If the value of a prize is $600 or more, you need to send the winner IRS Form 1099. This is also true if you pay someone (as a contractor, stipened, etc.) $600 or more during the year. A silent auction is different in that people are paying for their purchases. But, for example, if you have a door prize worth $600, you need to issue a form 1099.
- Craig
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Is there a threshold over which the PTO must also withhold taxes on the prize?
We keep our prizes under $600, though I have filled out some 1099s for payments to "independent contractors." Note that the recipient is supposed to report the prizes, even those under $600, as miscellaneous income on his or her 1040.
- gjcoram
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Good question. There's a second element for raffles in addition to the $600 threshold -- if the prize is worth 300 times the cost of the ticket or more (ie $2 or less for a $600 prize). If the value of the prize is $600 or more and the winnings equal 300 times the cost of the ticket or more, that's when reporting comes into play.
Here's a link to an IRS notice with more details (it's a pdf): http://www.irs.gov/pub/irs-tege/notice_1340.pdf
- Craig
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http://www.irs.gov/pub/irs-tege/notice_1340.pdf: http://www.irs.gov/pub/irs-tege/notice_1340.pdf