Tax write off?

[deronsizemore]

Well, I've been planning a niche golf site for sometime now as some of you know. I'm just brainstorming ideas constantly and one thing I'm thinking about doing is offering some kind of prize for visitors of the site. Whether it be after the first 10 posts in the forum, you're entered, or if you sign up for the newsletter then you're entered in to win the prize or whatever. I'm wondering if the prize that would be awarded can be written off on taxes as a business expense?

[Chris]

Absolutely... however giving prizes can get you into murky water. If it is more valuable than a certain amount you need to send the winner a 1099. Also if payment in anyway is required to win it'd be like running an illegal lottery.

[Bleys]

Gigalaw has an article (http://www.gigalaw.com/articles/2000-all/ezor-2000-06-all.html) that covers some of the basic legalities of running a contest.

You could also consider hiring a contest management firm, like one of the following (result of a quite yahoo search for "sweepstakes management"):

http://www.extra-mile-marketing.com/formats.html
http://www.marketingresources.com/content/content_list.cfm/category_id/14.htm
http://www.american-sweeps.com/
http://www.scapromotions.com/

[deronsizemore]

Absolutely... however giving prizes can get you into murky water. If it is more valuable than a certain amount you need to send the winner a 1099. Also if payment in anyway is required to win it'd be like running an illegal lottery.

Well, visitors definitely wouldn't be required to pay anything to win. I was just thinking about little stuff to start off with. Maybe a dozen golf balls (like 40 bucks). At the very most (if the site took off) I'd get a driver to give away which at the very most would be around 300 bucks. I don't think I'd need a 1099 form for that amount would I?


Gigalaw has an article that covers some of the basic legalities of running a contest.

You could also consider hiring a contest management firm, like one of the following (result of a quite yahoo search for "sweepstakes management"):

http://www.extra-mile-marketing.com/formats.html
http://www.marketingresources.com/c...egory_id/14.htm
http://www.american-sweeps.com/
http://www.scapromotions.com/


Thanks, I'll definitely give those a look see. I'm not sure if a contest management firm would be right for a conest of small stature like I'd be running...

[Bleys]

I think the rule is (and don't quote me on this, but I am relatively certain) that you only need to send out a 1099 if you have paid $600 or to someone over a one year period.

[deronsizemore]

I think the rule is (and don't quote me on this, but I am relatively certain) that you only need to send out a 1099 if you have paid $600 or to someone over a one year period.


Yeah, I'd never have to worry about a 1099 form then if you're in fact correct. Wouldn't ever be anything given away more than 600 bucks.

Thanks

[dc dalton]

Josh is right on the $600 part. I just had to do it myself for last year.

Basically anything in the promotional area (giveaways, ads, even things like business cards and keychains) all fall into the advertising catagory for your taxes and are 100% legal deductions. You are promoting your business by giving things away, things that cost you money hence they are a deduction.

You also have to really watch anything you do that involves a contest! There are some serious laws about this. Basically you can NOT force people to buy anything to be entered into a contest. If you do it falls into the "lottery" catagory and can be called gambling! Be really careful with that.

I know this all too well ..... in 1991 I ran a huge baseball card show in Binghamton, NY ..... our door prize was a 52 Mickey Mantle rookie card. We originally had the entry box inside the show until one of the local authorities showed up and informed us it was illegal. We HAD to put another entry box outside the show (before they paid admission) or they threatened to shut us down! This applies to websites as much as real world events so make sure you check with an attorney before setting up contests or any kind of giveaway.