So, what's worse? PSL's as an investment, drafting Daniel Jones with the #6 pick, or winning 100 years of Giants tickets when you live in Virginia?
Well...winning tickets is similar to winning the lottery - and that means it’s subject to income tax. The approximate retail value of the prize package is $425,673.00 -- and the NFL added this to the contest rules, "Estimated taxes paid on Grand Prize Winner’s behalf (to help offset income tax liability imposed in connection with the Season Tickets) (to be based on prevailing supplemental federal tax rate each season and approximation of applicable state taxes based on prevailing rates)."
Kelly Phillips Erb writes, "In other words, the NFL is grossing up the prize to account for the taxes. Grossing up is a term that you may also see in employment contracts and it means that the person or entity writing the check or issuing the prize is tacking on some extra dollars to help cover the tax liability. And as confusing as it sounds, the amount that’s grossed up is taxable, too (so yes, you have to gross up a little more).
"To claim his prize, Hampton must agree to fill out a form W-9. The contest’s terms and conditions make it clear that a form 1099 will be issued. Additionally, other than what’s clearly stated as a part of the prize, '[a]ll federal, state and local taxes…are the sole responsibility of winner.'"
CPA Practice Advisor adds, "Even when pay is grossed up for taxes, it still might not cover all the taxes. Federal income tax has progressive tax rates. As an employee earns more, they are subject to a higher tax rate. Many states have progressive income tax rates, too."
Why, yes -- Virginia has a progressive income tax.
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