I’m a Canadian who won Disney Contest. Now how do I pay taxes?

[frjohnk]

In 2019 I won the shop Disney now more fun in the sun contest.
-4 flights to and from Orlando
-4 park hoppers
-4 nights at deluxe hotel
-1 day VIP tour
$500 Disney gift card

Because I’m from Canada I signed a W-8BEN form.

We took the trip in Jan 2020.

I understand we have to pay 30% in taxes of the value of the trip. But a Canadian winning a US contest is not so common that I can easily search on what they did in regards to paying taxes.

Probably best to get an accountant for this but just wondering if anybody here has gone thru this. Thanks.

 

[hdrolfe]

Since it is only taxable in the US you will want one familiar with US tax laws for sure. There is no tax on winnings like this in Canada. Sorry I'm not more help. I would have expected a withholding tax on the prize but I guess in this case that isn't really possible. Normally that would be enough and then you wouldn't necessarily need to file.

 

[lozzypop]

This advice should be confirmed with either a lawyer or an accountant, but ......

If you are Canadian and only live in Canada, then you are only subject to Canadian tax law. And Canadian tax law says that lottery/sweepstakes prizes are non-taxable. You would have had to answer a skill-testing question to provide the consideration needed for the prize contract, but I am pretty sure you do not have to pay US taxes on the value of the prize. If you are required to pay the tax, then that should be deductible from your Canadian taxes under US/CA tax treaties.

The W8BEN form was necessary to explain why the contest sponsor was not withholding taxes from the prize value. I work for a firm that does work for US companies and we frequently have to fill out these W8BEN forms before we get paid. But we are not subject to US taxes because we don't operate in the US.

I tried a Google search with the following phrase "if you are a Canadian and win a US sweepstake, do you have to pay taxes?" All results have to be taken with a pinch of salt and always verify with a professional.

 

[hdrolfe]

This advice should be confirmed with either a lawyer or an accountant, but ......

If you are Canadian and only live in Canada, then you are only subject to Canadian tax law. And Canadian tax law says that lottery/sweepstakes prizes are non-taxable. You would have had to answer a skill-testing question to provide the consideration needed for the prize contract, but I am pretty sure you do not have to pay US taxes on the value of the prize. If you are required to pay the tax, then that should be deductible from your Canadian taxes under US/CA tax treaties.

The W8BEN form was necessary to explain why the contest sponsor was not withholding taxes from the prize value. I work for a firm that does work for US companies and we frequently have to fill out these W8BEN forms before we get paid. But we are not subject to US taxes because we don't operate in the US.

I tried a Google search with the following phrase "if you are a Canadian and win a US sweepstake, do you have to pay taxes?" All results have to be taken with a pinch of salt and always verify with a professional.

This isn't entirely accurate. Income is taxable in the country you earn it, in this case the US. They do tax lottery winnings. Since there is no tax due in Canada you cannot claim anything on your Canadian tax return. It's a common thought for people who win in Vegas and try to claim that as a credit in Canada, doesn't work out sadly. Treaties only help with setting limits on withholding amounts and such, in this case the treaty does not cover winnings. The foreign tax credit you could claim if it was taxable in Canada is actually not part of a treaty but part of the Income Tax Act and applies to any foreign income.

You can always call the IRS, they only have one number and it's not toll free from Canada: 267-941-1000 for international callers or overseas taxpayers.

 

[mamaofsix]

I have no tax knowledge to share, only wanted to say: Wow, what a prize! Jealous...

 

[Muskrat191]

Was the contest open to Canadians? (I assume so since you won.) If so, I would think that the prize was being awarded in Canada under Canadian tax laws (and therefore no tax is payable). However, I am not a tax lawyer, so don't base anything on my opinion. Do you have a copy of the "terms and conditions" from the contest?

 

[frjohnk]

I got a hold of the IRS and I’ll have to file a 1040NR return. Our neighbor is a CPA who will set me up with a coworker who specializes in US taxes.

Thanks.

 

[frjohnk]

Was the contest open to Canadians? (I assume so since you won.) If so, I would think that the prize was being awarded in Canada under Canadian tax laws (and therefore no tax is payable). However, I am not a tax lawyer, so don't base anything on my opinion. Do you have a copy of the "terms and conditions" from the contest?

Yes. Every year before the pandemic, Disney would put out a few contests for US and CAN residents. My daughter would bug me daily for about 2 years to enter. I did but sporadically. We actually won.

 

[gskywalker]

I am not an accountant but as others said we don't pay taxes on lottery winnings. Has Disney said you have to pay the US government a certain amount to claim the prize? I actually know someone who just signs up for contests as herr full time job, about 40 hours a week, she never claimed any income and she usually won at least about 30k a year in prizes.

 

[frjohnk]

I am not an accountant but as others said we don't pay taxes on lottery winnings. Has Disney said you have to pay the US government a certain amount to claim the prize? I actually know someone who just signs up for contests as herr full time job, about 40 hours a week, she never claimed any income and she usually won at least about 30k a year in prizes.

I’m not one either but buddy is. His coworker will confirm

I looked at the US CAN tax treaty and the prize I won looks like it falls under “ Other fixed or determinable annual or periodical gains, profits, or income. “


And because I am a Canadian who won a US contest then

“Foreign persons are subject to U.S. tax at a 30% rate on income they receive from U.S. sources that consists of:”

Quotes from IRS.

I was on the phone for over an hour with lady from IRS. She could be wrong but that’s why I’ll confirm yes or no with a CPA who specializes in US taxes.

This is definitely an obscure situation in which I could not find much comparisons.

 

[Chickinvic]

When my mom won money in Reno, she got tax withheld there, but was able to reclaim it by filling in some paperwork here in Canada.

 

[gskywalker]

I’m not one either but buddy is. His coworker will confirm

I looked at the US CAN tax treaty and the prize I won looks like it falls under “ Other fixed or determinable annual or periodical gains, profits, or income. “


And because I am a Canadian who won a US contest then

“Foreign persons are subject to U.S. tax at a 30% rate on income they receive from U.S. sources that consists of:”

Quotes from IRS.

I was on the phone for over an hour with lady from IRS. She could be wrong but that’s why I’ll confirm yes or no with a CPA who specializes in US taxes.

This is definitely an obscure situation in which I could not find much comparisons.

Glad you have that contact to hopefully figure it out for you. It also wouldn't be great if you had to pay taxes on the full amount because it would be the full retail price and would result in a lot of extra taxes.

Edit: FYI I just took a quick look and found that the 30% is as I figured, a US witholding tax and then you have to get an expert to get it back. Same as winning at a US casino, on the price is right etc. Take a search for it and you will find a site that talks about it and will give info.

 

[EastYorkDisneyFan]

When my mom won money in Reno, she got tax withheld there, but was able to reclaim it by filling in some paperwork here in Canada.

Someone I worked with onec completed on Jeoplerdy he was a four day champian and he said that after the taping he had to pay US Tax but was able to get most of it back once retuning to Canada.