Are there taxes to be paid on counseling or professional cleaning services?
I’m talking about the shows Intervention or Hoarders where they offer this to the people that appear, and many of them on Intervention are actually homeless and on Hoarders they are obviously a stone you aren’t going to get blood out of.
What happens then?
http://www.autoblog.com/2014/09/12/oprah-free-car-giveaway-10-years-later-featured/
Oprah’s audience all got new cars (last show, IIRC?). Mentions the tax implication was about $6,000 for MSRP $28,000. No competition except perhaps how they selected audience members.
Whether the audience in some sense “earns” the award is not an issue in deciding whether it is taxable. The US Income Tax code is remarkably simple, it taxes “all income from whatever source derived.” And then it goes on to give hundreds of pages of exceptions and special rules. If an exception does not apply, then the income is taxable.
So, if you are walking down the street and a dollar bill falls from the sky and lands in your purse, you have to pay tax on it. (Yes, I know, nobody will care about a literal $1 bill.) If you find a buried treasure and keep it, you have to pay tax on it. It has nothing to do with whether you earned it.
One of the exceptions in the tax code is for “gifts.” (The tax code imposes a separate gift tax on gifts, but exempts them from the income tax.)
In everyday colloquial talk, we pretty much call anything you didn’t work for a “gift.” But the courts have held that the word “gift” as used in the tax code has a more specific meaning.
Were Oprah’s actions taken out of a “detached and disinterested generosity”? Were they “out of affection, respect, admiration, charity or like impulses”?
Obviously not. It was a gimmick to get ratings for her show. The cars were given away in the course of her business, not a random act of kindness.
Yes, we may call the cars a gift. The tax law doesn’t.
In general, gifts up to $14000 are tax free in the USA. The donor can’t deduct them, and the recipient doesn’t declare them.
However, these are not really gifts; they are prizes. Someone (Oprah and/or the manufacturer) deducts them from their income tax, so someone must declare them as income. I wonder where the $65 figure came from. I thought it was around $600.
In any event, five years ago, my son & wife were in the audience of Martha Stewart and each took home an HP printer with value about $250. Neither had to fill out any form to get the prize.
The $65 figure was on their web site. Not sure how they picked it.
If they had zero income and then you give them a prize worth $3,000 then now their income for this year is $3,000. But then you take out the standard deduction and exemption and their taxable income is still zero. You don’t owe any income tax until you make more than $10,600 in a year.
Ah ok:smack:
For whatever reason(maybe the talk of withholding until taxes are paid first) I was assuming prize is counted differently than income.
:dubious:
The Simpsons as an authoritative voice:
During a cleaning day at the Simpsons’ house, Bart wins a KBBL radio contest after the station’s DJs, Bill and Marty, call him up. They give Bart the choice of two prizes: $10,000 in cash or the “gag” prize — a full-grown African elephant — and Bart chooses the elephant. This surprises Bill and Marty, who (understandably) believed that no one would ever actually take the gag prize, and thus have no elephant to give away. They instead offer Bart the money and a variety of other prizes, all of which he refuses, saying that he only wants the elephant. Word spreads throughout town about Bill and Marty’s refusal to give Bart an elephant, prompting their boss to give them a choice: either arrange for the delivery of an elephant, or lose their jobs to a DJ machine. They decide on the former option.
Seriously? That is not some lofty amount for normal adults. I could charge the equivalent of several new cars on my credit cards at any time if I was dumb enough to do it. You don’t have to be Donald Trump to have credit card limits in the tens of thousands of dollars range.
I have a high school friend that recently won the Showcase Showdown on The Price Is Right. Among other things, she won a jetski and a trip to Arizona. She already has the jetski and says she is going to take the trip soon. People really do get the prizes shown at least on The Price Is Right.
Doesn’t the show pay for the travel and accommodation? Otherwise they are kinda limiting the pool from which they can draw contestants.
The situation is quite a lot simpler in the UK. Most prizes - all the way up to £100 million lottery wins - aren’t taxable. The main exception is prizes paid by employers to employees.
It depends on the show but The Price Is Right doesn’t pay for travel. They select the contestants the day of the show based on a very short interview given as the general audience waits to enter. They never have a problem getting whatever types of contestants they want. Just watching the show being taped is a tourist attraction on its own.
There are plenty of Americans who can’t qualify for any credit cards at all, or they only have a little $500 limit card, or they have a limit of $3,000 but they’re carrying a balance of $2,900 and struggling to make the minimum monthly payment.
According to a recent survey…
Only 48 percent said that they could easily handle an emergency expense of $400 without running a balance on their credit card. Almost a fifth said they simply could not come up with the funds, and a similar share said they would have to take on credit card debt. Others said they would either have to sell something (9 percent), ask a family member or friend for help (12 percent), or turn to a payday lender (4 percent) to come up with the money. http://www.washingtonexaminer.com/youre-better-off-than-the-average-american-if-you-can-come-up-with-this-much-cash/article/2551800
The interesting thing is that in the US, gifts from employers to employees can be excluded from income in certain circumstances. From IRS Pub 525:
I met a guy who won $250k on who wants to be a millionaire. I asked if they paid him right away and he said yes. Did not ask about taxes but I assume he had to pay them.
In other words, they can give you a gold watch for 20 years of service and you don’t have to pay income tax on the value of the watch. That’s a rather narrow exception to the rule. The general rule is that gifts from an employer to an employee are considered income and they ARE taxable. Even the exception they make for the gold watch has a lot of restrictions on it. You can only get one every 5 years, and it has to be less than a certain dollar value, and there has to be a ceremony, et cetera.
Since we’re talking about winning a prize on a TV game show, let’s suppose your employer decides to have some fun on a Friday, so gives an espresso machine as a prize to the person who had the highest sales numbers for the week. That’s considered “compensation” by the IRS, and yes you have to pay taxes on the fair market value of the machine. The same would apply if the winner were determined by answering a trivia quiz. Generally, you’d see the taxes taken out of your next paycheck.
There is a story that on the 1962 New York Mets Richie Ashburn was from Nebraska and Marv Throneberry from Tennessee. Ashburn was more outgoing and talkative than Throneberry who was friendly but quiet. A clothes store had a contest that who hit their billboard the most times would win a boat. Throneberry won it. Also Ashburn was voted best player and also won a better. Throneberry was amused that two guys who lived far from water now had boats “We’ll have to put them in our bathtubs”.
The Player’s Association reminded Throneberry to declare his boat as income to the IRS. He said that Ashburn didn’t have to, the difference being Throneberry earned his boat by hitting a sign while Ashburn’s was a gift. Which left Throneberry muttering about having to pay taxes on something he couldn’t use.
Game shows and their ilk will use cars, houses and vacations because they feel those elicit dreams better than cold, hard cash.
Because you might win something you DO want to keep. Or you sign up with no clear understanding of what “winning” might do to your wallet.
Or maybe because you’re an aspiring actor, in between jobs, hoping that this little TV appearance will help you break into something better. Why do game shows use actors as contestants?
Not only this, but they’re taxed for the amount that the show lists as the retail price, even if you’re unable to sell it at that price. If you win a car that’s “worth” $25,000, and you can only sell it for $10,000, you’re still liable for income taxes on the full amount.