Aside from the winners, there's no one more excited about
sweepstakes prizes than the IRS. States that collect income taxes
get pretty tickled, too.
Many sweepstakes winners don't realize they have partners
when it comes to accepting their prize. The IRS and state
treasurers don't care who wins the prize because they are
guaranteed to receive a share of virtually every prize awarded.
(They may, however, root for a winner in the highest tax
bracket.)
Thompson Coburn's tax gurus can speak to this more
specifically, but here are some basic facts about state and federal
tax laws that sweepstakes creators need to know.
The IRS and many states consider the value of a sweepstakes
prize as "other income" for the winner and treat it like
his or her salary. If a sweepstakes has a cash prize, the
"income" is obviously the dollar amount of the prize. If
the prize includes non-cash items or services, it's the
sponsor's responsibility to determine the approximate
