(DailyThrive.com) – So, you’ve just won a sweepstakes prize, and you’re super excited because you now get to use your cool new product. Woohoo! Free stuff is great, especially if it happens to be cold, hard cash. Now all that’s left to do is enjoy your prize…right?
Before you rush out and spend all those winnings, you need this info. It turns out that prizes or awards that you win through sweepstakes are considered taxable income by the IRS. This means you’re responsible for paying on the full cash value for your prize.
Tax guru Mary Black explains why your winnings aren’t just counted as free money, and how you need to report them, in this video.
The Skinny on Winnings
Usually, you’re required to report your award income through a 1099-MISC form if it exceeds $600. But you can be taxed for any type of sweepstake prize, even if it’s just a small award.
That game you won? The coffee maker? The toy you gave away to your friend? It all goes back to the IRS in the form of the almighty dollar.
If you earn $1,000 worth of winnings from events, that money will be added to your overall income. So it’s a good idea to maintain a record of those winnings and make sure you can actually save up to pay for them. This will help you avoid penalties, interest and other legal issues with the IRS.
This doesn’t mean you shouldn’t go out and enjoy social media events and other fun award opportunities. Just be aware there’s no free lunch. Keeping that in mind can benefit you in the long run.
~Here’s to Your Success!
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