The Internet Invitational Pays Out $4 million. Here’s What a $1 Million Prize is Worth After Taxes

This year’s Internet Invitational, Barstool’s YouTube golf tournament, carries a $4 million purse, up from $1 million last season. The finale airs Thursday, November 12, per the episode schedule, and somebody is about to receive a very large check. You’re probably not winning a golf purse. But the trap that check sets is a common one: a big payment with nothing withheld from it. A freelance contract, a side-business payout, a contest prize, a large 1099 payment all work the same way. The money arrives whole, the tax doesn’t show up until later, and the gap between the two is where people get hurt. Here’s the math on a $1 million prize, and what to do in the weeks after any money like this lands.

Prize money is ordinary income

The IRS treats prizes and awards as taxable income. There’s no special prize rate. It stacks on top of everything else you earned this year and gets taxed at your ordinary brackets, which means most of a large prize lands in the top bracket. The payer generally reports it on a Form 1099. Unlike a paycheck or a bonus, a prize usually has no federal income tax withheld. If your bonus gets withheld at 22% and you still might owe, a prize starts at zero withheld and you owe all of it.

The second question: hobby or business?

How much you owe depends on whether the prize is a one-off or part of how you make a living.

• One-off prize. You entered a contest or a tournament as a hobby. The prize is “other income,” subject to income tax but not self-employment tax.
• Business income. Competing, performing, or creating content is your trade. A tour pro’s purse, or a creator who plays on camera as part of a content business, likely has self-employment income, which adds Social Security and Medicare tax on top.

That distinction is worth tens of thousands of dollars on a seven-figure prize, as the table below shows.

The math: a $1 million prize

These figures are an illustration, not a forecast of anyone’s actual payout or tax bill. Assumptions: a single filer, $100,000 of salary already earned this year with taxes withheld, the standard deduction, and a flat 5% state income tax as a stand-in for your state. 2026 federal brackets used: 10% to $12,400; 12% to $50,400; 22% to $105,700; 24% to $201,775; 32% to $256,225; 35% to $640,600; 37% above. Standard deduction for a single filer: $16,100.

	Hobby prize	Business income
Prize	$1,000,000	$1,000,000
Added federal income tax	$343,830	$336,937
Self-employment tax (Social Security and Medicare)	$0	$37,260
Additional Medicare Tax (0.9%)	$0	$7,411
State income tax (illustrative 5%)	$50,000	$50,000
Total tax on the prize	$393,830	$431,608
What you keep	$606,170	$568,392

Illustration only, not tax advice. Single filer, $100,000 salary, standard deduction, 2026 federal brackets, flat 5% state tax. How the business-income column works:

1. Self-employment tax applies to 92.35% of the prize, or $923,500.
2. The Social Security piece (12.4%) only applies up to the wage base. The 2026 base is $184,500, and the $100,000 salary already used $100,000 of it, leaving $84,500. 12.4% of $84,500 is $10,478.
3. The Medicare piece (2.9%) has no cap. 2.9% of $923,500 is $26,782. Together, $37,260.
4. The Additional Medicare Tax adds 0.9% on self-employment earnings above the $200,000 single-filer threshold, reduced by your wages. That’s 0.9% of $823,500, or $7,411.
5. Half of the self-employment tax is deductible ($18,630), which is why the income tax line is slightly lower than in the hobby column.

At this income, don’t count on the 20% qualified business income deduction to soften it. Athletics and performing arts are specified service trades, which lose the deduction above the income threshold.

The rough rule: on a large prize, expect to keep somewhere between 55 and 60 cents on the dollar, depending on your state and whether it’s business income. In a no-income-tax state, add back the state line.

One more wrinkle for anyone who competes or works in another state: the state where you earned the money may tax it even if you don’t live there. Your home state usually gives a credit for that tax so you aren’t taxed twice on the same dollar. This year’s tournament was filmed at Big Cedar Lodge in Missouri.

Step one: wall off the tax money the day it arrives

With nothing withheld, the entire check looks spendable. It isn’t. In the hobby example, $393,830 of it belongs to the government. Move that amount into a separate account the day the money clears and treat it as gone. Where you park it matters, because you may hold it for months. A high-yield savings account, a Treasury money market fund, or short Treasury bills all work. At an illustrative 4% yield, $390,000 parked for five months earns about $6,500. Treasury interest is also exempt from state income tax. For more on the choice, see where to keep cash above your emergency fund.

Step two: decide when to pay it

The IRS expects tax to be paid as income is earned. A large prize with no withholding can trigger an underpayment penalty, unless you meet a safe harbor:

• Pay at least 90% of this year’s tax through withholding and estimated payments, or
• Pay at least 100% of last year’s total tax (110% if last year’s adjusted gross income was over $150,000)

The second option is the one that matters here. In our example, last year’s tax was about $13,170, and the year’s salary withholding likely already covers it. If so, there’s no penalty even though roughly $390,000 is still owed. The full bill comes due April 15, 2027, and the money earns interest until then. If you can’t confirm the prior-year safe harbor, make a fourth-quarter estimated payment by January 15, 2027. Check your state’s estimated-payment rules separately; they don’t always match the federal ones.

Step three: put the rest to work

Once the tax money is set aside, the remainder is a normal lump sum, and the usual order of operations applies:

1. Fill the tax-advantaged room you have. If the prize is business income, a self-employed retirement plan can shelter a meaningful slice of it. The solo 401(k) vs. SEP-IRA comparison walks through which one fits.
2. Pay off anything costing you real interest, if you still carry it.
3. Invest the rest on a plan you decide before the money arrives. Research has generally found lump-sum investing beats spreading it out over time more often than not, because markets rise more often than they fall. If putting it all in at once would keep you up at night, a fixed schedule over three to six months is a reasonable compromise.

Leave a slice for yourself, too. A fixed share spent without guilt makes the rest of the plan easier to stick to.

What to do this week if a big untaxed payment lands

1. Check whether anything was withheld. Ask the payer which form they’ll file and in which box.
2. Decide, with a CPA if the amount is large, whether it’s hobby or business income.
3. Run the table above with your own salary, state, and filing status.
4. Move the estimated tax into a separate account the day the money clears.
5. Pull last year’s return and check whether the prior-year safe harbor covers you.
6. Calendar January 15 and April 15.
7. Invest the remainder on the schedule you chose in advance.

Sources

1. Internal Revenue Service, Publication 525, Taxable and Nontaxable Income
2. Internal Revenue Service, Instructions for Forms 1099-MISC and 1099-NEC
3. Internal Revenue Service, Topic No. 554, Self-Employment Tax
4. Internal Revenue Service, Topic No. 560, Additional Medicare Tax
5. Internal Revenue Service, Estimated Taxes
6. U.S. Social Security Administration, Contribution and Benefit Base