It’s not unusual for church groups to have raffles as fund-raising events. And sometimes the prizes can be quite large!
Some things to remember:
1. Generally, if the prize is more than $600, the group awarding the prize MUST report it to the IRS. Use IRS Form W-2G.
2. If the prize is more than $5,000, the group awarding the prize must also withhold federal income tax, and forward the amount to the IRS.
a. If it’s a cash prize, you reduce the prize by 25% and remit that amount to the IRS.
b. If it’s a non-cash prize, you should obtain 25% of the value of the prize from the winner before giving him/her the prize.
3. In some states, Texas for example, it is illegal to offer cash prizes for raffles.
FYI, a friend of mine won $15,000 in a church raffle last month!!! From what I understand, the church gave him five $3,000 checks, thinking this would skirt around the IRS requirements. No withholding; and the church didn’t even get his Social Security number for reporting purposes. So, if the IRS doesn’t know, I wonder if my friend will report the winnings all by himself! I’ll let you know what I find out.