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How do taxes work for prize winnings?

Asked by: mgates 558 views YA Discussion

I won a radio contest, the prize was a $ 5,000 shopping spree to a sponsor’s store, and a TV valued at $ 1,449. I know I am responsible for taxes, but I am confused at how they get paid. Do they tax me upfront, and I will have to pay a certain percentage out of pocket, or do I just claim the $ 6,449 (total prizes) as extra income on my next year’s taxes, and then just get a slightly smaller tax return?

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  • what would taxes be if won $25 000 shopping spree
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2 Answers

  1. mike on Jan 21, 2013 Reply

    You claim the actual cash value of the prices to the IRS. Not what the radio station stated they were worth. Of course the radio station wanted to build up excitement so they inflated the value of the contest. I would write down everything you got from the $ 5,000 shopping spree and the TV, then look all over the internet or Amazon.com to find the lowest prices. Then turn in the lowest prices to the IRS. Print the pages with the prices on them in case you get audited.

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  2. Linda R on Jan 21, 2013 Reply

    Most places, where you win the cash from, deducts the taxes and gives you what’s left – therefore, they do it up front. If the prize winnings are all items….then you just pay the sales tax.

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