I once received a prize check at the US Open for about $6.
1 Like
At one of the clubs that I run, the prizes (for a $5 ef tournament with usually around 25-35 entrants over 5 weeks) will often look like this:
$27.50 (Open splitting 1st+2nd, prize 1/2)
$27.50 (Open splitting 1st+2nd, prize 2/2)
$10 (Open splitting 3rd, prize 1/2)
$10 (Open splitting 3rd, prize 2/2)
$20 (U1600 1st)
$8.33 (U1600 splitting 2nd + 3rd, prize 1/3)
$8.33 (U1600 splitting 2nd + 3rd, prize 2/3)
$8.33 (U1600 splitting 2nd + 3rd, prize 3/3)
âŚI canât really see the point of reporting that.
The way I understand it:
I donât see that USChess would get involved. If youâre running tournaments, then the IRS cares that you report you receipts. You can deduct prizes as expenses. If any person earns more than $600 for the calendar year (not just in one tournament), then you would have to report that to the IRS on a 1099-NEC (used to be a 1099-Misc but I think the 1099-NEC has mostly replaced the 1099-Misc) if you are reporting your prizes as expenses. But as I said, if the IRS decides to audit you, then I donât see how USChess would be involved. Youâre reporting it on your taxes; USChess isnât reporting anything. Under $600, you donât have to report that individualâs prizes, and itâs up to players to report their own winnings (if more than their expenses). I keep a spreadsheet that lists all of my weekly winners in case the IRS knocks on my door. But my highest prize is only $20 or $25, sometimes, so no one reaches $600.
2 Likes
If someone is continuing to win throughout the year and it exceeds $600 will you report it ?
The IRS says you need to report it.
Yeah, youâve got to do it. Youâre submitting your tournament prizes as expenses, arenât you?
Most TDs I know are not. Maybe uschess needs to make reporting mandatory.
You said this upthread and the reasons it was a bad idea remain reasons why itâs a bad idea.
Having a complete list of prizes is the 2nd most requested feature from players. (Putting the results in tiebreak order is #1.)
Having prizes reported to US Chess doesnât ensure that they get properly reported to the IRS, though. Organizers have to remember theyâre running a business and that means dealing with taxes, etc, even if the affiliate is tax-exempt. (Some states might be looking to add sales tax to things like entry fees, I know the Nebraska legislature has discussed that several times, the golf courses seem to be the most vocal against it.)
To my surprise, the general backup withholding rate for US persons is 24% See this link.
Withholding for foreign nationals is generally required & generally reported on Form 1042 / 1042-S. That rate IS 30%, but may be overridden by US-contracting state tax treaty.
Many foreign GMs will always tell you that no withholding is required. 
In general, they are wrong. But there are exceptions: e.g., a Canadian GMâs prize under $15,000 is probably exempt under Article XVI (âArtistes & Athletesâ section) of the US-Canada treaty .
Most foreign nationals will not have an ITIN. You can certainly use UK, EU nations, JP etc. tax ID numbers on the 1042-S. See the 1042/1042-S instructions.
TL/DR. I would withhold 24% for noncompliant US persons & 30% for noncompliant foreign persons. Despite Mulfishâs confidence in my opinion, this ainât my bag. Use at your own risk.
You might want to request ID information and issue a 1099 anyway (presumably without backup withholding) so that the IRS (hopefully) has total winnings across multiple tournaments by multiple organizers.
But I am neither a lawyer nor a CPA.
The organizerâs sole interest is legal compliance. Good luck to DOGE on collecting for IRS.