Keeping Winners Happy – Even During Tax Season!

By: Jennifer French | In: Best Practices, Contests, Marketing, Sweepstakes

Since we are almost down to the wire for the end of tax season, I thought it fitting to bring up a few thoughts about sweepstakes prizing and paying taxes.  Yes, the reality is if you host an online sweepstakes or contest and offer consumers the chance to win exciting and sometimes expensive prizing, Uncle Sam will be waiting to receive his fair share from the winners come April.  Despite this, running a sweepstakes or contest is a great way to engage and excite consumers, and if you keep the few items below in mind, there won’t be any surprises at tax time and your winners will walk away with positive feelings due to their winning experience.

  • Clearly outline in the official rules that the winner is responsible for all taxes and fees associated with the prize.
  • Provide the potential winner with an affidavit of eligibility and release form that again reminds them that if they agree to accept the prize, they are responsible for all taxes and fees associated.
  • Suggest that the potential winner speak to their tax consultant regarding their personal financial situation and what accepting the prize will mean to them.
  • Refer them to http://www.irs.gov for more information on paying taxes on sweepstakes prizes.

These are just a few suggestions, but my number one recommendation, if your budget allows, is to offer a cash prize to offset the winner’s taxes. Your gesture of providing cash to ease their tax burden will go a long way!  Ultimately, the main reason you run sweepstakes is to engage and reward  new and current consumers, so make sure that in addition to their great prize, you reward them with the best possible experience.

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