With the advent of the Michigan Progressive Bingo
Game, bingo prizes have the potential to exceed $1,200. It is imperative
that organizations conducting bingos be aware of the federal income tax
withholding requirements. The following was reviewed by the IRS on
November 23, 2004.
IDENTIFICATION: The winner of a single
bingo prize of $1,200 or more must provide the organization with proper
identification. Two types of identification (e.g. driver license, social
security card, voter registration card, etc.) should be furnished by the winner
to verify his or her name, address, and social security number.
W-2G: If an organization awards a single
bingo prize of $1,200 or more, the organization must file Form W-2G.
WITHHOLDING: If an organization awards a
single bingo prize of $1,200 or greater and the prize winner fails to provide
proper identification, the organization must withhold 28% of the prize.
EXAMPLE: Organization XYZ paid a progressive
jackpot bingo prize of $1,300. The winner would only give his name as J.
Doe and did not provide proper identification. Organization XYZ should
collect withholding of $364 ($1,300 x 28%), pay the winner $936 ($1,300 - $364),
and file Form W-2G. If the winner had provided XYZ with proper
identification (including social security number), no withholding would be
required; however, the organization would still be required to file Form W-2G.
LIABILITY: The organization is liable for
paying the applicable backup withholding to the IRS, regardless of whether or
not it is collected from the prize winner. The best time to collect backup
withholding is before the prize is paid! Organizations must report
withholdings on Form 945 by January 31 of the following year.
|Employees of the Michigan Lottery are
not agents of the IRS nor are they tax consultants. Each
organization should contact a licensed professional or the IRS for more
information. To contact the IRS Exempt Organization Unit, call
877-829-5500. To receive a copy of Publication 3079 or other tax
publications or forms, call 1-800-829-3676 (FORM) or go to the IRS
website at www.irs.gov.