What do boring tax forms have to do with the thrill of winning sweepstakes prizes? It turns out that every successful sweeper in the United States needs to know a little bit about 1099 forms: Why you need them, how they work, and when you can expect to receive them.
Why U.S. Sweepstakes Winners Get 1099 Forms
If you enter sweepstakes regularly, sooner or later you'll win a prize. If you live in the United States, you're required to pay taxes on your prizes, and that's where 1099-MISC forms come in.
If you win any prize worth more than $600, the sweepstakes' sponsor is required to send you a 1099 form for it. They do this as part of their own tax requirements, showing where the money they spent on the prizes went.
You may also receive 1099s for smaller prizes, especially if the sponsor asked you to fill out an affidavit before they sent the prize to you.
As a sweeper, you'll receive these forms from the companies that you win from, and you'll keep them for your records and to help you properly report your taxes.
What Is a 1099-MISC Form?
Companies use the 1099-MISC form to report miscellaneous payments to non-employees. Sweepstakes prizes are treated as regular income by the IRS, and are therefore considered to be miscellaneous payments. And of course, winning a prize doesn't make you an employee of the sponsor, so you're a non-employee for tax purposes.
As the IRS puts it, companies "include amounts paid to a winner of a sweepstakes not involving a wager" on their 1099 forms.
Gambling and lottery winnings are treated differently than sweepstakes prizes, and those winners do not receive 1099 forms.
You do not have to have a 1099-MISC form from each of your prize wins to file your taxes, but they are helpful. They keep you from forgetting about prizes that you won or from misreporting their values.
If a company sends you a 1099 form, you can be sure that the IRS knows you won a prize. So be extra careful not to forget to report it when you file your taxes. You wouldn't want to trigger an audit!
What Information Can You Find on a 1099-MISC Form?
Your 1099-MISC forms include information that helps you keep track of the income you received by entering sweepstakes so you can report it accurately to the IRS at tax time.
Note that the value listed for your prize on a 1099 form might not be correct. The 1099 lists the ARV, while you're responsible for paying taxes on the fair market value of your prizes. Read on to see what to do if these numbers don't match up.
Your 1099-MISC forms will include:
- The sponsor's, name, address, and tax ID number.
- The reported value of the prize.
- Your name, address, and social security number.
- The tax year that the 1099 form applies to.
- Other relevant information.
You can view a sample 1099-MISC form, as well as instructions, by visiting the IRS website.
When Will Sweepstakes 1099 Forms Arrive?
Companies must mail a copy of the 1099-MISC form to its sweepstakes winners in a letter postmarked by January 31st of the year following the year in which they received a prize.
For example, if you received a prize in May of this year, your 1099 should be mailed by January 31st of next year.
The 1099-MISC form will be sent for the year in which you received a prize, not the year in which you were notified that you are a winner.
For example, if you are notified that you have won a car this year, but the sponsor doesn't actually deliver the prize until next year, you can expect to get the 1099-MISC form by early February of the year after that. If the sponsor sends the 1099 form for the wrong year, you can dispute it with them and ask them to send a corrected version.
Note that sponsors do not have to wait until January of the following year to send out their 1099-MISC forms. Some companies choose to send them shortly after awarding the prize, for example, or on a schedule like once per quarter.
What to Do If You Don't Receive a 1099 Form for Your Prize Win
The IRS tells you what to do if you do not receive an expected 1099 form:
"If you have not received an expected Form 1099 by a few days after (January 31st), contact the payer. If you still do not receive the form by February 15th, call the IRS for assistance at 800-829-1040."
In other words, if a 1099-MISC doesn't arrive when you expect it, you can contact the sweepstakes' sponsor to ask them to send it. But that can be tricky since, unlike asking an employer to resend a 1099 form, you might not have contact information available for a sweepstakes sponsor. Luckily, it isn't necessary to do so if you don't want to.
As helpful as they are, you don't need a 1099-MISC form to report your sweepstakes prizes. You should be tracking your prize wins so that you know how much you won during your tax year. That's the amount that you should report at tax time.
Remember that not receiving a 1099 form doesn't let you off the hook for reporting your prizes on your taxes. In the United States, you are legally required to report any prize win, no matter how large or small, even if the sponsor doesn't ask for your social security number to report the prize to the IRS.
What to Do If Your 1099 Form Shows the Wrong Prize Value
Remember that you only have to pay sweepstakes taxes on the fair market value (FMV) of your prize, which can be different from the value that the sponsor estimated in the sweepstakes rules.
There are a number of reasons why an FMV can vary from the sponsor's estimations. For example, if it takes a while for a prize to arrive, the item might be selling for less than it was when the sweepstakes' rules were drafted. If you feel that the prize value on your 1099 form is too high, you should dispute the ARV on your taxes.
If you made a mistake on your tax forms and need to correct the amount you reported, the IRS website offers instructions on how to do so.
Do You Need to Send Your 1099 to the IRS?
The IRS will receive the 1099-MISC form from the sweepstakes sponsor, you do not need to send them a copy yourself. You only need to enter the prize value as miscellaneous income on your tax returns and keep the 1099-MISC form for your records as proof of your sweepstakes income.
This is intended to be a general overview of how sweepstakes taxes work in the United States. Tax laws change frequently, and the most recent information can be found on the IRS website. The author is not a tax professional, and this article is not intended to be legal advice. Your tax situation may be different from what is outlined here, and you should always consult with a knowledgeable tax professional if you are unsure about anything to do with your sweepstakes taxes.