Do the Winners of Omaze Giveaways Have to Pay Taxes?
When it comes to joining giveaways and online raffles, it’s crucial to note the regulations for each sweepstake. In general, winners are responsible for any applicable taxes. Should a US winner receive a prize worth more than $600, for instance, they’ll be provided with a 1099 form so that they can report their prize winnings according to the government’s set of rules.
Here in Omaze, certain prizes come with taxes that can be covered, but there will also be situations where the winners will be asked to submit their respective reports. Take this giveaway as an example–with every $5 spent on merchandise, you will receive an entry ticket.
When it comes to tax coverage, the final amount will be determined after we know which prize you’ll win—it’s that simple. However, it’s always best to read the rules for each particular event you desire to enter.
To help further guide you in the process, we’ll give you the steps on how Omaze giveaways winners can pay their sweepstakes taxes:
Step One: Keep a Good Record
Keeping good records can make paying taxes on your sweepstakes winnings much easier. Record important information on a ledger or a spreadsheet, and jot down details such as names and sponsors of contests you’ve one, the date when you’re expected to receive the prize, and the date of receipt. If you feel that the amount of the prize could be incorrect, write down the ARV and FMV for value estimates.
Step Two: Solicit for 1099 Forms From Sponsors
If you win more than $600, the sponsor will send you a 1099-MISC form at the end of the year. Smaller prizes are usually accompanied by 1099-MISCs from sponsors. Make sure to include the information from these forms on your tax returns and make copies for your own records. Additionally, sponsors are required by law to mail these forms by January 31st. Even if you do not get a 1099 form, you must still declare the prize amount.
Step Three: Assess Fair Market Values
We emphasize the necessity of paying sweepstakes taxes on the Fair Market Value (FMV) rather than the sponsor's ARVs. Use this amount on your taxes after monitoring the FMVs of your winnings. This will be required to substantiate value differences when compared to any 1099s given by sweepstakes sponsors.
Step Four: Report True and Total Value
Many sweepstake winners believe that they only need to disclose prizes worth $600 and above. All raffle giveaway awards are required by law to be disclosed on US tax returns. As a result, you'll need to total the amount of all of your sweepstakes prizes throughout the course of the year—this is the amount you will report on your tax return.
Calculate the total FMV of your prizes, and input it on line 21 of your 1040 form, under the area labeled "Other Income." The IRS provides guidelines for completing the "Other Income" part of your 1040 form, while page 82 mentions prizes and honors.
Step Five: Seek Professional Advice
For the best possible results, have a tax professional examine your file. Sweepstakes taxes can make your tax return more complicated, especially with winning significant rewards. You want to be sure that you have not committed any mistakes that might result in you having to pay extra money.
After double-checking, you can finally submit the paperwork. As you fill up your 1040 form, you may submit it with your regular income tax return.
There’s a price you pay for the prizes you earn. This could mean more calculating and bookkeeping on your end, as well as filing the necessary paperwork. Beyond that, taxes are not always exact, and they very so often depend on values. Nonetheless, keep note of these steps to avoid sweepstake scams, discrepancies, and costly penalties!Are you looking to win a car in a sweepstake? FallenValor is dedicated to ensuring a quality experience for our customers, where they can engage and enjoy giveaways, sweepstakes, lottery, and raffle contests. Join our latest contest now by gaining an entry for every $5 you spend on our merchandise! For more details, contact us at Daniel@fallenvalor.org!