Occasionally, I write about tax topics for other business sites. Below is a preview of an article written for ByAimee.
Hosting a giveaway on your blog is becoming increasingly popular. Everyone loves winning, so a good giveaway relevant to the focus of your blog can bring you a lot of traffic.
First things first. Prizes are Income. In the United States, income is taxable unless specifically excluded (e.g., tax-exempt bond interest). Items of value won in contests, sweepstakes, or lotteries are taxable income to the recipient in the amount of their fair market value at the time they were won.
Requirements of the Blogger
Any giveaway with a value of $600 or more must be reported to the IRS and the winner on a Form 1099-MISC. This filing is purely informational but it puts the IRS “on notice” to look for that income to be reported on the winner’s Form 1040.
Requirements of the Winner
If you receive a Form 1099-MISC, you are required to report the income listed on your annual tax return. The IRS also received a copy of this Form 1099-MISC, so they are waiting for it to show up on your return!
Prizes valued at less than $600 should still be reported as miscellaneous income.
Read the rest of the article here.