How to report sweepstakes winnings
Winning a sweepstakes is one of those once-in-a-lifetime occurrences we may all dream about. There's nothing better than free stuff, but even prizes from contests have a cost.
When it comes to winning a sweepstakes, one of the most iconic images is the big cardboard checks presented by Publisher's Clearing House. The company's commercials always featured a shocked and ecstatic recipient of the annual Clearing House sweepstakes enamored by the free money arriving at their doorstep. Of course, the commercials never overtly state there are tax information reporting requirements.
IRS regulations mandate that all sweepstakes winnings exceeding $600 that are paid in a calendar year be reported on Form 1099-MISC during tax season. This threshold includes monetary winnings as well as the fair market value of items such as vehicles, trips to the Bahamas or a flat-screen television.
How to report
Sweepstakes winnings are recorded in Box 3 – other income – on a 1099-MISC. If the prize was awarded for a service that was performed – such as an award for having the top sales commission – it is reported in Box 7.