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USTaxAdvising
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I won a new car prize (worth $16,000 value). How do I report

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I won a new car prize (worth $16,000 value). How do I report this prize in my tax turn? Dose the company send me misc-1099? I am concerned about tax and please let me know how i can prepare for my tax reagarding reducing tax liability at the moment thanks
Submitted: 1 year ago.
Category: Tax
Expert:  USTaxAdvising replied 1 year ago.

Hello,

 

How do I report this prize in my tax turn? - This prize winning is basically like a gambling winning which is taxed as ordinary income. Since the fair market value of the prize was 16,000 you would report this on Line 21 of Form 1040. See link here for some information - http://taxes.about.com/b/2006/06/23/gambling-and-prize-winnings.htm

 

Dose the company send me misc-1099? - Yes the should. But even if they don't you still have the obligation to report the income on your tax return. What I am trying to say here is that the failure for them to issue a 1099 does not preclude you from declaring it as income.

 

You may wish to do a quick estimate of your total tax for the year since this income may put you in a different tax bracket. This income would be taxed at your current marginal tax rate.

Here is a link to the current tax tables showing the taxable income levels and the respective tax rates - http://taxes.about.com/od/Federal-Income-Taxes/qt/Tax-Rates-For-The-2013-Tax-Year.htm

Here is a link to a tax estimate calculator - http://www.efile.com/tax-service/tax-calculator/

 

I trust this provides the clarity you were looking for. Please let me know if you have any follow up questions.

 

Best regards,

Customer: replied 1 year ago.

I paid sales tax already. Is there any deductible items for a prize? thanks

Expert:  USTaxAdvising replied 1 year ago.

Hello Sunny,

 

The taxes I was referring to here are the federal taxes due on the prize you won. This is taxable federally just like your wages or employment income.

 

The sales taxes you paid will be deductible as an itemized deduction on schedule A (line 5 b). There aren't any other deductible items really unless you paid for a ticket to enter a draw for the prize. The cost of this ticket would be a deduction on line 28 of Schedule A.

 

I hope this helps. Let me know if you have any further questions.

 

Best regards,

Expert:  USTaxAdvising replied 1 year ago.
Hello,

Just following up. I hope I provided the clarity you were looking for. If not please let me know where I can assist by posting your follow up questions.

Best regards
USTaxAdvising, CPA
Category: Tax
Satisfied Customers: 1111
Experience: US Taxation specialist.
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