Planning On Winning A Jackpot?

Reply #33

Chewie — Tue, 22 Nov 2005 17:33:51 GMT

No wonder there's no money to fund schools, hospitals, roads, healthcare....The truth of the matter is, billions - BILLIONS - are awarded in funding bills that have no other purpose than to enhance the corruptability of elected officials. If they do not get their wishes, they do not vote for the bill. That is where the real problem is. Vote for your corrupt official, they give you free things. The American way!As far as the rich finding ways to keep their money. That is the purpose of the r... [ More ]

Reply #32

Iesha Kelly — Tue, 22 Nov 2005 15:42:53 GMT

That's depressing. seriously. No wonder there's no money to fund schools, hospitals, roads, healthcare....

Reply #31

sirbrad — Tue, 22 Nov 2005 15:15:03 GMT

Well if that is the case then $3,000 a month for life now looks like about $1,950 a month for life. Still good, but kinda still is bad because of the IRS. They already got their greedy hands on a huge amount, yet they will continue to take it every year? Is that 13% or 10%? As I told the PA lottery, they should raise the jackpot to $5,000 a month for life, as the taxes almost make it not worth playing. Not to mention the ticket cost.

Reply #30

Chewie — Tue, 22 Nov 2005 14:49:27 GMT

Every year, when you receive gambling winnings, you fill out IRS Form W-2G, Certain Gambling Winnings. Individuals who receive lottery winnings won by someone else or members of a group of winners on the same winning ticket must report their winnings on IRS Form 5754. You attach that to your annual income tax return. Is that still confusing

Reply #29

sirbrad — Tue, 22 Nov 2005 14:37:14 GMT

So 13% once then you're done? I would definitely be living off the pricinpal, as I doubt one could accumate enough interest to live off of that. At 5% that is about $115 a month. And that is if you do not touch the money! You would have to be already rich to do that. So there would be no more income after that right

Reply #28

Chewie — Tue, 22 Nov 2005 14:22:22 GMT

Same situation as every other annuity; the value has no bearing.

Reply #27

sirbrad — Tue, 22 Nov 2005 14:17:31 GMT

How about for a game such as lucky for life? I figured that after the IRS got their cut (25%) you would end up with about $27,000 per year? Which in reality is $2,250 a month for life, not $3,000. Would you still have to pay the 13% taxes on that, and only once? That amount is small enough as it is, so that would be ludicrous actually to charge more tax after the already huge hold out. But that is the IRS for you....ludicrous.

Reply #26

sirbrad — Mon, 21 Nov 2005 17:10:09 GMT

Jack Whittaker received a $10 million dollar advance because they did not have all his money for his $111 million, or something like that, lump sum. That was odd to me. How could they not have it? Why even play then? I wonder if that has happened since? If someone wins they damn well better be prepared to pay up what they advertised. They already over-inflate the jackpots way too much as it is.

Reply #25

sirbrad — Mon, 21 Nov 2005 17:06:49 GMT

Yeah that is about what I figured as well. Who pays that type of interest? I think the most I have came acrossed so far was about 10%. Most banks I checked average only about 4% for very large sums of money, if that

Reply #24

Chewie — Wed, 16 Nov 2005 18:13:12 GMT

I have no idea if any state would give you an advance; although I swear I remember reading about it happening (can't find it any more). However, it is not really important. If you have the validated ticket, no state is going to hand you a physical check with that high of an amount. That means you would have to have some place to transfer $185M to. Stand up and say I won (for example) $185M cash, and no doubt, the money machines will be lining up for a shot at that gold. I would (safely) a... [ More ]

Reply #23

modred — Wed, 16 Nov 2005 15:13:49 GMT

The way I calculate it David Edwards received a $41 million lump sum before taxes from his win of $71 million. Factor taxes into it and he gets around $23 million. If he gets $14,000 a day interest then his rate of return is about 23% and that is very very good. I think his broker is from Morgan Stanley or was at the time of the TV show Jackpot: Homes of Lottery Winners .

Reply #22

dvdiva — Mon, 14 Nov 2005 06:50:22 GMT

I'm not aware of any lottery giving an advance on the winnings. If it's in a trust, unless it's the lawyer taking the cash and running, you would have little to worry about. The prize could easily be held up by a lawysuit for a while like that crazy woman who claimed she lost the winning ticket.

Reply #21

rundown99 — Mon, 14 Nov 2005 06:44:11 GMT

I have a questionSuppose you claim your prize. It will take at least two weeks to get the full amount of money. But do they give you some of the money up front so that you can get out of town and rent a car, those type of things. And besides, during those two weeks you are waiting, couldn't someone try to convince the lottery to give them the money instead. Like, what if a greedy relative called up the lottery and tried to convince the lottery that he/she was authorized by you to take the mo... [ More ]

Reply #20

Chewie — Sun, 13 Nov 2005 19:40:24 GMT

I just read the news a lot. Once you filter the political barf, there are things to learn. Especially how corporations functions. Yahoo has a business section where you can spend your life browsing how corporations spread money around between executives, while keeping the base salary the same. I read about one company that hired a guy from one location, to be president of the company. They gave him a hiring bonus, even though he already worked for them. They gave him several million in stoc... [ More ]

Reply #19

dvdiva — Sun, 13 Nov 2005 19:07:43 GMT

Considering how little I make now they could withhold 100% of my W2 income after a MM win and I could care less.

Reply #18

TheGameGrl — Sun, 13 Nov 2005 04:30:24 GMT

Chewie, If I ever win the BIG ONE (MEGABALL), I would consider hiring you to cover my finances. Your ideas make sense! As off center as this sounds, what if a person creates a religious group and thus dodges taxes that way? From what I have read so long as two or more persons gather together to practice their religious beliefs and ceremonies -They may be constitued as a religious group, thus barring them from certain taxation. Actually had a case like this go to court because a family appealed... [ More ]

Reply #17

BaristaExpress — Sun, 13 Nov 2005 04:04:26 GMT

My bad Just6ntlc, I thought you were in favor of taking the annuity! Sorry for misreading your posting.

Reply #16

BaristaExpress — Sun, 13 Nov 2005 04:01:55 GMT

Just6ntlc, Uncle Sam will get a nice sum before you get your check, but in the long run he would get even more over the years if you were to take payments! Everyone knows taxes don't go down, they always go up! So, what would you really pay in taxes (lets say) 15 years into your payments? We really don't know right now, but you could bet your last dollar you are going to be paying a higher tax rate than you are today! This is the prime reason to take the cash option over an annuity

Reply #15

Just6ntlc — Sun, 13 Nov 2005 02:57:21 GMT

It would be a great effort if we would win the lotto jackpot in MM, CA SLP, or PB. I would talk to advisors and pick cash option should we win a lotto jackpot because it is a one time cash option. Uncle Sam would take more income tax if I had chosen payments.

Reply #14

Chewie — Sat, 12 Nov 2005 18:28:48 GMT

I would think that you would have to make an exceptional effort to not make money on a multi-million dollar win. The only way I can think of, is by not claiming it.

Reply #13

Lawrence Connor — Sat, 12 Nov 2005 18:25:13 GMT

this is somewhat confusing and dismaying

Reply #12

BaristaExpress — Sat, 12 Nov 2005 18:19:52 GMT

Sirbrad, No interest earned, No Income Tax on the money! As long as the principle earns you no income, then you can't be taxed on it! As you asked and answered your own question>> Would you still have to pay 13% every year after that? << Answer is NO! Or just once? <<< Yes, on the one time to make up the difference of what wasn't taken when the IRS took their first 25%.

Reply #11

Chewie — Sat, 12 Nov 2005 14:06:20 GMT

I would think that %10 would be about average. But don't forget the expense of money. Lawyers for multi-millionaires don't come cheap. Financial Advisers don't work for peanuts. The going rate for a compentent CPA has to be big numbers. If you have half a brain, you've set up an LLC (or something similar) and the expenses of the LLC are deductible; just like any business. If you follow the Trump rule, you never spend your own money, you borrow and spend some one elses. Then you make the pro... [ More ]

Reply #10

sirbrad — Sat, 12 Nov 2005 05:27:13 GMT

Would you still have to pay 13% every year after that? Or just once? As I said though, I could live off the principle forever, but I would not mind living off the interest. So as long as the interest is higher then the taxes would be?I heard that the one winner of the Powerball on the TV show I posted about here, (David Edwards I think,) accumulates about $14,000 a day interest! That is like $5 million a year! What would be the taxes on that interest? He must have some really good investments, a... [ More ]

Reply #9

BaristaExpress — Sat, 12 Nov 2005 04:34:59 GMT

No interest earned, No Income Tax on the money! As long as the principle earns you no income, then you can't be taxed on it! It's just that because the IRS took the first 25% doesn't mean you don't owe any additional tax, because you do, try like another 13% at the end of the year! With that kind of money your now in the 38% tax bracket! The IRS just gets the bulk of the money owed on your sudden wealth upfront is all.

Reply #8

sirbrad — Sat, 12 Nov 2005 04:00:48 GMT

True but as I said, What if one takes a lump sum, and invests it in a regular checking account that accumulates no interest? What if one was content with spending the principle, and did not want to bother with interest? I know for an absolute fact that I would never spend millions in principle, not even close, plus I have no family really, or dependents. So I would actually have no problem living off the principle. I would not want anyone else getting the money anyway.But it seems that the mor... [ More ]

Reply #7

hypersoniq — Sat, 12 Nov 2005 03:47:59 GMT

in a lump sum distribution, they only pay you once, therefore it is only income once...after that, you only pay taxes on the interest earned, but the principal has already been taxed.And PA does withhold 25%, but if it is over the amount above, you are responsible for paying the other 10% within the tax year of your win.

Reply #6

sirbrad — Sat, 12 Nov 2005 03:43:29 GMT

What if one takes a lump sum, and invests it in a regular checking account that accumulates no interest? Would you still be taxed every year? Do you pay 35% of your winnings every year? If so, that is a crock of crap.Although you would still have far more money than if you would not have won, the tax crap does put a damper on the windfall. I guess it is safe to say that the IRS does not play the lottery, they win everytime someone else does. Besides I doubt they would tax themselves.

Reply #5

sirbrad — Sat, 12 Nov 2005 03:37:52 GMT

Yes I also posted this too awhile back. Good article. The federal witholding here is also 25%, with no state, or local tax.

Reply #4

hypersoniq — Sat, 12 Nov 2005 03:03:20 GMT

top rate is currently 35% this is for income in excess of $163,225in my calculations I overestimate at 40% (makes it easier for quick calculations

Reply #3

Chewie — Fri, 11 Nov 2005 22:33:50 GMT

How did you come up with that? The Bush reduction? It is about to expire and he is out of tokens to maintain it.

Reply #2

CASH Only — Fri, 11 Nov 2005 21:14:54 GMT

The article must be outdated. Federal withholding is now 25%.

Reply #1

LotteryPlayer — Fri, 11 Nov 2005 21:12:12 GMT

Interesting article, Chewie. It's very informative.This paragraph will probably surprise some people: Many lottery winners, especially large prize winners, are often dismayed to learn that, even after their lottery prize is substantially reduced by income tax withholding, they may be required to pay additional income tax. Given the disparity between the 28% federal withholding rate and the 39.6% top marginal income tax rate for individual taxpayers, many large prize winners will have to pay mor... [ More ]

Planning On Winning A Jackpot?

Chewie — Thu, 10 Nov 2005 15:59:44 GMT

Its time for the refresher course: http://www.williamsmullen.com/news/articles_detail/019.htmThe Morning After: Tax Planning for Lottery WinnersA consideration for each dollar you plan on winning.