Recently I won $2000 in a costume contest put on by a radio station and new travel company. $1000 in cash from the Radio station and $1000 to use on the travel company's website to purchse a trip. My question is: how much am I going to be taxed on this money at the end of the year? They won't withhold taxes for me so I want to plan in advance so I don't get hit hard at the end of the year. I make about 45K a year at my job. Could anyone help me? And just for those who are curious I am going to Jamaica with my girlfriend for a week.....ahhhh the pampering.
Congratulations!!!!! I am an avid contester, so I love it when people win. I love it even more when I win.About the taxes on your winnings ... You will need to include the $2000 on your 1040 for 2001. You will have to file a 1040 for 2001, because it is the only form where you can report a contest winning. You do it on the line labeled "other income". How to pay and how much to pay?Based on the info you gave, you are probably in the 28% tax bracket. That means the tax on the $2000 is $560. Technically, the tax is due in the quarter you won the money. So if you won the money in April, the tax is due today (June 15th). To pay now you would need to get a 1040-ES (estimated payments) and a 1040 -V (voucher). Try the IRS website at http://www.irs.gov/forms_pubs/index.html.Another option, since the tax is a small amount, you won't be subject to penalties if you wait until you file your taxes to pay (assuming you have not increased your other income). Take $560 of the $1000 cash you won and put it in a safe place earning interest until April 15, 2002.As always, consult a paid tax professional ... the money you save might be your own.TaxProf
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