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Winning money from a competition is either going to show up as a prize or gambling on the "Other Income Line on Form 1040. It will be taxable income no matter the name.
If it is considered hobby income, the taxable entry point will still be on Other Income, 1040 but you may take expenses up to the amount of income on Schedule A Itemized Deductions subject to 2% of AGI floor.
Since you are not self-employed as a professional fisherman (unless you are), you can't deduct expenses all your expenses to have a potential loss. I am assuming the income was in Box 3 of the 1099-Misc. There are rules that have to be met in order to consider yourself self-employed.
This doesn’t make sense. You say if it’s Hobby - you can deduct. Then you say if it’s not self employment income - you can’t deduct expenses. Which is it?
In my case, it’s a hobby because I have another job. But, the expenses - like entry fees, boat repair and maintenance, insurance, far outweigh any winnings.
To report your prize winnings follow these steps.
This will put the income on Schedule 1 Line 8 of your Form 1040, as required by the IRS. You will pay state and federal income tax on the amount, but it will not be subject to self-employment tax.
You can deduct expenses related to your prize winnings up to the amount of your winnings. They will be reported on Schedule A however, if you do not itemize and use the standard deduction you will not be able to deduct your expenses.
Is this rule still apply this year and for prizes won in a different state?
Yes, if you won prize money you will still report it as other income as mentioned above. You will also need to file a non-resident return for the state you won the money in.
When you walk through the personal info section, you will be asked if you earned or won money in any other state, select yes, then choose the state you won the money in. After you complete your federal section, you will be guided to the state section where you will fill out your non resident state return first.
Cool, thanks for the reply. Now I need help on the section of the income looks like it won't let me edit the current year's income. How do you proceed with that?
You can Edit or Delete any Income Item you entered in TurboTax.
For a 1099-Misc, for example, type '1099-misc' in the Search area, then click on 'Jump to 1099-Misc'.
At the 1099-Misc Summary page, choose Edit or Delete. Same for W-2s and other types of income items.
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