In case you didn’t know, it is required by law to pay taxes on all your sweepstakes wins at the end of the year. No matter how big or small the prizes are the taxes still apply! Get yourself familiar with how these taxes work; we are here to help. While we’re not accountants, and we recommend you consult a financial advisor for really big wins, here are some tips to keep in mind.
How Are Sweepstakes Taxes Paid?
Your sweepstakes taxes are paid like any other form of taxes, right on your tax form at the end of the year. Your sweepstakes winnings should be classified as “other income” on your tax form. You should fill out the amount based on the “Fair Market Value” of the prize. Also remember to be honest!
Keep Records Of Your Wins
This is probably the most important thing for you to do. If you’re a hardcore sweepstakes player it is definitely easy to lose track of everything you’ve signed up for. Keep a folder or binder of everything you’ve signed up for and won so you don’t forget at the end of the year when it comes time to fill out those tax forms.
Get Your Forms Reviewed
You want to make sure that everything on the form is done correctly. If a tax form is filled out incorrectly can potentially cause difficulties for your tax return, and we certainly don’t want that to happen. Hire a tax professional to look over your stuff so there isn’t any issues.
The Sweepstakes Sponsor
In almost all cases, there will never be a situation where you have to pay taxes directly to the sweepstakes sponsor. If the sponsor is telling you that you have to pay them then, it may be signs of a non-legitimate sweepstakes. Be sure to examine the sweepstakes carefully, read the rules, and check out the rest of the sponsors site to see if it is legitimate. To find out how to spot legitimate sweepstakes check out our tips:.
Now that you know the basics of sweepstakes taxes you can go ahead and get prepared to get them done! And try your luck at one of our great giveaways, like the chance to enter every day to win $1,000! Good luck!