If you live in the United States.
The form will ask for the recipients name, address, their taxpayer identification number, date and signature.
As a result, you may not be able to use them as sweepstakes prizes.
If the value of all sweepstakes prizes given out during a specific period of time (and that can change depending on the specifics) will exceed 5,000 you may be prohibited from extending the sweepstakes to residents of Florida and New York without first registering your.
In addition, if one person wins multiple lower valued prizes within the same year, which when added together total 600 or more, they too will be required to complete a form W-9.You dont need to pay taxes on the sweepstakes prizes, but you need to properly report such prizes.Their notification documents should also advise the Winner to consult with their tax advisor.For verification, you should consult a tax expert).To read more posts by Marden-Kane, please visit our main blog page or subscribe to our email list.Some states restrict behavior such as requiring participants to visit alcohol retail locations or allowing alcohol to be used as part of the sweepstakes entry (like drinking as a way of entering the giveaway).The sender should be instructed by the Sponsor (or their designated Agency/Administrator) to send this form as a secure or encrypted email attachment or via mail.The prize value is considered income and must be reported on the winners tax return as taxable income.For example, if the sweepstakes prize is a trip you need to consider whether or not you need adult approval and companion.
If the prize is not cash or its equivalent, then the approximate retail value (ARV) or the fair market value (FMV) of the prize must be reported.
For simplicitys sake, Im going to limit this article to Canada and the United States, the main countries in which we run contests and sweepstakes.
But there's a very good reason why you shouldn't get your tax advice by word of mouth instead of from a licensed tax professional.
And, the Sponsor must send a copy of the 1099-misc form to the appropriate Winner by mail, postmarked by January 31st of the year following the year in which said prize was won, and to the IRS by February 28th.
See the Instructions for Forms W-2G and 5754 for more details.What if the sweepstakes prize is an item that can cause injury such as skateboard, what liabilities will you face?Image Getty Images / Ryan McVay.The rules for when and how the sponsors report their winners to the IRS don't affect you.Guns : Some states strictly forbid using firearms and ammunitions as sweepstakes and contest prizes.In the United States, you have to pay taxes on all of the prizes you win, no matter what their value.Sweepstakes prizes are not gambling winnings: Sweepstakes prizes are not the same as gambling winnings, according to the IRS' rules.However, neither of these issues affect how you, as a sweepstakes entrant, have to declare your taxes.