It’s common knowledge that running giveaways or contests on your blog will help drive traffic and attract new readers. It’s also a great way to network with other bloggers and cross promote. But if you currently run giveaways or contests on your blog, or are planning to – listen up.
You may or may not be aware, that regardless the size of your blog or giveaway, there are laws and requirements to running a fair and above board giveaway or contest; and that’s something that’s extremely important when it appears on your tax filing.
You might be wondering why this shows up on your tax filing at all. But many bloggers expense giveaways or contests and write them off come tax time. If a sponsor gifts you the prize that you’re going to pass on to your lucky winner, you can’t expense it. But if you’re paying for the prize yourself you can, along with the cost to ship it to the winner. (There’s more on deductions and expenses, but that’s for another blog post you can read here).
Here are a few guidelines for running your giveaway or contest*:
- You cannot charge an entry fee to enter your promotion.
- You absolutely must choose your winner at random.
- You must accept all valid entries.
- You must award a prize even if your prize sponsors backs out.
- Any giveaway with a prize valuing $600 or more must be reported to the Internal Revenue Service. Bloggers should not only make entrants aware of the value of the prize but the fact that they will need to complete a prize validation as well as be responsible fro any taxes that will result from winning.
- Bloggers based in the United States cannot run a promotion involving any of the following industries: tobacco, alcohol, gasoline, dairy, insurance, and financial institutes. There are special requirements for these industries and the cost to meet the requirements usually won’t justify the time you spend on it.
- You cannot extend an entry deadline in order to get more or any entries for the giveaway or contest.
To be sure you’re 100% in compliance with local laws, we recommend consulting with a legal expert. Good luck with the upcoming contest or giveaway – we’re sure it will be a smashing success!
To learn more about accounting for bloggers, visit these posts: