I'm planning to enter a fitness contest and the winner receives a total of $50,000 in prizes which includes $40,000 cash, fitness equipment, and health supplements. Do the taxes have to be paid by the winner upfront, are they taken out of the prize money, or are the taxes paid at the end of the year? I may not be able to afford to even win the contest. LOL Too funny.
2006-09-01 02:40:40 · 6 answers · asked by Anonymous in Business & Finance ➔ Personal Finance
I found this information on the irs.gov website which says the winner does have to pay taxes but it doesn't say when.
http://www.irs.gov/businesses/small/international/article/0,,id=10619
4,00.html
How can I calculate the total taxes on $50,000 worth of prizes? Does anyone know how much that would be?
2006-09-01 02:43:48 · update #1
The prizes would be taxable & due when you file the tax return for the year in which you received the prizes, not up front. If you win the prizes, it might be beneficial to withhold a larger amount of taxes from each paycheck at your regular job so you don't get stuck with a huge tax bill at the end of the year.
Good Luck!
2006-09-01 02:53:02 · answer #1 · answered by chh945s 2 · 0⤊ 0⤋
The sponsor does not have to withhold taxes although some will.
My suggestion is IF you win AND they do not withhold some of the winnings for taxes, take a portion of the money right away and make a tax payment (you can estimate the taxes on your winnings). That way it won't hurt so much in the end.
You can find the forms and instructions on the IRS website.
2006-09-01 09:50:46 · answer #2 · answered by KrautRocket 4 · 0⤊ 0⤋
I believe it falls under taxable income and must be included in your end-of-year filing. If I am correct, the tax rate depends entirely upon how much money you made yourself in other income during the year. I recommend you ask the question to a tax advisor. They'll probably answer it for free over the phone.
2006-09-01 09:46:54 · answer #3 · answered by deathbywedgie 3 · 0⤊ 0⤋
You probably have the choice to have withheld right away depending on the amount. In WI, if over $10,000 the withold for taxes right away. Given the choice it is usually better to have the witholding, just like from your paycheck. That way come tax time you don't have to come up with the money. Unless, of course you have it like that!
Remember, it is just withholding. Computations have to be performed to know your actual tax, because it is income.
2006-09-01 09:56:35 · answer #4 · answered by Anonymous · 0⤊ 0⤋
A cash prize probably just counts as income, so you'd include it when you filed your income taxes like normal. I have no clue about equipment prizes though, sorry.
2006-09-01 09:46:40 · answer #5 · answered by The Ry-Guy 5 · 0⤊ 0⤋
Im affraid Im not much help - Im in Australia and we dont have to pay taxes on winnings.
2006-09-01 09:47:23 · answer #6 · answered by ♥Kazz♥ 6 · 0⤊ 0⤋