Before you get too excited about winning a small jackpot, striking it rich on Jeopardy, or getting your “free” car from Oprah, we want you to think for a moment about the possible tax implications of gambling winnings and prizes.
First let’s talk about lottery and gambling winnings. This is not free money. If you win at a casino, the staff will ask for your social security number. The record of your winnings will be reported on a W2-G, it is most often given to you onsite. This means the IRS is going to get direct notification of your good luck. These winnings may be taxable and must be reported on your tax return as other income.
Your Oprah Car…unfortunately this too does not come without tax implications. I’m talking about one of the largest mass giveaways in television’s history. You all remember Oprah’s famous,”You get a car, you get a car, you get a car, everybody gets a car!!!” As grand as that event may have seemed, it was not without its faults. A prize of that nature does not come without strings. The winnings came with a tax bill of around $6k. Not so free, is it?
Televisions John Oliver seems to really understand tax and taxable events. In his amazing on-air event, he purchases a nearly $15 million dollar portfolio of medical debt, for around $60k. In an attempt to show how easy it is to become a second or third party collection agency, the popular television host sets up a debt buying company, with minimal effort online. He then relieves nearly nine thousand out of statute debtors of their old “bills”. Unlike Oprah or the Casino, John truly did these individuals a favor. Not only did he forgive their debts, but he did so in a way as to relieve them of possible tax implications.