Brands and agencies running sweepstakes, contests and other consumer promotions received welcome news in the recently enacted One Big Beautiful Bill Act ("OBBBA"). Effective for payments beginning in 2026, the threshold for issuance of a Form 1099-MISC to winners in such sweepstakes, contests and other promotions is increased from $600 to $2,000, with annual inflation adjustments beginning in 2027.
Why This Matters to Brands and Promotion Sponsors
Prior to the OBBBA, brands that awarded prizes—like gift cards, trips, merchandise, or event tickets—valued at $600 or more were required to issue a Form 1099-MISC reporting that prize to each winner and to the IRS. That requirement extended to one-time giveaways and sweepstakes for low or no-cost items.
This change offers several benefits:
- Fewer 1099s to File: Reduced compliance costs for brands, agencies, and fulfillment partners.
- Simplified Winner Experience: Fewer tax forms sent to winners who may not have expected them.
- More Flexibility in Prize Design: Sponsors may offer more prizes valued below the new threshold without triggering tax reporting requirements.
Important Caveats and Continuing Obligations
- Still Taxable: A prize's value remains taxable income to the prize winner and such recipient remains responsible for the payment of any associated income tax.
- Watch Cumulative Values: If a prize winner wins multiple prizes across campaigns by the same brand within the same year that total $2,000 or more, a Form 1099-MISC may still be required.
- Professional Winners and Influencers: If an individual receives compensation for promotional work or acts as an influencer, Form 1099-NEC may apply instead—still subject to the $2,000 threshold.
Final Thoughts
Brands and agencies can expect reduced paperwork and compliance costs, and consumers will face fewer unexpected tax forms for modest prizes. But tax obligations haven't gone away—prizes remain taxable, proper intake procedures are essential, and cumulative prize values won from the same brand can still cross the $2,000 threshold.
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