I once received a prize check at the US Open for about $6.
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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.
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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.
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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.
Yes, if they get over $600 during the year, we must report it.
This is why we our business on quickbooks and can check during the year. We are also working on tying tournament software to Quickbooks to make prize payment easier and faster.
I know many TDs that do not report at all.
My issue is what do you do if a player refuses to fill out the 1099 form
If the player refuses to fill out the W 9 (so that a 1099 can be sent) then you look at Bill Brockâs March 25th post regarding backup withholding (granted, better would be somebody who is very knowledgeable about taxes rather than somebody like Bill that readily admits it isnât his bag, but Billâs post at least lets you know what to look into).
Filling out the form(s) is a government requirement. US Chess addresses filling out required forms in rule 32C:
32C. Payment.
Prizes advertised as guaranteed must be paid promptly and in full. **Prize winners may be required to provide ID, **
social security numbers, tax forms information, etc. before prizes can be issued. Failure to pay guaranteed prizes
may result in penalties, including revocation of affiliation or tournament director certification.
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Bill was correct. Backup withholding is required when a vendor/prize winner does not provide a tax ID number as required. Backup withholfing is also required even with a TIN if the IRS tells you to withhold from a prior year.
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