Fundraising raffles are a great way to raise money, but there are lots of rules and regulations to follow if you want your raffle to be successful. These fundraiser raffle tips will help you raise the money you need while avoiding some serious pitfalls.
When conducting fundraising raffles, there are many Federal and State regulations to follow. Most importantly, your group must obtain all the necessary permits and follow the tax laws governing gambling winnings and income tax withholding.
Fundraising Raffle Regulations
- Tax Laws – Your group must follow Federal and state raffle laws regulating gambling activities. This article on Fundraiser Help details the various state raffle laws. The IRS document on Charitable Gaming is here.
- Permits Needed – Only non-profit groups with Federal 501(c) tax status are eligible to conduct fundraising raffles and other charitable gaming activities. IRS non-profit charitable organization regulations are listed here.
- Avoid Online Ticket Sales – Most states specifically ban online sales of raffle tickets because sales could be out-of-state.
- Accounting & Taxes – The IRS requires detailed reporting by groups doing charitable gaming activities, including raffles. In addition, any prize winnings over $5,000 must have 28% withheld from the prize for income tax and reported on a W-2G form.
- Tax Withholding on Prizes Over $600 – For raffle prizes worth more than $600, the winner must provide their Taxpayer Identification Number (TIN) to the non-profit or have 28% withheld for taxes.
- Tax Withholding on Non-Cash Prizes – Raffle prizes that are non-cash and worth over $5,000 must have the 28% income tax withholding collected by the charitable organization and remitted to the IRS by the group. The only exception to that rule is to increase the value of the prize by 28% on the winners W2-G form.
- Prize Winner Certification – Your group must keep records on all prize distributions and obtain signatures from prize winners on their W2-G forms to be filed by the organization. Winners must complete IRS Form 5754, Statement by Person(s) Receiving Gambling Winnings.
As you can see, there are many raffle regulations that non-profit groups need to follow. You should consult with a CPA that is knowledgeable about charity gaming tax laws before conducting a fundraising raffle to avoid any tax liabilities. As far as the IRS goes, ignorance of the law is no excuse and you could find that your group is responsible for the uncollected taxes.