I just read
about reporting winnings. Are there losses that can be reported
such as the cost of stamps, newsletters, etc? If so, under what
category? Is there a deduction for sweepstaking as a hobby?
I hope this
advice comes in time for this years tax season! In order to answer
your question, I will refer you to three sources that I consider
to be reliable:
Deducting sweepstakes supplies (stamps, newsletters,
envelopes, etc.) is an area with a great difference of opinion.
Since the hobby of sweepstakes is not a common one, I don't believe
there is any set precedent. Some people take their chances and
deduct their sweeps expenses to offset wins on schedule A as gambling
expenses. This is not subject to the 2% floor as when supplies
are deducted as a hobby expense to offset income (this is considered
more acceptable). If you do not file Schedule A with your tax
return, or if you have not had a win in the tax year, you cannot
deduct expenses.
source - http://www.bestsweepstakes.com/taxtips.html
When you win a big prize, it may affect your
income tax status. Even if it doesn't affect your tax status,
you may deduct sweepstakes expenses up to the amount of the value
of the prize, but only if you keep complete and accurate records
of your actual expenses. This includes postage, sweepstakes supplies,
newsletter subscriptions, and so forth.
Your records will need to satisfy all requirements
from the Internal Revenue Service, so make sure your records are
accurate. You must be able to prove that all of your supplies
(and postage) you claim were used specifically for entering sweepstakes.
For example, you buy stamps for reasons other than entering sweepstakes
(paying bills, sending cards, etc.). Therefore, a receipt for
buying the stamps is not going to be enough to claim the full
amount of your receipt. You need to be able to show how many sweepstakes
you entered and when you entered them. This is when accurate record
keeping is very important.
source - http://www.onlinesweeps.com/articles/records.html
If you itemize on your tax form, you may deduct
your sweepstaking expenses, to the extent that they (and your
other miscellaneous itemized deductions) exceed 2% of your adjusted
gross income, so save your receipts for stamps; supplies; and
newsletter subscriptions.
source - http://www.sweepsheet.com/faq2.html
