The Tax Is Right

Let’s reminisce a little bit, remember when you stayed home from school sick and you sat around and watched all those silly game shows that were on during the day?  You would watch, Let’s Make a Deal and The Price is Right, yelling at the TV, telling the people what the answer should be.  You always knew that if you made it on there, of course you would know the answer, get it right, and walk away with the major prize.  It’s just that simple.

It really happens…

I did it, I went to the Price is Right, was called onto contestants row, I was actually one of the first four selected and called down at the beginning of the show.  I get down there with the four other contestants, and  they show us the beautiful new 3D television we would be bidding on.  They move down the row taking bids and I went last, what did I bid?

Me Guessing the Price of the TV

Well wouldn’t you know it, that little bell went off, someone had guessed the price dead on the nose.  Who could that be?  Me, of course, so, I rush up onto the stage to meet Drew Carey and some of Barker’s Beauties.  They hand me my $500 cash (it’s a prop mind you they take it back from you as soon as you walk off the stage) and proceed to explain to me that I would be playing the Spelling Bee for a Brand New Toyota Corolla!!  I had to guess the prices of three objects in order to win more selections of cards,  I missed horribly on first guess for the price of some Toaster.  I ended up getting the price of a measuring cup, and then missed horribly on a set of Kitchen shears.  Now mind you, this was all before our frugal/FIRE days, but who in their right mind would pay $12 for a measuring cup and $35 for a bunch of scissors??  Anyway, I had one 1 extra selection of a card.  So I had a total of 3.  I needed to spell out C-A-R in order to win the NEW CAR….

Deciding which cards to take

I had won the TV, $500 and a fantastic new measuring cup, and Drew looks me in the eyes and says, “I’ll give you $3000 if you just sit down now”.  “No, I’m here for the car.”  So, I refuse, they flip the first card and it’s an A.  He offers $2000 for the remaining two cards.  I turn it down… and he turns over a C.  Proceeds to offer me $1000 for the last card, which I deny and … he flips it to reveal CAR.  I won it!!! I’m sure to hug everyone on the stage and proceed to run over to the car and dance around and get in the drivers seat, the whole 9 yards.  I then spin the wheel thing, tie with some guy and proceed to lose in the spin off, so no Showcase Showdown for me, but exciting none the less.  I mean really, I won a car?!?!  I actually had people come up to me after the taping asking to take a picture with me, pretty funny.

Life After the Show

This is all well and good, but what happens after this?  How does this all play out after the show, what are the repercussions?  So, after you are on the stage they seat you right up front in the audience.  You sit there until the end when they walk you back stage.  You’re handed a piece of paper that has all your winnings laid out and you’re told that you have 10 days to decide which prizes you want and which you want to deny.  There is no cash value, you take your prizes or decline them, one or the other.  The only suggestion we got was, “I’d call an accountant, if I were you”.  That was my first clue.

I went home and thought about it, I figure I actually had won something with some value, so I’d take it and try to sell it.  So I accepted all the prizes.  Little known fact, they only get you the stuff within 90 days of the On Air date.  So we went in January, it aired in March, and I ended up getting things delivered in May.  The TV is great, it’s still the one we use in our living room, 3D is a novelty that wears off after about the first time you try it, but it really is a nice tv.

Not a bad TV

The measuring cup broke within weeks, and the $500 was well, $500.  But the big one was yet to come.

I got a call from the dealership that deals with providing cars as prizes all the time.  I talked to them about what I can do with it, and they said that they will buy it back from me for $15,000.  Mind you it’s priced at $17,500.  So I think about it, try to put it up on Craigslist to no avail.  I decided for simplicity I’d just take the dealer’s offer and get it done.  I drove in one Saturday morning and took care of it.  I had to take it off the lot and return it back, so I took my brand new car to Jamba Juice with 2 miles on it, and returned to sell them my slightly used car with 3 miles on it.  See how happy I am:

My Shiny New Corolla

But, before I can leave I have to pay the Sales tax, fees and the new car registration on the vehicle.  So, I’m paying $1,850 for my new car already.  I know, I know it’s free car, so $1850 is nothing.  But still, if you’re not ready for it, it can be a shock.  And if you can’t pay it, you don’t get your car.

So it’s May when I take care of all this and cash the check that comes. Things are going just fine.  Then all the sudden come January of the following year, I get a 1099-MISC from CBS.  Wait what?  I didn’t work for CBS?  Yeah, they give you a 1099 for the MSRP of all your winnings.  Well that’s not fun, didn’t realize this was coming:

CBS 1099

So, I won a car that I sold for $15000, but I owe my full income tax rates for $19500.  Wow, and California adds another 10% income tax on top of the feds.  So how do I handle this?  I just entered the amount that I sold it for into my 1040 and called it a day.  Hey, I didn’t make that much, I only made $15000, so that’s what I put in there.  Makes sense to me.  Now mind you this is a full year past when I was on the show, and I owe almost $6,000 on my taxes.  Some free car.  So fast forward another year, actually November of the following year, and I get a stomach dropping letter from everyone’s best friend, the IRS.  “We noticed you got a 1099 for $19K you only wrote $15K on your taxes. You owe us another $1,700 plus penalties”  Lovely:

My friend and yours the IRS

I did my research before I just put the wrong number into my 1040.  So I knew I was right.  So, I followed up with a letter to the IRS.  Explaining to them where in their own tax code proved that I was right.  They didn’t believe the letter, so I had to go into the actual IRS building, which is a LOVELY place I tell you, and explain what I was doing to a guy in a cube.  I obviously knew more about the tax code than he did, not only because his eyes glazed over as I talked about it, but because he actually told me to keep it down, because his boss could hear that he didn’t know and that would get him in trouble.  So needless to say, he took care of it and I ended up getting the IRS off my back.  Here’s the letter so you can see:

Love Letter to the IRS

What did I learn?

Winning a car on the Price is Right is a lot of fun.  I honestly think the best part is the license plate frame I now have that says, “I won this car on the Price is Right”.  Another fantastic part was not telling anyone in my family about what happened, I just casually mentioned that we went to a taping and they should watch to see if they see me in the crowd.  This made my Grandmother’s year, I promise you that.

But, you never get a free lunch.  That “free” car, had I decided to keep it would end up costing me about $7,850 cash, and I had to fight with the IRS to not owe them another $1,666.  I don’t know about you, but spending almost $8k (potentially $9,500) on a “free” car seems a little nuts.

I’m glad that I won something that had some value to it and I’m glad that I actually knew what I was doing when dealing with the IRS.  I really pity the old woman that won the showcase showdown on my show.  She won a boat, and three vacations while on a fixed income in Oklahoma City.  Where exactly is she going to get the money to pay the taxes on some $40K in additional 1099 income when she doesn’t have enough for rent?  You don’t get cash, you have to come up with the tax money, if you can sell the stuff, great, but if not, you’re on the hook.  Uncle Sam doesn’t care, he wants his money. After this whole ordeal, I remember watching the mega prize Price is Right with a lady winning a Ferrari, good luck with that…

Oh, one other thing that I learned, and this will be handy if any of you are lucky enough to find yourself in this predicament in the future, remember your friend: US Tax Code Section 1.74-1(a)(2)

Ever dealt with the IRS and won?