About ten days ago, I noticed that a poker website was running a contest. Submit a fun poker game that can be run as a poker tournament; if your game is chosen we’ll send you the Bahamas. There were over 100 submissions, and eight were chosen to be voted on by listeners of the Two Plus Two Pokercast. My submission is one of the eight up for selection.
(If you would like to vote, you can do so by going here. Choose Russ Fox – Binglaha and you will have voted to send me to the Bahamas. If you are not registered on Two Plus Two, you will first need to register; you can do so by going to this link.)
So a friend asks me, “Russ, if you win this trip will you pay income tax on it?” The answer is easy: Yes, I will owe income tax on the trip.
The US Tax Code is very clear on this: All income is taxable unless Congress exempts it. Congress has not exempted sweepstakes and contests. It does not matter whether you receive a Form 1099-MISC or not; if you win a contest you are supposed to declare it as Other Income (Form 1040, Line 21) based on the fair market value of the prize you won.
If you don’t pay the tax, you’re committing tax evasion. Richard Hatch, the first winner of Survivor famously won $1 million and decided to ignore the 1099-MISC and advice from several accountants. After 51 months at ClubFed, he still proclaims that he wasn’t guilty. Unfortunately for Mr. Hatch, there were only 300 million witnesses….
As for myself, if I’m lucky enough to win the prize (with a value somewhere around $2000), it will go on my tax return. As for why I decided to try to win the trip, the week of the event in the Bahamas is the same time as a meeting of accountants in Sacramento. Let’s see, 85 F, fun in the sun, and beautiful people in the Bahamas versus 37 F, the Tule Fog, and fun accountants in Sacramento. Which would you choose?
Tags: Hatch
You’ve got my vote! Not only do you deserve it for all of the helpful content you produce, but since you are likely the only winner who would properly pay taxes on the prize, your winning reduces every American’s tax bill by like, .0002 cents! Sweet!
I’m not following the contest, so you should make another blog post if you make it to the next bracket and I’ll vote for you again.