People who win contests and receive an inflated 1099 from the sponsor do not have to pay taxes on the overvalued amount.
Take these steps to try and lower the value.
1)Determine the fair market value of the prize.
2)Call the sponsor and ask them to lower the value to the fair market value. Some will do this, but if they do not call the IRS at (800) 829-1040 and request that they send a Form 4598, 1099 Not Received or Incorrect to the sponsor.
3)If the 1099 is still not correct, don’t worry because you can still report the difference as a negative in Other Misc Income with the notation Prize FMV Adjustment.
Remember, even if you did not receive a 1099 you still have to report the income.