Bad News on Tax From Contest Winnings
It doesn't take a rocket scientist who works in accounting to figure out that a contest winner faces a tax liability for the prize won, but what about the average joe? According to a recent radio promotion in New York, it doesn't dawn on the winner, most of the time, that a tax burden is inevitable.
After one woman won tickets worth $900 to a concert, she was notified by the station that the value of the tickets (two tickets at $450 each) was reported to the IRS. This left her with a tax liability that could range from $135 to more than $300.
Although the woman could have refused the tickets and faced no liability, she admitted she received a copy of contest rules which stated in black and white that the value would be reported as income to her.
The bottom line? Advise your clients and customers to refuse such prizes if it's not something they truly want.