Comment by drawkbox | Hacker News Reader

Comment by drawkbox | Hacker News Reader

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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 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.

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

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-wi...

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

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.

"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."

Sure, if you want to be modern.

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?!

Okay I didn't think that through.

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.

Thanks for clarifying

The solution I came up with is to have the winner come into a store location to claim their prize. They can see their brand new motorcycle, be told that to drive this away we need to report the gift to the IRS so they can collect their cut.

I think most people will give up the digits then.

Good solution if local, most of the winners were all over the US.

Lots of people just didn't believe it and thought it to be a scam or maybe denied it due to the taxes, or maybe they were trying to stay on the down low due to collections or something who knows. For whatever reason, they didn't want the prize or didn't believe it.

Since it wasn't a cash prize in most cases, people would have to pay some taxes on it so maybe they didn't think it was worth it. Cash prizes are always easier as the person can just pay the taxes out of the prize, a product like a motorcycle or something fairly big, they would have to sell to pay taxes maybe.

I wonder if it would be worth starting a business brokering access to bricks and mortar for your industry. I'm sure you could find some national chains that have retail traffic that could take delivery of a prize and collect the relevant details.

Then it becomes a problem where you need assurance that the customer is going to actually show up at the store and claim his prize before you go to the trouble of shipping it out. Not a big deal.

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