What Sweepstakes Prize Winners Need to Know about 1099 Forms
Handy Information for Winners About 1099-MISC Forms
If you enter sweepstakes regularly, sooner or later you are going to win a prize. If you live in the United States, you will be paying taxes on your prizes, and many times that means dealing with a 1099-MISC form. You can expect a 1099 form to arrive if you won a prize worth more than $600, but also for smaller prizes that asked you to fill out an affidavit before receiving them.
The 1099-MISC form is used to report miscellaneous payments to non-employees.
Any sweepstakes prizes are considered to be miscellaneous payments. As the IRS puts it, companies "include amounts paid to a winner of a sweepstakes not involving a wager" on their 1099 forms. Gambling or lottery winnings are handled differently and do not result in a 1099 form being sent.
Having your 1099-MISC forms from each of your prize wins is not necessary to file your taxes, but they are helpful. Here's what you need to know about them:
What Information Can You Find on a 1099-MISC Form?
Your 1099-MISC forms will include information that helps you keep track of the income you received by entering sweepstakes so that you can report it accurately to the IRS at tax time. Remember that the fair market value of any prize is considered income for tax purposes. 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 for using them, by visiting the IRS website.
When Will Sweepstakes 1099 Forms Arrive?
According to the IRS 1099-MISC guidelines, 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 receive a prize, not the year in which you win a prize. So 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 following the year you got the car. 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 quarterly basis.
What to Do If You Don't Receive a 1099 Form for Your Prize Win
The IRS has the following to say about 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 that, 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 to, you can contact the sweepstakes' sponsor to ask them to send it.
But it isn't necessary to do so if you don't want to.
While they can be helpful, 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. And in the United States, you are legally required to report any prize win, even if the sponsor doesn't ask for your social security number to report the prize to the IRS. So you're not off the hook for reporting your prize winnings, even if a 1099 form never appears.
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 sweepstakes sponsor estimated when they offered the prize.
There are a number of reasons why a 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 sweepstakes 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.