I'm in a large contest with hundreds of entries that could bring the pot to nearly 50k assuming there's only one winner. I probably won't win it but I was just curious as to what the process would be if someone would win that much money and an estimate on what the taxes would be.
You owe taxes on it as income.
Not sure if this is relevant info or not but the contest is organized by a friend, so it's not through a major gambling organization or anything like that.
If the contest is not legal, the 5th amendment gives you the right to not claim the income - however, you must positively assert it - that is, you must inform the IRS you have unreported income but you are not reporting it based on your rights under the 5th amendment.
If you simply do not report it, you are a tax cheat.
EDIT- upon further investigation I've found out you still need to report the income, but if the source is illegal you can assert the 5th amendment and not reveal the source. LINK
This post was edited on 9/17 at 6:28 am