28 Oct I won a $30K charity raffle. Are the winnings subject to taxes?

Q. I recently won a charity 50/50 raffle worth $30,000 along with five friends. What are our tax implications? Do the winnings get reported to both state and federal?
— Winner

A. Congratulations on the raffle win.

You and your fellow ticket-buyers raised a bunch of cash for that charity.

Here’s what you need to know about tax liabilities.

Generally, the charity will take down your information and issue you a W2-G, which reports the winnings, said Kenneth Bagner, a certified public accountant with Sobel and Co. in Livingston.

The winnings will be taxable for federal and New Jersey purposes, he said.

“A person receiving gambling winnings must furnish the exempt organization a statement on Form 5754 made under penalties of perjury stating his or her identity and the identity of any others entitled to the winnings and their shares of the winnings,” Bagner said.

He said when the person receiving winnings is not the actual winner, or is a member of a group of two or more winners on a single ticket, the recipient must furnish the exempt organization information listed on Form 5754, Statement by Person(s) Receiving Gambling Winnings, he said.

Then, the organization must file Forms W-2G based on that information. The organization must keep Form 5754 for four years and make it available for IRS inspection. (See the specific instructions for Form 5754 for more information.)

“The exempt organization must file Forms W-2G with the IRS by the last day of February of the year after the year of the raffle,” Bagner said. “Use Form 1096, Annual Summary and Transmittal of U.S. Information Returns, to transmit Forms W-2G to the IRS.”

The organization must also issue Forms W-2G to prize recipients by January 31 of the year after the year of the raffle, he said.

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This story was originally published on Oct. 28, 2021.

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