Go For The Gold And Pay Your Tax – Olympic Medals Taxable
While millions of Americans were glued to their televisions to watch American athletes compete in this year’s Winter Olympics, the Internal Revenue Service was quietly getting ready to make sure that all our Olympic winners pay taxes on their victories.
It’s true. The Internal Revenue Code mandates that If you win a prize in a lucky number drawing, television or radio quiz program, beauty contest, or other event, you must include it in your income. For example, if you win a $100 prize in a marathon, you must report this income on your Form 1040. If you refuse to accept a prize, do not include its value in your income. Prizes and awards in goods or services must be included in your income at their fair market value.
That being the case, any athlete who accepts his or her Olympic medal will have to report its value as income and pay taxes on it. Considering that the value of each medal ranges from $10,000 to $25,000, this can be a hefty tax bill of up to $9,000. That’s true even though the competition took place in Russia and not the United States.
Contrast this to winning Olympic athletes from most other countries don’t have to worry about their medals being taxed. This unfairness has resulted in considerable debate during each session of Congress when a Summer or Winter Olympics is held but any legislation to change the tax law has never made it out of Congress.
You would think most Americans would be in favor of the legislation but there appears to be some backlash. For example, should an Olympian who comes home with 4 medals conceivably make $100,000 tax free while millions of hard working Americans struggle to support their families on far less income yet have to pay taxes? Also consider the millions dollars from endorsements that medal winners can make as a result of winning a medal.
It’s clearly a decisive issue with arguments on both sides. But what you need to remember that even income earned outside the U.S. may be taxable. Every year, thousands of taxpayers learn that lesson the hard way. If you live, compete or work outside the United States, you must still file tax returns here. In addition, if you win a prize or award, you must claim the value of that prize or award on your tax return as income.
Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems and make sure you are fully utilizing all benefits under the tax laws.