How To File Taxes when You're a Contest Winner

First of all do not automatically assume an organization like CBS will automatically file the taxes on your winnings like the first winner of Survivor Richard Hatch did.  The first thing you should do in order to properly file your taxes is contact an accountant or a tax professional that can help you through the process. 

If you happen to win a cash prize, you will have to pay gift taxes on those winnings.  If you win a very valuable item you also have to pay taxes on what would be the fair market value of any items like a Chevy Volt as well. The truth is that an accountant will be able to help you through the entire taxation issue as long as you take the proper paperwork and make sure that you don't spend more money than you won so you can pay your taxes in an effective fashion.  You can also use an accountant to learn how to properly give away some of your winnings to a 501(c3) foundation so the tax burden on the winnings will not be so bad.

If you win a contest involving a poker game for example, you also get to deduct whatever losses you have from your gambling excursions on your 1099.  It is important that you remember you do have to file taxes on those winnings because otherwise you very well could end up getting audited by the Internal Revenue Service.  A 1099 form is when you’re looking at the government likely taking a third or a fourth of your winnings.  The company or contest that you have won this from will likely advise you to wire part of your check to the federal government even before you begin spending any of it.   Winning a thousand dollars from something like a small lottery could possibly push you into the twenty-five percent tax bracket.  If you only won fifty dollars from a small church themed contest for example and yet you only made six hundred and fifty dollars in a year you will likely only have to pay a ten percent tax on all earnings as a part of your 1099 form.

A situation like Wheel of Fortune can cause you to have an extremely high tax rate to deal with so it is important you find some good tax free funds to put that money in such as a Money Market Fund.  Knowing how to manage your money is important when learning about how to properly file taxes.