Does anyone know why game show prizes are considered earnings anyway? Maybe if it was a game show where a particular actual skill won you the prize, but can guessing correctly the retail price of a showcase be considered earnings?
[QUOTE=Hampshire]
It wasn’t a prize on a gameshow but I remember when Oprah gave cars to her entire studio audience that a lot of the people receiving them balked because they couldn’t afford the taxes on them.
Oprah car giveaway
[/QUOTE]
It looks like from the article Oprah’s production company screwed the people. I think she could have disbursed those cars as “gifts” (taxes on which are paid by the giver, not the recipient) but instead called them “prizes.”
This varies by state. Wisconsin does not allow gamblers to deduct losings from winnings. If one were to win $100,000 and lose $90,000 in Wisconsin, taxes are assessed on the full $100,000.
Because that’s how the lawmakers made the tax laws.
[QUOTE=Peter Morris]
A basic misconception there. You don’t need to pay tax on $24,200 because you’ve already paid tax on the first $20,000.
Here’s how it works.
Win a car, get a tax bill of $2,000. The studio pays the bill for you.
That counts as an extra prize of $200. You have to pay tax on that prize. The tax bill is $20. The studio pays the bill for you.
That counts as an extra prize of $20. You have to pay tax on that prize. The tax bill is $2. The studio pays the bill for you.
That counts as an extra prize of $2. You have to pay tax on that prize. The tax bill is 20c. The studio pays the bill for you.
That counts as an extra prize of20c. You have to pay tax on that prize. The tax bill is 2c. The studio pays the bill for you.
[/QUOTE]
It’s actually less. From Cowboy8467’s link you only pay tax if the prize is worth more than $600, so the extra $2000 counts but not the rest. So it would only be £22000.
[QUOTE=Colophon]
It seems kind of crazy that game-show prizes are taxed in the USA. They’re prizes! WHy the hell should you pay tax on them?
Are lottery prizes taxed there too?
Over here, game show and lottery prizes are tax free – in fact all betting wins are now tax free since the gambling levy was abolished in (I think) 2001.
[/QUOTE]
It seems kind of crazy that income earned through game-shows is not taxed in some countries. It’s income! WHy the hell shouldn’t you pay tax on it?
-FrL-
[QUOTE=ParentalAdvisory]
Not sure how I would net less cash though by getting a loan. Possible issue with the depreciation and resale value is all I can see. Any minimal loss on the loan interest still sounds worth it, assuming a quick sale. But at 2k, it’s might be worth it to wait for the best resale price you can get.
[/QUOTE]
Less cash because your method nets the winner around $15,000, while the other nets the winner exactly $20,000. Your method involves the winner just paying the tax himself, while what we were talking about is the possibility that the prize-giver might pay the tax on your behalf, so you get the full $20,000. We’ve seen that if the prize-giver wants to pay the tax on your behalf, what they must do, in effect, is give you $22,222.22 instead of just $20,000. Then after you pay the tax on that larger amount, your left with $20,000.
Also, you’re right–I was trying to start something like a philosophical debate. (I wonder if that’s just a polite term for trolling? :smack: 
) But I’ve seen that there is in fact no there there.
-FrL-
I think that you pay tax on the sum of all the prizes, not on each separate prize. If you win three prizes of $250, then you pay the tax on $750. You can’t say that each prize was less than $600.
Or looking at it the other way, it seems crazy that America DOES tax prizes. You win a car in a game, why SHOULD you have to pay a large tax bill for it?
[QUOTE=rayh]
It’s actually less. From Cowboy8467’s link you only pay tax if the prize is worth more than $600, so the extra $2000 counts but not the rest. So it would only be £22000.
[/QUOTE]
I think that CBS webpage is wrong. I believe that the IRS requires the payer to report to the IRS any earnings greater than $600 and to provide a 1099 form to the recipient, but I think the recipient is still supposed to report earnings less than $600 when filing income taxes, even though no 1099 was received and no earnings were reported by the payer.
And as for the situation of an overvalued contest prize, here’s another article that discusses what to do. It suggests telling the IRS that you disagree with the value reported on the 1099 and to have the IRS fill out a Form 4598, Form W-2 or 1099 Not Received or Incorrect, although you’ll need to provide justification of the difference. The IRS will then contact the payer to respond.
[QUOTE=Peter Morris]
Or looking at it the other way, it seems crazy that America DOES tax prizes. You win a car in a game, why SHOULD you have to pay a large tax bill for it?
[/QUOTE]
Did you not read the post I quoted in that post?
-FrL-
Yes I did. And it just so happens that I come from a country where you don’t pay tax on money that you win. And why on Earth should you? If you gamble and lose, your losses are not tax deductible. so if you gamble and win, why should you pay tax on it? I understand that in my country winnings used to be taxed until some professional gambler successfully pleaded that they should be exempt, for the reason I just gave.
[QUOTE=Peter Morris]
Yes I did. And it just so happens that I come from a country where you don’t pay tax on money that you win. And why on Earth should you? If you gamble and lose, your losses are not tax deductible. so if you gamble and win, why should you pay tax on it? I understand that in my country winnings used to be taxed until some professional gambler successfully pleaded that they should be exempt, for the reason I just gave.
[/QUOTE]
I think you’ve been a bit whooshed. My apologies. My only point was you can make an argument either way.
-FrL-
[QUOTE=Peter Morris]
Yes I did. And it just so happens that I come from a country where you don’t pay tax on money that you win. And why on Earth should you? If you gamble and lose, your losses are not tax deductible. .
[/QUOTE]
In the USA- your losses are deductable - up to the amount of winnings. So for many they have no net winnings.
In the US, even the “Nobel Prize” is taxed!
I believe we are the only nation to do so.
Tris
[QUOTE=Frylock]
It seems kind of crazy that income earned through game-shows is not taxed in some countries. It’s income! WHy the hell shouldn’t you pay tax on it?
[/QUOTE]
Lots of reasons, but I think the most salient one is that, in all honesty, people shouldn’t be penalised for good fortune. Besides, a sensible Government knows it will get a chunk of the winnings anyway when prizewinners register their new car, buy petrol, insure it, spend their prize money, put it in the bank and earn interest on it etc.
Taxing prize winners is low. Everyone deserves a break now and then, and the government shouldn’t be wading in and saying “So, you won a new Ford, huh? Great, we’ll be taking 10% of that. That’ll learn you to enter competitions!”
[QUOTE=Martini Enfield]
Lots of reasons, but I think the most salient one is that, in all honesty, people shouldn’t be penalised for good fortune. Besides, a sensible Government knows it will get a chunk of the winnings anyway when prizewinners register their new car, buy petrol, insure it, spend their prize money, put it in the bank and earn interest on it etc.
Taxing prize winners is low. Everyone deserves a break now and then, and the government shouldn’t be wading in and saying “So, you won a new Ford, huh? Great, we’ll be taking 10% of that. That’ll learn you to enter competitions!”
[/QUOTE]
That seems fair, until you figure that someone else is taking a deduction for most of those prizes. So, in the big picture, the taxpayers would be the losers if prizes were tax free to the recipient.
If prizes weren’t taxed in the U.S. some corporations would figure out how to give their executives lots of prizes.
Figuring out ways around the tax laws is a national sport. That’s one reason our tax laws are so complex - legislators are constantly trying to fix some loopholes in the tax code while simultaneously trying to add other loopholes at the request of campaign donors.
Experience here suggests that this isn’t the case. How, exactly, are “taxpayers” the losers when people who win cars on Wheel of Fortune don’t pay tax on it?
Then again, the Australian Government is operating on a budgetary surplus at the moment, so it’s not like they need the money. And having said that, there would be armed riots in the streets if the government here tried to introduce the taxing of prizes or gambling wins.
[QUOTE=Jeff Lichtman]
If prizes weren’t taxed in the U.S. some corporations would figure out how to give their executives lots of prizes.
[/QUOTE]
Most other countries manage just fine with prizes being tax-free
Besides, if companies tried giving their executives “Prizes” (You’ve won a chauffeur-driven Bentley for guessing how many quarters in this financial year!), the Tax Department would point out the Fringe Benefits Tax, which covers this sort of thing.
Disclaimer- this applies to California lottery winnings.
If you win $20,000,000 lottery jackpot, and decide to take it all at once, then you receive about $10,000,000 (immediate “cash value” of the total prize is approximately 45-55%- depends on the bonds purchased by the lottery).
Then, you pay 25% in federal taxes ($2.5 million). You pay no CA state tax on the winnings.
So, you are left with about $7,500,000. Not bad.
[QUOTE=Martini Enfield]
Experience here suggests that this isn’t the case. How, exactly, are “taxpayers” the losers when people who win cars on Wheel of Fortune don’t pay tax on it? …And having said that, there would be armed riots in the streets if the government here tried to introduce the taxing of prizes or gambling wins.
[/QUOTE]
Becuase Wheel of Fortune gets a tax deduction for the car- or General Motors does, whoever provided it. If it is a deduction to the giver, it is income to the givee.
And, what are you going to be armed with? Boomerrangs?
[QUOTE=DrDeth]
And, what are you going to be armed with? Boomerrangs?
[/QUOTE]
Box Jellyfish, Funnel Web spiders, crocodiles.
[QUOTE=DrDeth]
Becuase Wheel of Fortune gets a tax deduction for the car- or General Motors does, whoever provided it. If it is a deduction to the giver, it is income to the givee.
[/QUOTE]
Why would WoF or GM get a tax deduction? GM isn’t donating the car to charity, they’re exchanging it for “promotional consideration.” WoF is giving it away, but it’s not to charity, and since they’re getting the car in exchange for goods and/or services they aren’t taking a loss on it.