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As mentioned by others, sweepstakes sponsors are required to report prizes awarded to US residents to the IRS if the value is $600 or more. For tax purposes som

As mentioned by others, sweepstakes sponsors are required to report prizes awarded to US residents to the IRS if the value is $600 or more. For tax purposes some also choose report prizes of lower values especially if they are giving away lots of them that equal substantial value businesses expense out. I thought it was only the 15k prizes above gift tax but it was actually any prize for tax tracking. Lots of people balked when the SSN question came up and understandably so. In a few cases the prizes were motorcycles and ATVs and I felt bad for the people that passed them up. The promotions systems were brand focused and most of them really did want to give away the prizes but sometimes it was tasking due to the fear of a scam. The entries were mainly for brand focused games and brand focused gear/prizes mostly marketing focused. The system also only asked for email and the opt-in for the company/brand loot running it was un-selected. Though the brand companies did want to collect emails of people interested in the brand, they had to opt-in for that. We mainly needed emails for contacting if the user won. After winning, names/SSN/location would be asked for but lots of people weren't having it.

beojan 8y ago
Wouldn't it be easier to exempt prizes from income tax and instead have a sweepstakes tax paid by the sponsor instead?
- drawkbox 8y ago
  It would be easier but it is law and the IRS wouldn't like that. Part of this process of getting the info allows it to be a gift if the sponsor does include paying the taxes, they still need the info to do that. Basically any transfer of value is tracked and the company that gives it away needs proof to write off the amount and/or declare it a gift. The SSN and affidavit are the scary part where people think it is a scam. Anytime you win prizes this happens even if you are on a gameshow. [1] [1] https://www.nerdwallet.com/blog/taxes/pay-taxes-game-show-winnings/ https://www.nerdwallet.com/blog/taxes/pay-taxes-game-show-wi...
raverbashing 8y ago
Well this is solved by asking the SSN to redeem the prize, but not before the draw.
- jonhendry18 8y ago
  The solution is probably a two-part form where the winner can fill in their SSN and seal it in an envelope, then the contest operator would take that envelope and enclose it with the operator's part of the form, and mail it. That way the contest operator need not ever see the winner's SSN. The amusing thing is the apparent widespread assumption that contest operators are shady as f.
  - mratzloff 8y ago
    "Here is a code. Please go onto the IRS website and enter this code and the relevant information, then tell me the code you get in response."
    - jonhendry18 8y ago
      Sure, if you want to be modern.
  - aekotra 8y ago
    What the...the problem is the contest winner not trusting the operator with their information. How does giving the operator an envelope containing their SIN solve this problem?!
    - jonhendry18 8y ago
      Okay I didn't think that through.
- drawkbox 8y ago
  As mentioned, this is only asked of winners to collect their prize, after the draw. If they won they must be contacted to verify and get info to send them the prize. Since it is a transfer of value, the SSN has to be known for the 1099 form that is required by the IRS after $600 in value being transferred. It is also required if the sponsor gives it as a gift, pays the tax portion and for the sponsor to expense it out on the business' taxes. Same thing happens on gameshows or any giveaway. It is probably easier to trust after you were on a physical gameshow though, if you just won a prize online it seemed scammy to many eventhough we took all precautions to make it legit including no opt-in when they entered the email or phone. Only their email/phone was required to enter after they won the minigame or played the ticket. Everything else was asked later if they won the prize. It is harder than you'd think to give away the actual prize to people that won it due to all the scams out there taking the fun out of things.

beojan 8y ago

Wouldn't it be easier to exempt prizes from income tax and instead have a sweepstakes tax paid by the sponsor instead?

drawkbox 8y ago
It would be easier but it is law and the IRS wouldn't like that. Part of this process of getting the info allows it to be a gift if the sponsor does include paying the taxes, they still need the info to do that. Basically any transfer of value is tracked and the company that gives it away needs proof to write off the amount and/or declare it a gift. The SSN and affidavit are the scary part where people think it is a scam. Anytime you win prizes this happens even if you are on a gameshow. [1] [1] https://www.nerdwallet.com/blog/taxes/pay-taxes-game-show-winnings/ https://www.nerdwallet.com/blog/taxes/pay-taxes-game-show-wi...

raverbashing 8y ago

Well this is solved by asking the SSN to redeem the prize, but not before the draw.

jonhendry18 8y ago
The solution is probably a two-part form where the winner can fill in their SSN and seal it in an envelope, then the contest operator would take that envelope and enclose it with the operator's part of the form, and mail it. That way the contest operator need not ever see the winner's SSN. The amusing thing is the apparent widespread assumption that contest operators are shady as f.
- mratzloff 8y ago
  "Here is a code. Please go onto the IRS website and enter this code and the relevant information, then tell me the code you get in response."
  - jonhendry18 8y ago
    Sure, if you want to be modern.
- aekotra 8y ago
  What the...the problem is the contest winner not trusting the operator with their information. How does giving the operator an envelope containing their SIN solve this problem?!
  - jonhendry18 8y ago
    Okay I didn't think that through.
drawkbox 8y ago
As mentioned, this is only asked of winners to collect their prize, after the draw. If they won they must be contacted to verify and get info to send them the prize. Since it is a transfer of value, the SSN has to be known for the 1099 form that is required by the IRS after $600 in value being transferred. It is also required if the sponsor gives it as a gift, pays the tax portion and for the sponsor to expense it out on the business' taxes. Same thing happens on gameshows or any giveaway. It is probably easier to trust after you were on a physical gameshow though, if you just won a prize online it seemed scammy to many eventhough we took all precautions to make it legit including no opt-in when they entered the email or phone. Only their email/phone was required to enter after they won the minigame or played the ticket. Everything else was asked later if they won the prize. It is harder than you'd think to give away the actual prize to people that won it due to all the scams out there taking the fun out of things.