Do you really have to declare and pay tax on competition winnings in the US? Would you have to do this in the UK?
I never would have thought..
I never would have thought..
HM Revenue & Customs doesn't regard lottery winnings as income, so all prizes are tax-free – hurray! However, there could be tax implications once you've banked your winnings.
http://www.thisismoney.co.uk/money/experts/article-2551709/I...
HMRC has produced guidance in the context of freelancers who win prizes and the short version is that they view most prizes as taxable income of the freelancer.
Gambling income is tax free in the UK as I understand it, you pay tax to take part (the tax at that end is greater unless the company pays out more than it receives!).
(Having a website which looks like the DailyMail open at work (even during break) isn't the best look!)
I believe the same is true of gambling winnings (The reasoning being that you aren't given tax refunds when you lose, so it's unfair to tax when you win)
Prizes that you haven't payed for entry might be different.
Which becomes really interesting when you consider professional poker players.
Everything you receive from everyone is taxable income unless you can find a specific tax code saying that it isn't. Lottery winnings are taxable unless a section exempts them. Non-monitary prizes or awards from competitions are taxable.
As with most tax law, this is necessary to prevent widespread avoidance. Nobody would pay any taxes if only money income was taxed. We'd revert to a barter economy wherever possible, defeating the purpose of taxation. (ir employer pays employees with physical good via a company store.) If all competition winnings were exempt, employers might pay people in gambling tokens simply to avoid them having to pay taxes.
Yes, and it's why I would always cringe whenever I saw The Price Is Right with someone winning $50,000+ of stuff they didn't need (or often even want).