before your taxes are due. Each contest will mention the value of the prizes available.

For example, if you win a trip the prize giver sends you a 1099 that claims the prize to be valued at $20,000.00, but you discover that the trip is really only worth $15,000.00, you need to contact the prize giver and tell them that you do not agree with the amount on the 1099 and that you have receipts to contest the amount they claim the prize is worth on the 1099.

If you are unable to get a corrected 1099 from the prize giver, then you will need to contact the IRS at (800) 829-1040 early in the morning (you have a better chance of reaching them without holding for hours if you call early in the morning). Tell them that you received a 1099 and that you disagree with the amount. You will then need to tell them that you have tried to resolve the situation, but have been unable to do so satisfactorily. Then you can tell them that you were advised to have IRS complete a Form 4598, “Form W-2 or 1099 Not Received or Incorrect.” Have all the necessary documentation (receipts and how you got your figures) at hand to prove your case. The IRS will then contact the prize giver and you will (hopefully) receive a corrected 1099.

Remember, keeping receipts is a good idea-even, if you do not think you will need them. Because some day you might be faced with a situation like the one above and, if you have your receipts, the whole ordeal will be a lot easier to deal with and a bit more stress free.
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Last edited by MagiePerdu : 11-13-2009 at 11:24 AM.
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Old 11-13-2009, 12:27 PM
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Thank you Patti, that was what I was looking for. I "probably" won a contest that was entered once, and only for my state. It gives me the "choice" of $25,000 of windows, doors, patio enclosure, sunroom, etc..I really dont need any of em, so I had picked the sunroom, and this woman keeps calling me, (cellphone that I never hardly use), and I of course keep missing her calls. Girls at work said I had to pay a gift tax of 44% which is way too much for a "free" prize that I really dont want or need. Then why did I enter??? Who knows! But I have 30 days to figure something out. I think I'll just keep ignoring her calls. I dont NEED that sunroom enough to pay even 35%. Thank you for this info. Its exactly what I was wondering about
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Old 11-16-2009, 03:50 PM
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Quote:
Originally Posted by beanie View Post
Thank you Patti, that was what I was looking for. I "probably" won a contest that was entered once, and only for my state. It gives me the "choice" of $25,000 of windows, doors, patio enclosure, sunroom, etc..I really dont need any of em, so I had picked the sunroom, and this woman keeps calling me, (cellphone that I never hardly use), and I of course keep missing her calls. Girls at work said I had to pay a gift tax of 44% which is way too much for a "free" prize that I really dont want or need. Then why did I enter??? Who knows! But I have 30 days to figure something out. I think I'll just keep ignoring her calls. I dont NEED that sunroom enough to pay even 35%. Thank you for this info. Its exactly what I was wondering about
When I lived in Houston and entered a few sweeps at the Rodeo every year, I invariably "won" something that I hadda pay for!
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