A woman who won fabulous prizes on "The Price Is Right" has a warning for contestants: When you "come on down" to pick up your winnings, be prepared to pay your taxes.
Andrea Schwartz won $33,000 worth of prizes on the TV game show in March 2012, including a pool table, a shuffleboard table, and even "a new car!" -- a shiny red Mazda 2. But what came with all those goodies was an unexpected tax bill.
"Yeah, you don't just drive off the back lot with the car," Schwartz told Yahoo! Shine. "After the show, you fill out some paperwork and basically sign your life away. You say that you're going to pay the taxes on it. If you win in California, you have to actually pay the California state income tax ahead of time."
(Death and) Taxes
You know what they say, nothing is certain in life but death and taxes. The latter is attached not only to items you purchase at a store, but also prizes you win from TV game shows like "The Price Is Right."
For Schwartz, her $33,000 in total winnings meant she owed about $2,500 in taxes just to get the prizes "released" to her, she told The Onion's A.V. Club.
Schwartz said she could barely afford the tax bill. She even had to use some of her cash winnings ($1,200 from "The Price Is Right's" popular "Plinko" game) to help pay it off.
On top of that, game show winners also have to fill out extra paperwork come Tax Day, according to the IRS. Your total winnings must be counted as part of your income, which means you could be thrust into a higher tax bracket.
Some Strings Attached
According to the American Institute of Certified Public Accountants, taxing game show winnings makes sense. Winning contestants generally need to file a tax return in the state where they won their prizes, and then the claim a tax credit in their home state, ABC News reports.
There are some strings attached, however. For example, even if your home state has a lower tax rate, you won't be getting back the difference. Also, you're paying taxes on the prize item's market value (the manufacturer's suggested retail price, in other words), as opposed to the usually discounted price that a regular buyer would pay for it on the open market.
If you want to avoid this unpleasant surprise, know that game show winners are free to decline their prizes. But there's no other way to get around paying taxes if you still want that new Prius, especially if you want to avoid going to jail for tax evasion.