We are in the middle of the tax season of 2007. The subject is so huge and complicated that I just dread to get started on it. However, sweepstakes and contest and lottery winnings are subject to taxes in the US, and since I was a taxpreparer for 6 years, I might as well tackle the subject as much as I can understand myself.
To determine our tax liability, whether it is earned or unearned income, which winnings from gambling are, should always be determined from the form 1099 which you get in the mail from the sponsor of the prize you won if it is over 600 dollars. Forms are the lifeblood of taxes which brings me to the subject of Hobby Income which most winnings are considered by the IRS. It would be so much less complicated if we had a schedule to put our hobby income, instead of putting it on line 21 on the 1040 and putting the losses on the Schedule A subject to the 2% Adjusted Gross Income deduction which means that only people who make enough income to itemize, can take the losses up to the hobby income. I lost a client once at H&R Block because he insisted that he should be able to take his losses and subtract them from his winnings. He had a shoebox full of nonwinning lottery tickets to prove it. If life was just that simple, it would be wonderful. I wonder myself what the rationale behind this procedure is but I am at wit’s end. It was a good education for a newbie to taxes, like myself, to the traumatic subject of taxes.
The very first thing to remember is the Forn 1099 which will be sent to everyone who has more than $ 600 in winnings in any tax year which is for most people Jan1. – Dec. 31. It will be sent from sponsors who award the prizes from any kind of gambling activity which of course includes sweepstakes, lotteries and contests. No matter what the prize, it must be included as income at the Fair Market Value, which is the amount at which the prize would change hands between the buyer and the seller, neither being required to buy and sell, and both having reasonable knowledge of all necessary facts.
TTHERE IS NO FAILURE UNTIL YOU FAIL TO KEEP TRYING.
