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Audit: Stores buying Michigan lottery tickets from players

Michigan LotteryMichigan Lottery: Audit: Stores buying Michigan lottery tickets from players
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DETROIT, Mi. — Some Michigan stores that sell lottery tickets are hitting the jackpot by buying winning tickets from desperate players at a discount, according to auditors who are urging a crackdown on the illegal practice.

Lottery players who owe back taxes or other debts don't want the state to learn their identity. So they're probably selling winning tickets back to retailers for less than what they're worth, the audit found.

An audit released Tuesday said 37 store owners turned in winning tickets worth nearly $3.6 million in 2012 and 2013. One retailer collected 107 prizes worth $346,312 last year.

Six store owners didn't report $509,211 in lottery winnings on their 2012 tax forms. No stores were named in the report.

"We recommend that the (Lottery) Bureau sufficiently identify and investigate lottery retail owners who repurchased winning lottery tickets, likely at a discount," the Office of the Auditor General said.

A message seeking comment wasn't immediately returned by a lottery spokesman. But in response to the audit, officials said 11,000 businesses sell Michigan lottery games, and discounting is an issue "for virtually all state lotteries."

Nonetheless, it is pledging to be more aggressive by automatically investigating any retailer that turns in more than 20 tickets a year worth more than $20,000. The Lottery Bureau also told auditors that it will ask winners to disclose how they got a ticket.

Officials said 13 retailers were "disciplined" during the audit period.

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41 comments. Last comment 2 years ago by Stack47.
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MzDuffleBaglady's avatar - Lottery-018.jpg

United States
Member #81314
October 16, 2009
19447 Posts
Offline
Posted: November 18, 2014, 11:31 pm - IP Logged

Some Michigan stores that sell lottery tickets are hitting the jackpot by buying winning tickets from desperate players at a discount, according to auditors who are urging a crackdown on the illegal practice.

Lottery players who owe back taxes or other debts don't want the state to learn their identity. So they're probably selling winning tickets back to retailers for less than what they're worth, the audit found.

An audit released Tuesday said 37 store owners turned in winning tickets worth nearly $3.6 million in 2012 and 2013. One retailer collected 107 prizes worth $346,312 last year.

Six store owners didn't report $509,211 in lottery winnings on their 2012 tax forms. No stores were named in the report.

"We recommend that the (Lottery) Bureau sufficiently identify and investigate lottery retail owners who repurchased winning lottery tickets, likely at a discount," the Office of the Auditor General said.

A message seeking comment wasn't immediately returned by a lottery spokesman. But in response to the audit, officials said 11,000 businesses sell Michigan lottery games, and discounting is an issue "for virtually all state lotteries."

Nonetheless, it is pledging to be more aggressive by automatically investigating any retailer that turns in more than 20 tickets a year worth more than $20,000. The Lottery Bureau also told auditors that it will ask winners to disclose how they got a ticket.

Officials said 13 retailers were "disciplined" during the audit period.

Wow!!!!!

The Struggle is real!

    RJOh's avatar - chipmunk
    mid-Ohio
    United States
    Member #9
    March 24, 2001
    19901 Posts
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    Posted: November 18, 2014, 11:45 pm - IP Logged

    "We recommend that the (Lottery) Bureau sufficiently identify and investigate lottery retail owners who repurchased winning lottery tickets, likely at a discount," the Office of the Auditor General said.

    The Office of the Auditor General didn't say who was going to pay for the identification and investigation work.  Does he expect the lottery to pay for it out of their profits and pass the benefits to other state departments who job it is to do that?

     * you don't need to buy more tickets, just buy a winning ticket * 
       
                 Evil Looking       

      Avatar
      Kentucky
      United States
      Member #32652
      February 14, 2006
      7344 Posts
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      Posted: November 19, 2014, 12:42 am - IP Logged

      "We recommend that the (Lottery) Bureau sufficiently identify and investigate lottery retail owners who repurchased winning lottery tickets, likely at a discount," the Office of the Auditor General said.

      The Office of the Auditor General didn't say who was going to pay for the identification and investigation work.  Does he expect the lottery to pay for it out of their profits and pass the benefits to other state departments who job it is to do that?

      They already know which retailers and forgot it's not against the law to purchase a lottery ticket for less than face value. I never did it, but if someone offered me a legitimate pick-4 $5000 winning ticket for $2000, I probably would.

      There sure are lots of state agencies and reporters trying to get their five minutes of fame on something that is apparently legal.

        LottoMetro's avatar - Lottery-024.jpg
        Happyland
        United States
        Member #146344
        September 1, 2013
        1131 Posts
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        Posted: November 19, 2014, 1:13 am - IP Logged

        They already know which retailers and forgot it's not against the law to purchase a lottery ticket for less than face value. I never did it, but if someone offered me a legitimate pick-4 $5000 winning ticket for $2000, I probably would.

        There sure are lots of state agencies and reporters trying to get their five minutes of fame on something that is apparently legal.

        Perhaps discounting is legal in the general sense, but it is still against lottery regulations which makes it illegal in terms of the retailer's agreement. So essentially, a breach in contract that would leave the door open for a lawsuit from the state. Not to mention aiding tax evasion, but that would be difficult to prove.

        This takes the cake though:

        Six store owners didn't report $509,211 in lottery winnings on their 2012 tax forms.

        If they are not reporting winnings on their taxes (regardless how they acquired those "winnings"), we all know what happens next.

        If the chances of winning the jackpot are so slim, why play when the jackpot is so small? Your chances never change, but the potential payoff does.
        If a crystal ball showed you the future of the rest of your life, and in that future you will never win a jackpot, would you still play?

        2017: 0% (0 tickets)
        P&L % = Total Win($)/Total Wager($) - 1

          Get paid's avatar - Lottery-062.jpg
          texas
          United States
          Member #152324
          February 11, 2014
          168 Posts
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          Posted: November 19, 2014, 10:34 am - IP Logged

          The only way they can combat this is to make it illegal until then people owing the goverment thousands in taxes,the same in chid support,will continue to do it,because its not illegal.

            noise-gate's avatar - images q=tbn:ANd9GcR91HDs4UJhjxO7cmeMQWZ5lB_FOcMLOGicau4V74R45tDgPWrr
            Bay Area - California
            United States
            Member #136477
            December 12, 2012
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            Posted: November 19, 2014, 11:52 am - IP Logged

            ..13 Retailers were " disciplined" during the Audit. Oh Boy that had to hurt!!

            *Scene at home..

            Wife: Honey l know you did not get much sleep last night due to your meeting with the Auditors- how did that go?

            Husband: Rather well my love- we were disciplined! 

            Wife: Well what exactly does that mean?

            Husband:Well l interpreted it to mean that our actions have caught the attention of the lottery Commission. .

            Wife: So we stop altogether? 

            Husband: No, just be cautious moving forward....that's all. 

            Wife: Well that must come as a relief. 

            People who say it cannot be done should not interrupt those who are doing it- George Bernard Shaw.

              Avatar

              United States
              Member #122691
              February 6, 2012
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              Posted: November 19, 2014, 4:53 pm - IP Logged

              The State better watch it before the retailers cut them off at the knees, that's who holds the real power with the lottery. Most if not all stores could stop selling lottery tomorrow and it would have little to no effect on their bottom lines. If you sell a $1 bag of chips you make 50 cents before all expenses. In comparison if you sell a $1 lottery ticket, you make 6 cents before expenses. The State is getting their money, the government is getting their taxes which they really should not since virtually no other country taxes their lotteries. This is a perfect example of people getting greedy and shooting themselves in the foot. They need the retailers a whole lot more than the retailers need them. If 70% of the retailers got together and boycotted them for a month, the lottery office would be shuttered.

                Avatar

                United States
                Member #122691
                February 6, 2012
                330 Posts
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                Posted: November 19, 2014, 5:03 pm - IP Logged

                Perhaps discounting is legal in the general sense, but it is still against lottery regulations which makes it illegal in terms of the retailer's agreement. So essentially, a breach in contract that would leave the door open for a lawsuit from the state. Not to mention aiding tax evasion, but that would be difficult to prove.

                This takes the cake though:

                Six store owners didn't report $509,211 in lottery winnings on their 2012 tax forms.

                If they are not reporting winnings on their taxes (regardless how they acquired those "winnings"), we all know what happens next.

                This is what makes no sense. If you win anything over $500 it has to be claimed at the Lottery Office and taxes are taken out before hand, anything under that can be cashed by the retailer and that is not taxable, therefore that $509,211 had to be lottery winnings that were not taxable to begin with, prizes under $500, therefore the government would be illegally trying to get tax money that they were not entitled to in the first place. 

                If I won a $100,000 in prizes from scratch-off tickets, as long as they are under $500, I am under no obligation to report my winnings to anyone, just like if you went to the casino, put $10 in the machine and won $100. If A wants to sell his winning ticket to B for a discount, then that is their business.

                  LottoMetro's avatar - Lottery-024.jpg
                  Happyland
                  United States
                  Member #146344
                  September 1, 2013
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                  Posted: November 19, 2014, 5:33 pm - IP Logged

                  This is what makes no sense. If you win anything over $500 it has to be claimed at the Lottery Office and taxes are taken out before hand, anything under that can be cashed by the retailer and that is not taxable, therefore that $509,211 had to be lottery winnings that were not taxable to begin with, prizes under $500, therefore the government would be illegally trying to get tax money that they were not entitled to in the first place. 

                  If I won a $100,000 in prizes from scratch-off tickets, as long as they are under $500, I am under no obligation to report my winnings to anyone, just like if you went to the casino, put $10 in the machine and won $100. If A wants to sell his winning ticket to B for a discount, then that is their business.

                  If I won a $100,000 in prizes from scratch-off tickets, as long as they are under $500, I am under no obligation to report my winnings to anyone, just like if you went to the casino, put $10 in the machine and won $100.

                  This is simply incorrect. Gambling winnings are taxed as regular income. This means that if you won $100,000 during the year, you owe taxes on $100,000, regardless the size or frequency of your individual wins. The lottery/casino is only required by law to withhold a certain percent above a certain amount, but this doesn't mean you won't owe additional (or less) taxes on the winnings. And technically, any income over $0 after deductions is taxable.

                  If the chances of winning the jackpot are so slim, why play when the jackpot is so small? Your chances never change, but the potential payoff does.
                  If a crystal ball showed you the future of the rest of your life, and in that future you will never win a jackpot, would you still play?

                  2017: 0% (0 tickets)
                  P&L % = Total Win($)/Total Wager($) - 1

                    Avatar
                    Kentucky
                    United States
                    Member #32652
                    February 14, 2006
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                    Posted: November 19, 2014, 5:41 pm - IP Logged

                    Perhaps discounting is legal in the general sense, but it is still against lottery regulations which makes it illegal in terms of the retailer's agreement. So essentially, a breach in contract that would leave the door open for a lawsuit from the state. Not to mention aiding tax evasion, but that would be difficult to prove.

                    This takes the cake though:

                    Six store owners didn't report $509,211 in lottery winnings on their 2012 tax forms.

                    If they are not reporting winnings on their taxes (regardless how they acquired those "winnings"), we all know what happens next.

                    Without much proof, other state agencies are assuming all the tickets are being cashed at a discount. We really can't expect buyers to pay the winner the full value of a ticket before state and federal taxes are deducted. But that doesn't change the fact the taxes will eventually be deducted so it's not the tax people complaining.

                    Either I missed the memo saying our personal income tax returns which includes our SS number, are now public record or there is no way of knowing if the lottery winnings were on the tax forms or not. I know what happens when a W2-G is omitted, but that's between the person and the IRS and not someone writing an article.

                    The person writing the article probably got the tax informations from a state agency without ever questioned how that agency got it.

                      Coin Toss's avatar - shape barbed.jpg
                      Zeta Reticuli Star System
                      United States
                      Member #30470
                      January 17, 2006
                      10392 Posts
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                      Posted: November 19, 2014, 8:07 pm - IP Logged

                      This sounds like a bizarre twist on the old " I can't cash the ticket I'm an illegal" scam, except that there is a payoff.

                      Sounds like some Michigan lottery retailers are the "J C Wentworth" of lotto!

                      Those who run the lotteries love it when players look for consistency in something that's designed not to have any.

                      Lep

                      There is one and only one 'proven' system, and that is to book the action. No matter the game, let the players pick their own losers.

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                        February 6, 2012
                        330 Posts
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                        Posted: November 19, 2014, 9:40 pm - IP Logged

                        If I won a $100,000 in prizes from scratch-off tickets, as long as they are under $500, I am under no obligation to report my winnings to anyone, just like if you went to the casino, put $10 in the machine and won $100.

                        This is simply incorrect. Gambling winnings are taxed as regular income. This means that if you won $100,000 during the year, you owe taxes on $100,000, regardless the size or frequency of your individual wins. The lottery/casino is only required by law to withhold a certain percent above a certain amount, but this doesn't mean you won't owe additional (or less) taxes on the winnings. And technically, any income over $0 after deductions is taxable.

                        Once again, still not true, only technically. If I win scratchoffs or jackpots that are under $500, I will get cash in my hand from the retailer and no one is the wiser. If you are not intelligent, you will deposit in the bank and file it with the IRS, but that is your choice and your problem. You can go to the casino everyday, win $100 and there is no documentation or paper trail which will require you to pay any taxes, and that is reality. If I win $100 on a scratchoff, I walk in, hand the retailer the ticket, he verifies it, gives me my cash and our business is concluded. 

                        If I don't deposit the money, and never had to fill out any forms when I collected winnings, how exactly are you going to prove what I won and collect taxes on it?

                          LottoMetro's avatar - Lottery-024.jpg
                          Happyland
                          United States
                          Member #146344
                          September 1, 2013
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                          Posted: November 19, 2014, 10:08 pm - IP Logged

                          Once again, still not true, only technically. If I win scratchoffs or jackpots that are under $500, I will get cash in my hand from the retailer and no one is the wiser. If you are not intelligent, you will deposit in the bank and file it with the IRS, but that is your choice and your problem. You can go to the casino everyday, win $100 and there is no documentation or paper trail which will require you to pay any taxes, and that is reality. If I win $100 on a scratchoff, I walk in, hand the retailer the ticket, he verifies it, gives me my cash and our business is concluded. 

                          If I don't deposit the money, and never had to fill out any forms when I collected winnings, how exactly are you going to prove what I won and collect taxes on it?

                          In your original post, you said, "that is not taxable," in reference to a large accumulation of small wins.

                          I showed the contrary, and that was really the only purpose of my post. If you win any sum of measurable amount you will have to put it through the system at some point, and that is where they would nab you. The saying goes, even drug dealers pay their taxes. The IRS is not one to mess with.

                          You, like most casino/lottery players, may win $100 here and there, but at the end of the day, are the net winnings enough to exceed your deductions and actually trigger a tax? Probably not. Again, I am referring to significant cumulative winnings over the year.

                          P.S. Most casinos now require IDs (either player's card or DL), and therefore a paper trail would likely exist even on small wins. But as I said above, small wins are irrelevant if they don't exceed your deductions, so I digress.

                          If the chances of winning the jackpot are so slim, why play when the jackpot is so small? Your chances never change, but the potential payoff does.
                          If a crystal ball showed you the future of the rest of your life, and in that future you will never win a jackpot, would you still play?

                          2017: 0% (0 tickets)
                          P&L % = Total Win($)/Total Wager($) - 1

                            Avatar

                            United States
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                            February 6, 2012
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                            Posted: November 19, 2014, 11:23 pm - IP Logged

                            In your original post, you said, "that is not taxable," in reference to a large accumulation of small wins.

                            I showed the contrary, and that was really the only purpose of my post. If you win any sum of measurable amount you will have to put it through the system at some point, and that is where they would nab you. The saying goes, even drug dealers pay their taxes. The IRS is not one to mess with.

                            You, like most casino/lottery players, may win $100 here and there, but at the end of the day, are the net winnings enough to exceed your deductions and actually trigger a tax? Probably not. Again, I am referring to significant cumulative winnings over the year.

                            P.S. Most casinos now require IDs (either player's card or DL), and therefore a paper trail would likely exist even on small wins. But as I said above, small wins are irrelevant if they don't exceed your deductions, so I digress.

                            I made it pretty clear in my original post that I was talking about wins in amounts under $500 that would not be subject to tax or any kind of documentation. Casinos kind of sort of require IDs but that has no bearing on what you win and if it is taxed. You don't have to have a player's card as a requirement at any casino that I have ever been to and even then I have no idea how much information the player's cards have and if the IRS even has the right to the access of the info on them seeing as most casinos are owned by the Native Americans, not to mention that if the casinos divulged that information, that would pretty much be the end of their business.