Paying Taxes on Prize Wins

Winners of sweepstakes are required to pay taxes for the prize he gets, if the winner lives in United States. The prizes are not only referring to cash, but also include other grand prizes such as cars and dream houses even small prizes like T-shirt and baseball caps.

When to pay taxes?
If you have been notified to win certain prize but haven’t got them, then you are not obligated to pay taxes. That is to say, you are required to pay your taxes on the condition that you receive what you win.

How much you should pay?
The taxes that winners pay are accordance to the true Fare Market Value. In other words, the value of the prizes is supposed to be on the time winners receive the prizes, not the time they win. For example, if a winner wins a prize worth of $800 at the time he win, but when he actually get the prize, the value of the prize goes down to $600, the winner is only required to pay taxes on $600 instead of $ 800.

How are Taxes Paid?
Just like the regular salary, taxes on the prize got by sweepstakes are paid at the end of the year on the tax form. In most cases, you should not pay taxes directly to a sweepstakes sponsor. However there is exception, the sponsor will collect some taxes for the vacation giveaways from winners.