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Among the many changes included in the One Big Beautiful Bill Act (OBBBA) is one relevant to brands and agencies running sweepstakes, contests, and other consumer promotions.
For prizes (such as cash, gift cards, trips, merchandise, and event tickets) awarded after December 31, 2025, OBBBA raises the federal Form 1099-MISC reporting threshold from $600 to $2,000, with automatic inflation adjustments beginning in 2027. Prizes awarded during calendar year 2025 remain subject to the $600 threshold.
New 1099-MISC Threshold for Prizes
Previously, the IRS tax rules required promotion sponsors to collect a completed Form W-9 from each prize winner and then to issue a Form 1099-MISC to the winner and to the IRS when the prize value reached or exceeded $600 in a calendar year. Under the new law, the Form 1099-MISC reporting obligation will generally apply only when the total value of prizes awarded to a recipient in a calendar year reaches or exceeds $2,000. As a result, sponsors will not have to collect Social Security numbers from winners of prizes valued at$1,999 or less, nor will they be required to issue a Form 1099-MISC for those awards.
What Didn't Change Under Prize Tax Law
While the reporting obligation threshold has changed for Forms 1099-MISC, neither the reporting process nor the underlying tax treatment has changed when it comes to higher-value prizes. Sponsors must still send a copy of the 1099-MISC form to the appropriate winners by January 31 of the year following the year in which said prize was won, and to the IRS by February 28.
The fair market value of a prize amount is still taxable income to the winner, and winners are still responsible for reporting prize income to the IRS on their tax returns and paying any taxes due, even if no 1099-MISC is issued. Notably, if a winner receives multiple prizes from the same sponsor during a calendar year that together meet or exceed the $2,000 limit, a Form 1099-MISC is required.
Sponsors should also continue to maintain accurate records of all prize amounts awarded, and recipients' identities, even when prizes are valued below the new reporting threshold.
Benefits of the Higher Prize Reporting Threshold
The increased threshold offers several benefits for brands and agencies, including:
- A reduced compliance burden, with fewer W-9 requests and 1099 filings required
- An improved winner experience, since the requirement to provide a Social Security number (or other Tax Identification Number, as applicable) often comes as a surprise to winners
- Greater flexibility in prize design, allowing sponsors to structure promotions with more prizes without triggering the new reporting obligation
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