A Board on which I serve wants to have a raffle that will give away money and a car. Can you tell me what the dollar threshold is for reporting the winnings to the IRS. Must we ask for people to give their SS# in order to collect their prize?
The threshold for reporting gambling winnings on Form W-2G is generally $600. You must actually withhold if the winnings are more than $5000 from a sweepstakes, wagering pool, or a lottery. You must also withhold if the winner does not give you the SSN and the prize is reportable (over $600).
You may want to be sure that the lottery is permitted under state law. Otherwise it may be illegal activity subject to the possibility of criminal prosecution. (Legality has nothing to do with the requirement to report. That's how Al Capone went to jail.)
Monday, May 2, 2011