Fantasy Sports – Real Taxes?

Fantasy football game season is fun and exciting for all its participants. The luring possibility of winning, the friendly rivalry and comradely increase the level of adrenalin while the game lasts.  Yet, the sweetness of the ultimate prize may somehow be spoiled by taxes payable on winnings.

In particular, let’s assume a game is held at the place of employment where an employer allows free entry for all employees and provides prizes. When upon winning an employee is awarded a trophy by an employer, it will likely be taxable as wages subject to regular withholdings, including FICA taxes. 

The rules are rather specific that prizes given in any form of cash or equivalent to cash such as gift cards, gift certificates or even coupons will be taxable. However, property of nominal value such as a turkey, a ham, candies or maybe a T-shirt with company’s logo on it will not be considered wages and will instead be treated as excludible de minimis fringe benefit. In other words, in order for a fringe benefit to be excludable as a de minimis fringe benefit, it must be a property or service that is small in value, infrequent, and administratively impracticable.

Unpleasant consequence? Maybe, yet I am quite positive that taxes are a small price to pay for the enjoyment we receive playing the game…