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tldr: (assuming you operate on a cash accrual basis as is normal for individuals) the income counts in the year you constructively receive the cash equivalent value.

There's a contest/drawing near me this week with a sizable prize (>1k, <50k) and the odds look quite good. Since we're so close to the end of the year, I was curious which tax year the prize would fall under. It took a lot of searching but it seems I've found the relevant factors. First, just winning the contest or being given a fake check doesn't constitute cash equivalence. However, it seems a real check does meet that standard (rather than the funds being available in your account or as cash). It also seems constructive receipt would then be achieved as soon as said check arrived in the mail (or was made available for pickup). So I emailed the guys running the contest when to expect it and they responded usually eight weeks but could be as soon as four. Well four lands in this tax year but 4.5-8 lands next year. He also made it clear their organization would be reporting it in 2016 but that appears to have no relevance to my reporting. The other interesting grey area was created by one case where the recipient was told to expect a check next year and instead delivery was attempted on the Dec 31st. If they indeed manage four weeks, delivery may similarly occur on the 31st. So a few questions come to mind:

If I were gone on vacation (not taken to avoid receipt; it's been planned) would that count? What if I while I was on vacation the people sending the check notified me that it was en route and to expect it by the 31st (but I was in another state)? What if a delay on a contestant's part in sending in paperwork caused the check to land after Dec 31st?

Hope this topic is useful or at least interesting for others!

 

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if you receive a 2016 1099, don't you have to report it on 2016 taxes? That seems rather straightforward?

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I think the answer is it's whatever tax year they file 1099.

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rufflesinc said:   if you receive a 2016 1099, don't you have to report it on 2016 taxes? That seems rather straightforward?
  No, although the IRS may contact you (or even audit you) when their computer detects the mismatch w/ the 1099.

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I plan on winning the lottery this week, but won't redeem my ticket until next month. For an instance like this I'm fairly certain since the payment won't be processed until next year, it will be in next year's taxes. The same as if you're paid in January for the last pay period in December.

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I would read the rules about when the reward will be paid. I would expect the taxes year would depend on the payout date.
The 1099 may be recorded as of the date the check is written - not the date you receive it.
You may make a case it was received in the new year and file accordingly IF you are willing to be questioned on that point.  Your bank deposit may be evidence of date of receipt.

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The bottom line is it's taxable in the year you receive your prize.  If your prize is a check mailed to you, you have a reasonable amount of room to fudge when you received it.  Of course, if you sign for delivery or deposit the check, you are pretty much bound by that date (deposit the check on 12/30/16, and you cant claim you received it in 2017).  The only time it will even be an issue is if your reporting of the prize doesnt match the year the company files the 1099, and then you'll just have to be able to explain the discrepancy (which in most cases wont be an issue as long as you can show it was reported in another year).

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JW10 said:   I would read the rules about when the reward will be paid. I would expect the taxes year would depend on the payout date.
The 1099 may be recorded as of the date the check is written - not the date you receive it.
You may make a case it was received in the new year and file accordingly IF you are willing to be questioned on that point.  Your bank deposit may be evidence of date of receipt.

  There was no description of the payout in the rules so I contacted them and they said usually 8 weeks to cut a check but could be as little as 4. There was a three day period following the contest in which required paperwork had to be delivered which, if fully used, would have pushed cutting of the check into January. I would use the delivery receipt as evidence (and if they didn't do a signed receipt for some bizarre reason I would use the post date). The 1099-MISC would be filed in 2016. Some websites suggest attaching a note to your return explaining the situation. In this day of automation, would this note actually be scanned/saved and read?

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Let me call the IRS and get back to you.

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Are you going to win the publishers clearinghouse too!?!?!?!!!?! They tell me I'm in the last round of the finals selected for the minor major prize!

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I always wondered about this as far as state income tax is concerned. If i win a lottery drawing in December while I'm a resident of New York state, but I move to Delaware or New Hampshire before the end of the month/year and I don't claim the prize until the following year during which I never resided in New York State, would I owe New York state income tax on any part of the winnings? Does possession of the winning gambling instrument (the winning ticket) constitute, for legal/tax purposes, my receiving the money?

I could always take the annual payment option at first, then leave the state, then switch to the lump sum option in the second year, pay federal tax on that lump sum, and have whatever amount remains free and clear. Then I could move back to New York after the second year.

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DTASFAB said:   I always wondered about this as far as state income tax is concerned. If i win a lottery drawing in December while I'm a resident of New York state, but I move to Delaware or New Hampshire before the end of the month/year and I don't claim the prize until the following year during which I never resided in New York State, would I owe New York state income tax on any part of the winnings? Does possession of the winning gambling instrument (the winning ticket) constitute, for legal/tax purposes, my receiving the money?

I could always take the annual payment option at first, then leave the state, then switch to the lump sum option in the second year, pay federal tax on that lump sum, and have whatever amount remains free and clear. Then I could move back to New York after the second year.

  
New York State takes the position that, if you were a resident on the date you won the prize, then you're obligated to pay state income tax on all winnings, regardless of when realized. 

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cestmoi123 said:   
DTASFAB said:   I always wondered about this as far as state income tax is concerned. If i win a lottery drawing in December while I'm a resident of New York state, but I move to Delaware or New Hampshire before the end of the month/year and I don't claim the prize until the following year during which I never resided in New York State, would I owe New York state income tax on any part of the winnings? Does possession of the winning gambling instrument (the winning ticket) constitute, for legal/tax purposes, my receiving the money?

I could always take the annual payment option at first, then leave the state, then switch to the lump sum option in the second year, pay federal tax on that lump sum, and have whatever amount remains free and clear. Then I could move back to New York after the second year.

  
New York State takes the position that, if you were a resident on the date you won the prize, then you're obligated to pay state income tax on all winnings, regardless of when realized. 

  I wonder if I left the state never to return and refused to pay if they would try to extradite me.  I wonder if the feds would somehow get involved.

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