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Sunday, December 23, 2012

A Little, But Important Footnote (Or, how to pick where you place your raffle tickets)

While much of my professional life is spent reading and interpreting the small print, it really is much more fun to look at the (big) picture.  Here I refer to the big glossy pictures of all the things a girl could possibly dream of, featured in the most recent Chinese Auction catalogs that arrived in my home and didn't make it to the recycling bin before Thing #2 discovered them and sat down to peruse.

While Thing #2 was drooling over some jewelry prize "we" could win ($4500 of it), I had a chance to share with her in a very condensed form why we don't participate in these very popular auctions:
1.  We prefer to just give tzedakah, 2.  The organizations that we give to regularly don't have such fundraisers, and 3.  if there is something we really want in life, we can just buy it and satisfy the desire quickly.

But we all like to dream and I am no exception, so the idea of throwing five, ten, or fifteen dollars into a pot in hopes of winning something I probably won't ever get around to indulging in is tempting. . . but then there is the small print.

At the end of the catalog is the print that every accountant see in large font:  the taxes on any winnings are your responsibility.  And this is really what everyone needs to understand before entering into a raffle.

If you are entering to win a non-cash prize, you best not be cash strapped.  The $10,000 living and dining room suite could cost an average taxpayer a nice chuck of change (a good $3,300-$3,500 for the 25-28% marginal payers after federal and state taxes).  I think even the most frual among us go through phases where we want to get something really nice or enjoy a wonderful experience.  At least for me, dropping a little money can usually satisfy that desire.  Drool-inducing silver and jewelry won in an auction would cost me nearly $1,500 and a good $500 in blow money would more than satisfy any consumer itch.

For those that enjoy the auction, does the small print make a difference when entering?

59 comments:

Anonymous said...

I find the same thing humorous with the price is right show. Better win cash as well or just leave the prizes at the show for most folk

Anonymous said...

How meticulous are the non-profits that run these auctions at reporting the winnings to the IRS? (I assume that 1099's are not requried for items valued at less than $600.00) How good are the winners at self-reporting?
What is the taxable value - For example, if a jeweler donated a pair of diamond earings that cost him $1000, that he usually sells for $2,000 and sometimes marks down to $1500, how much can he deduct for the contribution and what is the taxable amount for the winner?

Shoshana Z. said...

Seems like there should be a tax disclaimer in the Chinese auction catalogs.

megapixel said...

a friend won a car on a game show, and then was told -the motor is not included. if you want the motor, you have to pay for that.

also a relative won a trip to CA, had a great time, and then was mighty disappointed when come december, she rec'd tax documents that required her to file as extra income. that trip cost her a fortune, since that difference pushed her into a higher tax bracket that year.

Mr. Cohen said...

Change "the most frual among us" to "the most frugal among us".

Anonymous said...

http://thepartialview.blogspot.com/2012/02/intermarriage-solution-for-shidduch.html

Am I a tax cheat? said...

over the years, we won a bunch of stuff at Chinese auctions - so much so that the running joke in the family was that if we entered no one else would. A fur coat, a trip for two to Israel, a set of China, a 25-inch TV (it was a Young Israel auction - the 'frummer' places would never have such a prize), $500 gift certificate to TOYS R US, etc. I guess I never thought about the taxes and I never got a 1099.

I never give money to a Chinese auction unless the charity is already on my "list".

thegameiam said...

The real disclaimer should be that nothing related to raffles whatsoever is tax-deductible. You are receiving a thing of value: a chance to win a prize, even if you don't win. These are extremely deceptive.

wondering said...

Is what gameiam true? Any accountants or tax lawyers out there who know the law? If I buy a raffle from a tzedokah org that sells 10,000 of them at $10 each and gives the winner $1,000, netting the yeshiva $99k on the deal, is NONE of my $10 tax deductible? Sounds bizarre.

Orthonomics said...

To answer a few questions:

*This is the link to the IRS notice that details how raffle winnings should be reported and when tax must be withheld: http://www.irs.gov/pub/irs-tege/notice_1340.pdf

**Raffle entries are not tax deductible as a charitable donation, but gambling expenses can be deducted as misc. on the Schedule A if you itemize and are not subject to the normal 2% floor
http://www.irs.gov/taxtopics/tc419.html.


To "Am I a Tax Cheat?" Sounds like you did not know and the organizations were not at all in compliance (a trip to Israel for 2 is indicative of that). Consult your tax accountant regarding amending past returns.

Julie said...

Growing up, my father ruined "The Price is Right" for me by calculated how much the prize would cost the winner in taxes. Because of him, I have never been interested in entering raffles. The prizes are never worth what I would have to pay if I win.

Anonymous said...

These comments have centered on the tax aspect of auctions. What concerns me, particularly in the hard-pressed frum world, where parents are up to their ears in debt and have 7 to 10 children - when these families run auctions and tzedakah parties, how much of the proceeds benefit the tzedakah, and how much defray the expenses of the sponsors. And expenses they have. You need to know the ehrlichkeit (honesty) of the people in charge of a tzedakah or auction.

The terrible stress that frum people are under cannot be understood by modern orthodox people, who have far greater means and far fewer children, and who make far less elaborate promises to marry off their daughters. I know families in this position, and one baal habass (head of household) is straight and honest and does not collect tzedakah for any self created organization - he gives to every meshulach who comes to the door. He pays his gemach debt every month. He is the soul of honesty, as is his ikeres habayis (wife). But what of families that sponsor tzedakahs and auctions? What do you know of the sponsors and their standards?

Poverty, lack of education, and money making tzedakahs make me wonder - are these tzedakahs transparent? No they are not. The thought is risible. You have no statement of account, of how much is collected for the cause and how much for the gemach debt and the chasanah and the house for the couple.

I can't help but wonder.

Five Towns Guy said...

Not to burst the bubble of the guy who gives no tzedokaoh to orgs but does give every mishulach - he would be a LOT better off finding a reputable org (Yad Eliezer; Tomchei Shabbos) and giving it to them. They research the need of the people they give the money to and their overhead is so low as to be nonexistant.

Does he actually think that is a better way to giving charity? How much of that goes the driver? How much pays for the ticket to come into the US to begin with? How does he know the money is is not funding the next Neturai Karta trip to Iran? etc etc

Anonymous said...

One of the things that I hate about these auctions and raffles is the materialism that they glorify and promote - the items tend to be glitzy baubles and silver, along with some new tech toys. I also hate when you buy a ticket to a dinner or other charity event and then when you get there find yourself coerced to buy raffle tickets.

Avi Greengart said...

Anon 12:46,

I take your point, but... I love stuff. Given the choice between giving a check and entering a Chinese auction, I choose the auction every time because it adds an element of fun (the choosing process; winning is a bonus), and giving happily is a higher level of tzedaka. For the same reason, I don't give money at dinners (or attend them) - I generally don't enjoy them at all, so why make that part of my tzedaka allocation?

Now, the Rambam probably meant giving happily is better because the recipient feels better when he sees you giving him happily, which lessens the guilt of taking. But my interpretation works for me - and I really do think simchat mitzvah is important, especially for tzedaka.

Five Towns Guy - agreed. I generally don't give (or give much) to meshulachim, even those with certificates from our town committee. I was burned badly a few times, and now I limit the number of places I give to. Tomchei Shabbos is one of them, even though they don't do auctions. :)

Hopefully my income will rise faster than my expenses so I can keep giving tzedaka (auctions or not).

rosie said...

I am also wondering how the IRS knows who wins. For example, if a person buys clothes in NY and pays no tax and then goes home to MI with the clothing, he owes use tax but few people bother to keep track of it and pay it. The tax form has a suggested use tax based on income for honest payers. If someone wins at an auction and walks away with his or her prize, how does the IRS tax him or her? Is it the honor system? What happens if a person wins something in Canada and brings it to the US? Do the customs officials charge him anything? What percentage of people voluntarily notify the IRS of a large prize that they win? Basically, whose obligation is it to notify the IRS? Also, if a person wants to participate, are they better off trying to win the less impressive prizes such as religious books? Are religious books taxable?

rosie said...

http://contests.about.com/od/taxesfinances/f/taxessweepsprizesunder600.htm

I think that I found the answer to some of my own questions. The sweepstakes sponsor is obligated to report winners of $600 or more but might report all winners. The winner must report a prize of any size. Obviously if the sponsor of the contest fails to report the winners, the winners might get away with not paying the taxes, if they are less than honest tax payers. The only prizes that are not taxed are those that the recipient has done nothing to win. For example, if a shul wants to honor the minyon goer of the year with a new silver menorah, and the minyon goer did not enter a contest or do anything other than be chosen by his peers as deserving of a prize, the prize is not taxable, although gifts of a certain size are taxable and can be turned down if the taxes would not be able to be paid.

rosie said...

Does the IRS look carefully at how a mosod gets it's money? For example, the donors of the gifts get a deduction for their gift and they report that on their taxes. The winners, however, could be people who are welfare recipients who spent their last $20 to win a year's supply of disposable diapers. I have never heard of anyone worrying about paying taxes on the winnings and lots of frum people attend and sometimes win these auctions. Many of these prizes are small and won't be remembered when it is time to pay taxes, even if legally it needs to be declared. I have never heard of someone being audited for winning and most are more concerned with giving maaser from prizes than about paying taxes. Basically, are the mosdos avoiding the tax declaration because their main source of income may be the auctions and if people knew it could cost them something in taxes, they would avoid participating? According to "am I a tax cheat?" even a yearly winner is not followed by the IRS. I am just wondering why I have never heard of this tax situation till now, but then, I have never won and no longer enter these auctions.

Miami Al said...

One of the Survivor winners didn't report his $1 Million dollar winning, and he went to prison.

People that win big ticket prizes, or gifts, do get 1099s. People that win at Casinos/Horse Races do get 1099s. An old family friend used to keep his discarded race tickets (and I think scooped up ones people threw away) because only your net winnings were taxable, and he used the old tickets to document his race "losses" to avoid taxes.

The IRS won't also know if you switched your chicken purchases to Purdue, but few Orthodox Jews would advocate that method of saving money, why are contests different.

Caveat, I generally avoid raffles, I find them unpleasant, but I have won sub-$600 gifts when everyone at the event was automatically entered, and not received a 1099, and I personally have no recollection if we remembered it at tax time to report or not. If we remembered, I'm sure we did, but if we forgot (a January prize and taxes filed 16-22 months later) I'm not sure that I was perfect in it.

I feel with much of this stuff, legally, we're all imperfect. However, morally, I think that attitude matters. If you are proud of "pulling a fast one," well, that's pretty gross. If you don't remember every cheap thing you've gotten over the year, well c'est la vie.

rosie said...

Al, your local yeshiva who makes an auction is neither a racetrack, a casino, or a game show. They are run by the folks who don't seem to know much about tax laws. The attendees at these events are likewise like the above poster "am I a tax cheat?" who innocently came away with huge prizes that she did not declare on her taxes. Guess what! The IRS never even knew what she won and she is in a quandary about doing the right thing.
Al, I would think you have been reading the latest news and our taxes are not exactly decreasing. While it may be the law of the land to pay them, I doubt that the average Joe Shmoe out there who wins a set of golf clubs at the church raffle is going to tell Uncle Sam and neither is his church.
It may be immoral and unethical to try to get out of paying taxes but what percentage of people volunteer to pay that which they will never be caught if they don't pay? That is my question.

Anonymous said...

Rosie: I think you are asking the wrong question. The question should be why aren't religious organizations which should be held to a high standard since they purport to promote ethical living and self-discipline not complying with the law. In other words, if the item is valued at $600 or more, issue a 1099.

rosie said...

Anon: the hard truth is that religious organizations cannot survive without money and we can either give it to the government or to the religious organizations. The government is taking more and more. If we were angels, it would not be necessary to entice us to give bigger donations than we can afford, by offering prizes. Trouble is, we usually don't open our pocketbooks nice and wide unless we feel that it will benefit us. It is the same as the sale at the store that really is not a sale at all but an attempt to fool us into spending more than we can afford.
If we were not concerned about our own comfort or even our own welfare but totally put tzedukah first, it would not be necessary to woo us with gimmicks but the truth is, most people will buy themselves that extra piece of clothing rather than skip the shopping trip and send a check to the local tzedukahs. I can't blame the causes, Jewish or otherwise, for doing what is their own best interest for survival by avoiding the tax issue and leaving it up to the individual and I don't think that frum Jews are the only organizations guilty of this. Those Jews who subscribe to a higher standard will send a nice donation and skip the raffle.

Avi Greengart said...

Anon 8:43 is right - the orgs should send 1099s where applicable.

Anonymous said...

Rosie: Yes, you can blame the frum organization for leaving it up to the taxpayer. They should be issuing 1099's for prizes worth more than $600. They also should disclose to participants that the prizes are taxable and need to be reported - they may not be legally obligated to do the latter but its the right thing to do.

We forget that this country is very generous by allowing religious organizations to be tax exempt and to allow donations and shul fees, etc. to be tax deductible. Personally, I would get rid of the deductibility and use the deductions to make sure that programs for the elderly, disabled and truly needy are fully funded instead of being threatened in Congress every day. Those who truly believe in their religious organizations will still fund them like they did in the old country.

rosie said...

I looked up some 2012 online Chinese auctions by frum organizations. One of them, Bonei Olam, has a disclaimer on the home page stating that the gifts are subject to taxes and that a 1099 would be given for all gifts over $600. I also looked up a yeshiva Chinese auction that no mention of taxes anywhere on the site. Bonei Olam is a national organization that helps all Jews with fertility issues whereas the yeshiva is for a particular community and probably does not get contributions from outside the frum community. It is very much like a major food company that puts in the small print on the sweepstakes entry that the prize is subject to taxes as opposed to a local food store that auctions off some electronic item worth more than $600. I once won a model airplane worth $30 at a local mom and pop toy store after filling out a raffle ticket. I received a call that I won the model airplane and no one said a word about taxes although legally, I would have had to report the win and pay taxes on the toy airplane. I doubt that any of the other prize winners reported it either because the government was not looking to see where the money went and no one even thought about the taxes.
Are shul fees deductible? That is a membership for a service and not just disinterested generosity which is the government definition of charitable giving.
We don't live in the old country but in the old country, there were probably fewer organizations clamoring for the same few dollars from the same few people. Tell you what, anon, next time you get a catalog for an auction, if you don't see a tax disclaimer, call them up and let them know how disappointed you are.

rosie said...

I just looked up the auction disclaimer on another frum auction site and it did say that the prize recipient was responsible for all applicable taxes but did not mention that it would issue a 1099 like the Bonei Olam site did. I wonder if there is any legal obligation to put a disclaimer.

rosie said...

Also, charitable trusts and corporations, or organizations which are exempt from taxation under state or federal law, are not bound by the provisions on the operation of contests.

This was from an article about the legal aspects of sweepstakes and contests. It might not be required of charitable organizations to print a disclaimer about tax laws.

Anonymous said...

Anyone who is involved in organizing or running any type of raffle or even a bingo or poker night fundraiser (ok, I know these aren't common in the frum world) should make sure to check local and state regulations. Many states and localities have very specific requirements about getting a permit and reporting if more than a certain amount is involved. The amount varies by state. In some places, a raffle for a $5,000 prize might trigger the requirements. These are entirely separate from IRS requirements and usually religious organizations are NOT exempt.

Getting back to IRS requirements, SL can fill us in more, but I believe that for prizes of certain amounts (i.e. over $5 or 6,000), not only does the organization have to issue a 1099, it has to do withholding, just like employers have to do with wages.

And Rosie, charities might not be required to warn participants that they will issue a 1099 and that there may be tax consequences, but it is the right thing to do. Sometimes we get so focused on what is the law, that it is easy to forget about common sense and what is the right thing to do even if not required. Just like all those fundraising dinners -- its the decent thing to let people know in advance what portion of the ticket will be deductible and what portion will be the cost of the dinner and therefore not deductible.

rosie said...

Anon, I was looking at some magazine ads for sweepstakes and absolutely none of them mentioned one word about taxes. Even the fine print did not mention taxes. One of them required the entrant to email an entry but no explanation whatsoever was given as to the obligation of the winner regarding taxes on the prize which was estimated to be worth $500. These contests, like Chinese auctions, exist to make money for the organization or business and they usually don't dampen the enthusiasm with a hefty dose of reality. Most likely, winners of all types of contests probably get away without paying taxes. No one is on top of them and no one gets caught. It is the rare person who will pay up anyway when he or she knows that the IRS has no way to find out that he or she won anything. How many human beings simply "do the right thing"?

Lost and Found said...

This has been very enlightening. I have heard of the massive sweepstakes commandeering a huge percentage of one's winnings, but never even thought of the chinese auctions as being taxed.

I have always preferred to giving places I know, but now it's been infinitely reinforced.

Thanks.

Miami Al said...

Rosie,

"How many human beings simply "do the right thing"?"

Until becoming Frum, everyone that I associated with did so. That's not to say that they were perfect, but in the normal world, good people "do the right thing."

It's only since hanging out in a world where we have 11 year olds getting legal training that "do the right thing" is seen as stupid.

There is something rotten here.

Defender said...

Nothing personal Miami, but I think you are absolutely full of it. If you actually believe that everyone out there does the right thing EXCEPT the frum people, you are probably hanging out with the wrong frum people.

Miami Al said...

Defender,

Nope, lots of scum bags out there, I just never associated with them. It's just that in the frum world, they're "around" me more and not so easily avoided.

The people I know that considered themselves good people all tried to "do the right thing."

I'd never met before holier than thou people that also thought it was okay to lie and cheat and steal. I'm sure they exist, I just never encountered them.

rosie said...

Al, your friends considered themselves good people and are you sure that they always remembered to claim prizes as income on their taxes? I wonder how many IRS agents see an entry "won model airplane in store drawing, value $30." They would probably have a good laugh. It is true that the first thing G-d will ask us when we pass away is whether or not we were scrupulous in business dealings but I wonder if our nature of forgetting the string that is attached to winning something will be held against us.

Miami Al said...

Rosie,

Am I sure that they always claimed prize income on their taxes? I'm sure that they didn't. I can't remember anyone keeping good records of poker or casino winnings, etc., to know if they needed to report or not. I don't think people often bother with these small dollar prizes. My issue is not the not remembering, but rather the belief that because of "insert expensive religious requirement" people feel justified in tax evasion. There is a huge difference between "I come out about even on these things, I don't keep track" and "hahaha, the Yeshiva and I are too smart, the IRS will never catch us, bwahahaha."

Are my friends super meticulous with this stuff, no, they aren't. OTOH, they aren't super meticulous checking their lettuce for bugs. I will say that the religious Christians I know tend to be meticulous in these small matters, while my secular friends ignore all these "small" issues.

rosie said...

I think that there are some very secular people who feel that the government is snatching away enough of their money and giving it to lazy bums who don't work and that if they can make something look deductible, or hide income, they will. They feel justified because they don't like the way the government is throwing away their money. They want to outsmart the government. Religious Christians may sweat the small stuff but as humans, they may fail in some bigger way because everyone falls prey to temptations once in awhile. To frum people, these auctions are big temptations. Aside from the tax evasion issue, there are some who gamble the rent money. There are ladies who make the circuit of all these events and view it as kosher gambling. The auction issue is very problematic but then where is the money supposed to come from for all the worthy causes? The causes are within their legal rights to print a disclaimer that taxes are the responsibility of the winner and leave the matter up to the winner. They are not legally obligated to be tax police although those who have an ax to grind with the frum community feel that they are morally obligated to give 1099 forms in order to force the winners to pay taxes on the winnings. These auctions are often run by volunteers who don't have to volunteer to file forms. Who then, of these organizations are we holding responsible for making sure that people pay the taxes?
And of the secular world, I just looked in half a dozen secular ladies magazines and there are lots of contests and sweepstakes and they don't bother letting anyone know what their tax obligation is. There is away around that too. One contest states that the gift has "no cash value" even though the gift is brand new merchandise. I don't see too many angels in the tax paying corner from either camp.

Miami Al said...

Rosie,

All these things are true.

I'm very put off by the attitude of "laws don't apply to us" I see in the Frum world, it's pretty gross and embarassing.

In terms of 1099 forms? If you are a non-profit maintaining 501(c)3 status and turning in 990s, you can give out 1099s. It's a simple form, and you get a pack of the forms for $10 at office supply stores this time of year. No excuse for any firm that has an accountant to not file 1099s.

rosie said...

Giving out forms is one thing and taking social security numbers to give the IRS is something else. It may require more effort.

Anonymous said...

Rosie: The organizations are legally required to report winnings or prizes over $600 on a 1099 and in many states and towns, must even report smaller amounts. The issue is not whether or not some people legitimately don't know they don't have to report or forget a token $25 winning. Nor is the issue whether or not gentiles are scrupulous. I always laugh when I hear the argument that we shouldn't have to do X because the seculars or gentiles don't do it. Isn't leading a Torah life supposed to help one avoid temptations to cheat and lie and to be a better person. Would you say we can eat lobster because the seculars do?

Also, these days most people will either get a questionnaire from their accountant before the returns are prepared that would call for disclosing winnings. Those who use programs to prepare their own returns will probably also see questions about winnings. Yes, some will still legitimately forget the small item, but that's not what we are talking about. We are talking about not reporting the $1,000 diamond earings or the $3,000 silver candelabra.

As for the argument that we can't be meticulous because all these organizations need to raise money, what good is tainted money, that is not a justification for knowingly playing fast and loose. There are plenty of other ways to raise money.

rosie said...

Remember too Al, losing a chunk of the prize dampens the enthusiasm for winning. Non profits lose by dampening enthusiasm the same way that major food companies don't want you to think about your taxes when you enter their sweepstakes. The food companies are not non-profits and must report the winnings but non-profits are not obligated to shoot themselves in the foot.

rosie said...

Anon, where do you see that organizations are legally required to report the winning of large prizes. I read that non-profits do not have the same legal requirements. If you can find it written somewhere, I would like to see it because I only came across one auction where they state that 1099s are given out. You are right that tainted money is no good and the sages of olde warned that children who were fed from tainted money would grow up to be non-frum. It is a serious issue but there are not plenty of other ways to raise money or Chinese auctions would not be as common as they are.

rosie said...

http://charitylawyerblog.com/2009/10/07/charity-raffles-tread-carefully/
actually, according to this, many of these raffles may be totally illegal. I wonder if they have been told that they discharge their legal obligation with the disclaimer that taxes are the sole responsibility of the winner because in some cases, such as when the prize is many times the amount gambled or when it is worth $5000, the organization must withhold the taxes at 25% and pay it. Some states require the raffle to be registered with the state and it takes months. I hope that these organizations are operating the auctions legally because what I read on one site said that charitable organizations don't have the same level of obligation that profit businesses have. These auctions have been going on for years and so far, I have never heard of anyone being caught running an illegal auction and these booklets are mailed across state lines and mass distributed. If they are doing something illegal, could someone please explain how it has lasted this long and is still ongoing? Someone obviously looks the other way at these things. I would also think that by now, there would have been articles in all the frum publications about the poor dude that won a $10,000 dining room set and couldn't pay the taxes on it. Someone must be bailing those guys out.

rosie said...

http://www.nals.org/?p=1340

This link gives each state's laws about gaming and Chinese auctions are included in these laws. The advice at the bottom of the article advises organizations to hire lawyers before attempting a fundraiser that involves any form of gaming. I hope that these organizations have adequate legal counsel and wonder what percent of charitable organizations outside of ongoing bingo games operate their raffles legally.
Anon, when large numbers of people are ignoring laws and the laws are not enforced, Jews are no more at fault than anyone else. Laws that are not enforced may not have the halachic requirement of laws but ask your own rav.

rosie said...

http://www.oorah.org/auctionterms/index.asp

read this disclaimer from the oorah auction. It does issue 1099s but also states that the taxes are the sole responsibility of the winner and the winning is void in states where it is prohibited. Looks like a lawyer wrote the disclaimers because it is a national raffle.

rosie said...

http://www.frumsatire.net/2007/12/19/is-it-tzedaka-or-is-it-something-else/

This very good article on the subject of Chinese auctions in the frum world is 5 years old but right on the money. Basically the only way to keep a charitable appeal from being tossed straight into the trash is to spend mega bucks on a glossy catalog of incredible prizes. Much of the money raised pays for the event but overall the cause makes more than if they relied on straight donations.

Anonymous said...

http://thepartialview.blogspot.com/2013/01/new-frum-shidduch-site-yourshadchanorg.html

rosie said...

anon,
what does this shidduch site post have to do with Chinese auctions?

Abacaxi Mamao said...

Laws must be followed whether they are enforced or not. Full stop. I cannot believe that anyone would suggest otherwise.

If you don't like the taxation system under which you live, elect politicians who agree with you. The US has the lowest tax rates in the Western world (and the fewest services for the poor, elderly, parentless, etc.). I can't believe that people would object to paying taxes on gambling earnings (which auctions basically are), but I guess to each her own. Since the government disagrees, though, I recommend following the law. Even if you will never get caught. Dina d'malchuta dina, etc., if your ethical obligation to follow the laws of your country doesn't compel you.

rosie said...

abacaxi, I would imagine that not only Jews but others, even good people, win prizes and don't report the prize if it isn't going to be reported to the government. For example, a local grocery store is raffling off $300 in groceries. What percentage of people would you think would report the win? The store is just going to hand over the prize, no questions asked. Now you can say that most people are not moral or ethical and really, I don't know how Hashem judges the winner who doesn't pay taxes on the win, but I don't know how many people will pass such a test. No one is suggesting breaking the law but it is probably inadvertently broken on a frequent basis. No one objects to paying taxes on gambling wins but they are not going to force the money on the government either.
You know what really bothers me about this argument? Everyone expects frum people to be able to pass tests that others cannot pass. Some frum people never enter contests and never have the test of having to give some of it up for taxes and others are unfortunately not on that level. Dressing the part does not mean that they pass every test that comes their way. Abacaxi, I am really proud of you that you give lots of tzedukah without having to be lured with prizes and wish that all could do the same. We need to be inspired to follow your brave example.

rosie said...

BTW abacaxi, do you know that if you find a dollar bill on the ground and you pick it up that you are supposed to report it to the IRS? How do you handle found money? Do you declare it or just give it to tzedukah?

rosie said...

http://matzav.com/americans-feel-austeritys-bite-as-payroll-taxes-rise#more-84929

Higher taxes and higher health insurance premiums since health insurers now must insure everyone despite prior or pre-existing illnesses. At least in Canada, the taxes are higher but it includes medical care. Those who say that the care there isn't as good should compare infant mortality rates and longevity between us and them. Even with their socialized medicine, they are outliving us.

tesyaa said...

Everyone expects frum people to be able to pass tests that others cannot pass.

First of all, surely some people who are not frum would pass the test. Secondly, frum people constantly toot their own horns as better, finer people than the "goyim". A rabbi in Israel stated that the world is full of 8 million murderers and thieves, and the only decent people are the frum! If someone is merely dressing in a costume I understand that they are no finer than a person from another culture, but most frum people do not admit to wearing a costume. They really think they are somehow better. If they are better, they should obey the law, even when most others can't.

rosie said...

Tesyaa, there is a certain psychology of winning that makes some people look at winnings as separate from earnings. They view it as a gift and therefore don't even realize that they owe anything for the gift. This has nothing to do with the person's religion. Secular magazines with contests in them don't even mention taxes. The rabbi in Israel is full of hot air and I see very few RW rabbonim that view all frum people as fine and upstanding and all goyim as ruthless sinners. Rabbonim know that the changes in frum communities over the last couple of decades mean that they cannot assume anything about anyone simply because of the way that they are dressed. No one admits to wearing a costume. When Catholic priests molested numerous children, they also did not admit that their priestly robes were mere costumes.
They really think they are somehow better.
This phrase is true and they are not fooling anyone and this is why people like you and Miami, and Anon, and Abacaxi get angry that they want to get away with something.
Still, I wonder how Chinese auctions that are heavily advertised, are held yearly, and involve mail that crosses state lines, could still be run illegally, or does the IRS look the other way at some contests?

rosie said...

I would also say that when looking up info on Chinese auctions, I saw that B'nei Akiva schools and NCSY had these auctions as well. I would think that the attendees and participants of such auctions are MO. Should we simply assume that the MO are are more conscientious about tax paying than the RW and therefore their auctions are more kosher? Because they don't feel religiously superior to other Jews, should we figure that if they fudge a bit on their taxes it is somehow more excusable?

Miami Al said...

One of the ways to avoid a tax on it is to give something with no retail value. The way to do that is a special, promotional line of a product that isn't sold. Much of the Jewelry you see at these contests are that way... Much is made of the Jewelry store giving it away, but the manufacturers give it to them (usually from "seconds" or otherwise flawed merchandise), and they can't sell it, only give it as prizes.

So there are ways to do it.

Simply not issuing 1099s is a criminal way to do it.

Casual casino gamblers don't keep records (serious ones play on Credit, and the Casino tabulates it all for them), and if they happy to win one time, they probably aren't reporting it.

Again, no one is saying that everyone else is perfect. It's this strange attitude of superiority I see from people that are clearly not superior.

rosie said...

While there is no doubt that there are those in the RW community who feel superior, I have also met people from other walks of life who also feel superior. Usually, they are not truly superior, they just perceive themselves that way. This pertains to non-Jews and non-frum Jews as well. I could see it if they had really accomplished something in life but oftentimes it is simply so that they don't have to face their own insecurities.
I did see a gift in a secular magazine giveaway that said "no commercial value" and it was probably seconds as Miami Al was saying.
I did ask someone whose mother won a custom wig and she said that the 1099s were given for cash prizes but not for merchandise that was won. Again, was the wig something that had no commercial value?

Abacaxi Mamao said...

Rosie, I was not saying that I was perfect, only that the fact that "nobody follows the law" is not a good reason not to follow it.

If I found a dollar on the ground I might just keep it and not report it to the IRS. Or I might give it to tzedakah and not include it in my itemized tax deductions. When I am paid for work that I do, though, even in cash, I pay taxes and social security and all the other payroll taxes on it. I've been reporting cash income on my tax returns since my father started filing them for me when I was a teenager (and earned more than the minimum required to pay social security tax on babysitting and summer job earnings). Does this make me superior in some way to people who don't? Yes, if we consider following the laws of a democratic country to be a measure of superiority.

I once went out on a date with a frum guy (with smicha) who was questioning the kashrut of the hot chocolate I ordered but then, it turned out, had always been paid in cash and never paid taxes or social security on it. He said that he "didn't know I had to." For someone with an Internet connection and the ability to fluently read English, that is no excuse. It is pretty easy to figure out on the IRS websites what is taxable and what is not.

I don't know if RW or MO or seculars Jews or non-Jews are more likely to follow the laws of the land or not. What galls me is the idea that you can somehow morally justify purposely not following the law of the land just because you think you won't be caught or can't be bothered to search for something on the IRS website. Anyone doing that some sort of non-superior person in my eyes. I don't go around spouting this in polite company--that's what blogs are for.

Abacaxi Mamao said...

I also never claimed to give tons of tzedakah. I love giving tzedakah and if I had more, I would give more, but I am a full-time graduate student right now so I do not have a lot to give. But, when I do give, I give online through NetworkForGood and not for cash prizes or dinners. I am not saying that those who enjoy raffles are in any way in the wrong--only that they should follow the laws in reporting all income. Or, if they don't follow the law, admit that it is personal failing and not something that is okay.

rosie said...

My only moral justification is that they are not terrible people for doing what the average winner of a prize does. They are not superior to a more honest person and there is no halachic justification for dishonesty but I see on here that most people view frum people more harshly than others who do the exact same thing. I wonder how many people who win anything, regardless of religious persuasion think that they need to find out if it is taxable or not. That, to me, is the nature of the psychology of winning and not necessarily a sinister desire to cheat. I have a feeling that a lot of people who get tips such as waiters, waitresses, hair stylists, etc under report their cash earnings. They frequently get audited, particularly if it appears that they live on more than they claim to be making. Society does not usually view them as crooks, and recognizes that they may be a bit desperate. In my mind we must separate the fact that frum Jews are viewed as having a superiority complex and that fact that many don't report auction winnings. And, unlike you, I do feel that the auctions are very problematic for reasons besides taxes but I understand that these causes have not found another way to raise significant sums of money.