Have Fun Entering Sweepstakes, But Be Careful Of Taxes (Especially On Trips)

preface: a sweepstakes is a random drawing. a contest requires a skill and is typically judged by the contest provider. also, i’m neither a lawyer or an accountant, but have been entering sweepstakes for 3 decades. i’m not endorsing anyone, caveat emptor, and void where prohibited. that said…

i love entering sweepstakes…but only the legit ones that conduct random drawings where anyone can win and has an equal chance (like coca-cola, pepsi, major food brands, major corporations, etc.) i’m still on the fence about publisher’s clearing house, but the major corporations i believe in. there’s a caveat though. be careful of taxes.

you have to pay taxes, sign affidavit’s (often required getting notarized), release them from any/all liability, etc., but the taxes are the biggie.

included with all the paperwork they send you (if the prize is $600.00 or more) is a tax form that they send to the irs. do not think for a second that you won’t have to pay the taxes, because the irs is already aware of your received prize. if i win cash, taxes are just fine…but if i win a trip, it’s not. here’s why:

i’ve never seen a sweepstakes where the value of the trip you could win didn’t have a very inflated value. in the official rules of every sweepstakes must be written the value of each prize (and you have to pay taxes on the value of that trip!). almost every trip i’ve seen, i could have scheduled it much cheaper myself. i’m not sure why their trip values are always so high, except maybe to make it sound grander than it is. at any rate, i never enter sweepstakes where a trip is the main prize. i’ve found that the taxes i’d have to pay on their deemed value is about what it would cost for me to book the trip myself. makes zero sense. plus, you usually have to travel on their specified dates. too much pressure all around.

a side note on sweepstakes taxes: the irs lets you claim “fair market value” on your prize, if you can prove it and it’s reasonable. for example: if you win a car the sweepstakes values at $50K, but you sold it to someone for $40K, you can change the value of taxes owed accordingly. one sweepstakes gave a bar of gold to the grand prize winner. at the time of the sweepstakes, its value was very, very high…but by the time the winner got the gold bar, gold prices dropped substantially. he only had to pay taxes on the “fair market value” of what he reasonably profited from the prize instead of the amount on the original tax form given to the irs.

also remember that rules, laws, guidelines can change at any moment.

and you never, ever, ever, EVER, have to pay anyone money to receive a prize from a legit sweepstakes. if they want money (for any reason), you are being scammed!

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