By Ian Salisbury
March 28, 2018

Whoever wins HQ Trivia’s giant $250,000 jackpot Wednesday will walk away with glory, cash—and a hefty tax bill.

HQ Trivia has become an online sensation over the past year, doling out cash prizes to trivia whizzes who answer each game’s 12 questions correctly. While some winners take home only a few dollars, others have managed to claim thousands. Wednesday’s game will offer the largest pot yet, with movie studio Warner Bros. sponsoring a $250,000 prize.

(A spokeswoman declined to specify whether Wednesday’s jackpot would be shared, or in a more recent format, given away to a single winner.)

Part of the fun of HQ Trivia is undoubtedly the bracing pleasure of getting something for nothing. But the Internal Revenue Service doesn’t see it that way. For tax purposes, prize money is no different than any other kind income.

A winner in top tax bracket (a single filer earning $500,000 or more) would owe Uncle Same 37% of whatever they take home. If the $250,000 prize is claimed by a single high earner, that tax bill could reach as much as $92,500.

For less wealthy winners, the tax bill depends on how much they earn, although a large share of the jackpot could push them into a higher tax bracket. The IRS taxes single filers’ earnings above $38,700 at a 22% rate—until the earnings reach $82,500, at which point the rate shifts up to 24%. At $157,500, the rate jumps again to 32%. You can see the full list of marginal tax brackets here, although remember deductions and other adjustments mean these amounts don’t correspond directly to your salary:

courtesy of the Tax Foundation

If you do end up winning a significant amount, expect HQ Trivia to ask you to fill out an IRS Form W-9, which includes information like your address and Social Security numbers, according to April Walker, lead manager for tax practice and ethics at the American Institute of Certified Public of Accountants. That will allow them to send you a Form 1099 later on, to help you report your earnings to the IRS.

One thing you may not have realized: While the IRS requires a Form 1099 be issued for income over $600, you are technically supposed to report — and pay taxes on — all your winnings, even if it was just a few bucks in one of the regular games.

It goes on line 21 of your 1040, says Walker, under “other income.”

SPONSORED FINANCIAL CONTENT

You May Like

EDIT POST