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Taxes on Contest Winnings

by geekstarpilot / January 30, 2007 12:11 PM PST

I just heard the story in BOL399 about the guy who could not take his trip to space prize because he was not able to pay the taxes.

Ha??? What do you mean pay a tax on a prize won? Is the US government so hard up for revenue that it has to tax prize winnings?

As an avid space nut I can feel this guy's pain. For me winning this prize would be the best thing in the world.

In Australia revenue or benefits gained from "windfall gains" (e.g. winning a lottery, winning a prize on a TV show, or a trip to space, etc) are not taxable.

The only way that any tax would be paid would be if you invested your winnings (e.g. $100,000 lottery prize) and earn interest or made captial gains.

Interestingly there was a case of a person having to pay tax on game show winnings because this person was a regular game show contestant and the tax office deemed that the money was actually income from the job of being a professional game show contestant.

Rgds,
GeekStarPilot

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Taxes
by ktreb / January 30, 2007 3:46 PM PST

We have relatively low income taxes (Oh, I can hear the screaming now...) so they got to get it from somewhere.

But there are ways of getting out of paying them sometimes. My parents won a car 12 years ago playing bingo at an Indian casino. Since they gambled so much they were able to claim a loss in the amount of the car so they didn't have to pay any federal taxes on it. (BTW, they were audited for that year so brought many boxes of bingo receipts to the IRS office to prove their losses) They had to pay taxes to the state, though.

They gave the car to me! Grin

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it's needed
by kellenjb / January 30, 2007 9:12 PM PST

They kind of have to impose a tax on gifts otherwise people could easily get around taxes. Sales tax for example, I will gift you $15,000 if you gift me a car. If you work the system well enough you could even get a tax write off for your oh so generous donation.

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I dunno
by navsimpson / January 31, 2007 6:25 AM PST
In reply to: it's needed

In Canada - where approximately 50 cents of every dollar you earn goes back to government Happy - they don't tax lottery or contest winnings, so I'm not sure that's the reason they must. It seems weird that of all countries it's the US that does this given that their historically right of other democracies.

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Do They Tax Dead People, Down-Under?
by Catgic / January 30, 2007 10:13 PM PST

geekstarpilot --- Do you Ozzians tax dead people down in Oz, like we do Up-Under? here in Yankee Doodle Land?

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The Tax Man Always Cometh...
by Guidemaker Dave / January 30, 2007 10:22 PM PST

I won a car at a company Holiday party back in 2000. They even paid the $8000 in taxes (Fed, state, local) so I wouldn't have to, or so we all thought.

Come tax time, my tax attorney said the Internal Revenue Service laws requires taxes on the tax payment the company made. So while I didn't have to pay taxes on the car value, I had to pay taxes on the taxes the company paid because the IRS says that payment constituted income to me. Needless to say, I was NOT a happy camper.

Also, I had a neighbor who won prizes on the game show "The Price Is Right". She said right after she won the Showcase and the show ended, the IRS representative walked over to discuss payment... right there in the studio. Apparently the agent is there full time to do this. So now everytime I see a gameshow, I look for a suit with a briefcase off to the side of the curtain/stage waiting a lurking....

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(NT) Same thing for any prize a la price is right, wheel of frtn
by robstak / January 31, 2007 5:10 AM PST
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(NT) Will the winner of the PhotoshopBOL contest be taxed??
by robstak / February 1, 2007 4:23 AM PST
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(NT) How can you tax something that is priceless?
by ktreb / February 1, 2007 11:48 AM PST
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(NT) haha cute
by robstak / February 2, 2007 5:15 AM PST
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