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Win big in a sweepstakes? There may be a price tag on the prize

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MILWAUKEE -- She won big in a sweepstakes, but it turns out the prize came with a price tag.

You might think it's a scam, but it's not.

It was a dream moment for Laura Cross, she won a brand new car through a sweepstakes.

Laura Cross

But after the celebration, came a harsh reality.

"I'm probably going to have to forfeit the gift," said Cross.

Cross can't afford the $5,700 in federal taxes required to claim the car.

"In the end, if you don't have the money and you don't get the prize, you end up with nothing," said Cross.

Cross reached out to Contact 6, asking if the tax amount was correct.

Contact 6 determined it was.

The IRS requires any winnings of $5,000 or more from a sweepstakes, whether cash or property, be subject to a withholding rate of 24%.

Since the fair market value of the car is about $24,000, that comes out to around $5,700.

"You are receiving a prize that makes you wealthier or better off and when that happens, the Internal Revenue Code says you are subject to tax," said Robert Teuber with von Briesen & Roper, S.C.

Cross' car came from a United Way sweepstakes.

United Way makes a big impact locally by caring for the homeless, offering medical and dental care, and providing school supplies and holiday gifts to low-income families.

United Way is a reputable organization.

People can and should donate to it with confidence.

But there are others out there, who, under the guise of a sweepstakes, are actually running scams.

"You may have other organizations or other unscrupulous people out there who are pretending to award you the car and are going to tell you, look, you have to pay me first," said Teuber.

To research a charity, you can go to CharityNavigator.org.

United Way of Greater Milwaukee and Waukesha County gets high marks.

Cross considered taking out a loan to claim her prize but in the end, decided against it.

"So, lots of excitement and now it's like, not so excited no more," said Cross.

Cross officially forfeited the car.

United Way tells Contact 6:

'We make sure every sweepstakes winner understands that contests and sweepstakes are strictly governed by federal and state laws. This includes the fact that any taxes, title, registration, licensing fees, and insurance costs are the responsibility of the winner of the prize.'

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