Winning a Prize is not free - Uncle Sam

Did you know that the Internal Revenue Service (IRS) requires winnings from lottery drawings, TV game shows, and other contests to be reported as taxable income?

According to Topic 419 covering Gambling Income and Expenses, gambling winnings are fully taxable and must be reported on your tax return. It also includes cash winnings and also the fair market value of prizes such as cars and trips.

Technically, students that win prizes at the RHA Casino game or that dinner at Sushi Rock or a gift certificate are supposed to be reported as income. But why would the IRS need to go after a student if he or she fails to report that Party for 25 certificate at Jillians? It does not seem advantageous for the agency to waste time and manpower to go after you. Would they go after a contestant on a radio show if he or she won a front row pair of tickets to see Justin Timberlake or Madonna?

Remember in 2004 when Oprah Winfrey gave away 276 Pontiac G-Six cars to the audience of her show, we saw images of people laughing, jumping, and crying after opening the box and finding a car key. It was talked about on the late night talk show hosts and newspapers. Of course, Uncle Sam had to ruin it for everybody. It told the 276 winners: Pay $7,000 in taxes or give up the car. The model given away had a sticker price of $28,500 so it would need to be claimed as taxable income, so depending on the individual's tax bracket, the tax could be as high as $7,000. This was the amount even with Pontiac agreeing to pay most of the local charges, including state sales tax and licensing fees.

For these people, they had three choices: they could keep the car and pay the tax, sell the car and pay the tax with the profits or forfeit the car.

Today, we turn to Brian Emmett. It was his childhood fantasy to go to outer space, and it almost came true for him when he won his ticket to the stars in a 2005 sweepstakes by Oracle Corp., in which he answered a series of online questions on Java computer code. He became an instant celebrity, giving media interviews and appearing on stage at Oracle's trade show.

Unfortunately, Uncle Sam said that the winning trip costs about $138,000 and must be reported as income, so Emmett would need to fork over $25,000 in taxes! Twenty-five thousand dollars!

Unwilling to sink into debt, the software consultant from the San Francisco Bay area gave up his seat.

Once again, the only people that can go on these future space orbital flights are the ultra-rich. If you win a trip, you gotta pay taxes on it. So much for the lower classes.

Honestly, the amount of taxes we pay for lottery and grand cash drawings are horrendous. Is it right for them to take so much out of our pockets?

So the next time you see a contestant on a TV show or listening to a contestant winning on a radio show, that grand prize they won is not free. It's taxable winnings. Another gift from Uncle Sam, and this is the same country and the only country to tax American citizens working abroad. Did I mention that the government raised taxes on them for this year?