Jenkins, Magnus, Volk, Carroll, P.C.

Certified Public Accountants

 

42714 Woodward Avenue  Bloomfield Hills, MI 48304

 

Phone: 248-858-2400

Fax:     248-858-7301 

 

Website: www.JMVCcpa.com

April 2021

April 2021 Q and A

Q and A

Question:
I bought a fundraising ticket to support a non-profit and I won the main prize, a new car. Will I be taxed on winning the car?


Answer:
Raffles are considered a form of lottery. Although cash winnings of more than $5,000 are subject to a 25% withholding tax, non-cash prizes are treated differently.


With no cash to withhold, the winner of a non-cash non-profit raffle must pay the organization 25% of the prize’s fair market value, minus the amount of the wager. However, in some instances, the organization may pay the tax for the winner.


If the value of the car is at least 300 times the value of your wager, you’ll receive a Form W2-G from the non-profit showing the car’s value and the tax withheld. Since the IRS considers this prize to be income, you’ll need to report the vehicle on Form 1040. Keep in mind you may also owe state taxes.


Question:
My business was approached by a professional employer organization (PEO). What does a PEO do for businesses?


Answer:
A PEO offers outsourced solutions for things like human resources, payroll, and benefits. Often it can decrease benefit costs due to its purchasing power and keep your company up-to-date with employment regulations. Using a PEO means that employees technically work for the PEO under a co-employment model. This means the PEO assumes some of the risks associated with being an employer.


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