lottery taxes

Reply #52

Chewie — Wed, 16 Nov 2005 14:49:35 GMT

It is best to hire a very good lawyer and CPA.With a win of $185M, the answer is no. Don't hire a very good lawyer. Hire the BEST lawyer and the BEST CPA money can buy. Get over sheep mentality of being frugal - cheap - and spend some of that money on something worthwile; your future.

Reply #51

Preppy — Wed, 16 Nov 2005 08:35:07 GMT

Question number 2 It is best to hire a very good lawyer and CPA. This is a very messy and very complicated situation. Some states don t tax lottery winnings, while others do tax. The state tax ranges from 2% in Nebraska to 10% in Montana. The tax treatment of lottery winnings depends upon the states involved, your state s tax laws concerning lottery winnings from another state, and the tax reciprocity agreements between or among the states in question. In the case of California, California neit... [ More ]

Reply #50

BaristaExpress — Tue, 15 Nov 2005 21:22:44 GMT

Point taken Chewie. And I also agree with you on the PETA members and supporters

Reply #49

Chewie — Tue, 15 Nov 2005 21:13:48 GMT

I was speaking financially. To keep the most in your pocket mentality. I am rather cold-hearted, more so then most people, but there are areas I care about. Animals would be extremely high on my list (I doubt they are deductable). Paid awards to lost animal volunteers would be high. Something like trips around the world to the top one hundred animal life savers from the combined hurricanes; with special stops at all the zoo's. Find a couple thousand worthy shelters and set up a few million... [ More ]

Reply #48

BaristaExpress — Tue, 15 Nov 2005 20:52:56 GMT

OK Chewie, I have to give praise where praise is due! I highly regard your comments and views on here that are straight forward and make sense! But this last one that you just stated, doesn't sound like you!Isn't charity is a percentage deduction, not a reduction in earned income? << That's CorrectIt would appear to be cheaper to give it to the IRS. << Why in gods name would anyone want to give the IRS money just because it's cheaper to do so? I'm sure as hell not going to! This is why and if y... [ More ]

Reply #47

Chewie — Tue, 15 Nov 2005 19:59:28 GMT

The next year (2006) they best be doing something (like giving to charity) to lower their tax rate or something as not to be paying such a high tax bill!Isn't charity is a percentage deduction, not a reduction in earned income? It would appear to be cheaper to give it to the IRS.

Reply #46

BaristaExpress — Tue, 15 Nov 2005 19:54:51 GMT

OK Dvdiva, That is correct for MM, because of the time constraint! The constrictive receipt law can not be applied! But in the case of the PB winners, you are correct again! They had the time to get everything done in a timely manner and didn't for tax purposes and that just might go to court if the IRS chooses to do so

Reply #45

JAG331 — Tue, 15 Nov 2005 19:52:39 GMT

Yes, yes, yes, BaristaExpress. I always owe the government $1,000 in April, rather than having them owe me money. I'd rather use the government's money for a year, than have them use mine for a year

Reply #44

BaristaExpress — Tue, 15 Nov 2005 19:49:27 GMT

Employers you can that with by having them take an extra 5, 10, 15 bucks out of every check or even more as not to have to pay at the end of the year! But if your employer is withholding to much and you are getting 200 or more back (2 years in a row) in the form of a refund the U.S. Treasury always puts a note in with your refund check asking you to have your employer to make changes to how they calculate your withholding!Now with that said let me tell you what a dear friend asked me one year (m... [ More ]

Reply #43

dvdiva — Tue, 15 Nov 2005 19:48:30 GMT

For the current MM game why file taxes in April for a check recevied in January? It doesn't matter what year it was withheld. It mattered when you get the cash. Since it will take 60 days to recieve the cash any drawing (multistate) in the last 60 days of the year means it would be taxed on the next year since you don't have the cash.Also the highest bracket is 35%.If you are talking about the Powerball winners since they could have had the cash if they didn't delay turning in the ticket the IR... [ More ]

Reply #42

JAG331 — Tue, 15 Nov 2005 19:47:33 GMT

The highest tax bracket is currently 35%. It was lowered from 38% a few years ago.Hold on to your money as long as you can! Don't have them take it right away. Let yourself earn interest until April, not the government

Reply #41

NoCompLotto! — Tue, 15 Nov 2005 19:32:44 GMT

OK, well that I understand... I knew that you would have to make up the extra 13%, I just thought you were saying something like you were going to be taxed twice (at the full amount) on the same JP amount in both years. TYVM for clearing it up. But isn't there a way that when you claim the prize, you can tell them to take out the extra 13% right then and there so you wouldn't have to pay it later? I thought you could, since you can do that at most employers. You can tell them to withhold an addi... [ More ]

Reply #40

BaristaExpress — Tue, 15 Nov 2005 19:29:17 GMT

OK NoCompLotto here it is, You go to the lottery headquarters in 2005 to turn your winning ticket in (right). They make sure it is authentic, you get your lump sum check minus the Fed taxes (right). And the amount they took from said check is 25% (right). Now when you file your taxes in April of 2006 for the tax year of 2005 your going to have to make up the difference of the 13% they didn't take when you received your lump sum check in 2005! Any winner of the lottery is put in the highest tax b... [ More ]

Reply #39

NoCompLotto! — Tue, 15 Nov 2005 19:12:53 GMT

Barista:I was in a bad mood the other day.. please excuse the shouting.... sorry.My point I am trying to make about the double-taxing issue is why would you be taxed on $315M in 2 different tax years? It seems like from that, the way I am understanding it, you would end up paying taxes twice... once in 2005 from when you won, and once again in 2006 when you claimed it. It just doesn't make sense that Uncle Sam would say Congratulations! Now give me my share twice! Please help me to understand... [ More ]

Reply #38

BaristaExpress — Tue, 15 Nov 2005 19:05:04 GMT

When you win, let everyone know the answer the IRS - and subsequent court ruling is. Until then, its like trying to find a heart for the tin man.Besides, it depends on the judge and how he thinks the law should be applied to that particular case! The constructive receipt doctrine has been applied in other contexts with respect to lottery prize winners

Reply #37

NoCompLotto! — Tue, 15 Nov 2005 18:57:45 GMT

This I will do... and finally give my brain a much-needed rest.

Reply #36

Chewie — Tue, 15 Nov 2005 18:52:10 GMT

When you win, let everyone know the answer the IRS - and subsequent court ruling is. Until then, its like trying to find a heart for the tin man.

Reply #35

NoCompLotto! — Tue, 15 Nov 2005 18:38:09 GMT

Only the lord knows... IRS publication 17 is my friend, and that is what I have been consulting all through this topic. My theory, which I stated before, is You are taxed on all income in the year you receive it, whether actively or constructively. I remain behind my position from earlier... the simplest one. Claim in 2005, pay in 2005... Claim in 2006, pay in 2006. I'm not budging from this because it makes no sense to pay a tax on income you have not yet received

Reply #34

Chewie — Tue, 15 Nov 2005 18:36:53 GMT

Naw. No one will every give up. Just change the rules, and start again. Same question, rephrased. Same answer regardless.

Reply #33

BaristaExpress — Tue, 15 Nov 2005 18:35:49 GMT

The statement that the law is one thing, the ruling of the court trumps the law still holds true today, even with the new laws of 10-21-98! Court rulings will always trump the law, unless it's ruling is shown or proved to be unconstitutional, then the law on the books will prevail

Reply #32

pigsNtrees — Tue, 15 Nov 2005 18:34:16 GMT

Good lord this makes my head spin ala Linda Blair. Have we came to an consensus on this yet

Reply #31

Chewie — Tue, 15 Nov 2005 18:34:09 GMT

Then the courts over rule them again. Thats why America has a Constitution. To protect us from lawmakers. The courts will always have the upper hand.

Reply #30

Preppy — Tue, 15 Nov 2005 18:27:16 GMT

Interesting post - especially for the first time. Thanks. The time available (restraints) to collect the winnings seem have an enormous bearing on the tax issue, and the basic Constructive Receipt mentality. Under normal circumstances, it would appear, you pay in the year won. However, should that timeline be unreasonable, your tax base is the following year. The law is one thing, the ruling of the court trumps the law. Sounds logical, however, would this court ruling, which occurred befor... [ More ]

Reply #29

Chewie — Mon, 14 Nov 2005 18:52:30 GMT

Interesting post - especially for the first time. The time available (restraints) to collect the winnings seem have an enormous bearing on the tax issue, and the basic Constructive Receipt mentality. Under normal circumstances, it would appear, you pay in the year won. However, should that timeline be unreasonable, your tax base is the following year. The law is one thing, the ruling of the court trumps the law.Other Constructive Receipt IssuesThe constructive receipt doctrine has been appli... [ More ]

Reply #28

Preppy — Mon, 14 Nov 2005 18:01:53 GMT

I have been following this very interesting topic for the last few days and have decided to post my comments, actually my first post. Under federal tax law, as it existed up until October 1998, lotteries had to be extremely careful about offering winners any choice in how the prize was paid. Tax law had developed the constructive receipt rule: You have to pay income tax this year on money that has been put aside for you, money that you can collect whenever you want, even if you put off bein... [ More ]

Reply #27

BaristaExpress — Mon, 14 Nov 2005 16:35:12 GMT

Thanks Dvdiva for the informative article! That was great reading! But there is one thing though, it's what happened in the end! And here it is, right here >>>> Because the plaintiffs have not shown that they are entitled to a tax refund we believe that the district court was correct in granting summary judgment in favor of the government.Eloise Thomas is identified as a plaintiff in this action because she filed a joint tax return with Roy Thomas. This tells me that the Thomas family lost their... [ More ]

Reply #26

BaristaExpress — Mon, 14 Nov 2005 14:13:03 GMT

Holy chit, your a tax preparer! What a scary thought!AND YES, I DO KNOW THE DIFFERENCE BETWEEN A DRAW INSTANT GAME. PLEASE DO NOT INSULT MY INTELLIGENCE.I don't have to insult anything of the sort, because you already did by giving your scenario of the instant scratch game, when no reference was implied to any such game in any of this thread! Just by your lack of using common sense and your inability of simple reading/comprehension skills explains it all

Reply #25

NoCompLotto! — Mon, 14 Nov 2005 07:48:53 GMT

You are missing my entire point.IF YOU CASH THE TICKET IN 2005, YOU PAY 2005 TAXES. IF YOU CASH THE TICKET IN 2006, YOU PAY 2006 TAXES, REGARDLESS OF THE DRAW DATE!!!!!!!AND YES, I DO KNOW THE DIFFERENCE BETWEEN A DRAW INSTANT GAME. PLEASE DO NOT INSULT MY INTELLIGENCE.As for the I have no idea what I'm doing when it comes to taxes crap, ASK MY CLIENTS. NOT ONE OF THEM HAS HAD ANY TROUBLE OVER THE 6 YEARS I HAVE DONE THEM.

Reply #24

dvdiva — Mon, 14 Nov 2005 06:06:45 GMT

Turns out the correct answer is how long it takes between the time you claim the ticket and get the actual cash.http://bojack.org/mt-arc/002491.htmlFor Powerball it's 60 days. For MM I don't know. Any drawing within that time can be claimed on next year's taxes.So if a drawing occurs on Dec 1 and it takes 45 days to get the actual cash there would be no way you could get access to that cash if you had gone to the lottery office on Dec 2. There was another case that someone won on dec 1 but didn... [ More ]

Reply #23

Tenaj — Mon, 14 Nov 2005 06:03:43 GMT

In North Carolina you do. um huh. You pay double taxes. They raise so much sand about the lottery being bad but have their hand stuck out when you win. SC once had a game called Carolina Five that was tax free in their state. If you won and lived in NC you still had to pay NC taxes as well.

Reply #22

BaristaExpress — Mon, 14 Nov 2005 05:37:43 GMT

Instant scratch off tickets are different than a ball drawn lottery! So the scratch game ends when it ends and you claim the money from the instant game before that date, of course your going to pay the taxes at that time! There is no way to tell when that one ticket was sold since it's an instant scratch ticket! The only time the lottery knows anything about a scratch off ticket is when the retailer scans that ticket to validate that ticket! The lottery office knows nothing until then! Just lik... [ More ]

Reply #21

Chewie — Sun, 13 Nov 2005 22:17:27 GMT

You don't want an aswer, you want to argue. Pay a lawyer. Let him charge you by the hour for indicision.

Reply #20

NoCompLotto! — Sun, 13 Nov 2005 22:15:19 GMT

OK, Here's another proposal:You buy a $10 instant ticket with a $1M top prize. The game goes on sale on 12/31/2004, you buy the ticket on 1/1/2005. You win the top prize of $1M. You CLAIM the ticket on 1/2/2006, 174 days before validations end.Barista: Do you honestly think that I would have to pay taxes for 3 YEARS (sale year: 2004, buy/win year: 2005, claim year 2006)? According to your previous stories, this is what your assumption would be. Uncle Sam must REALLY like you, since you apparentl... [ More ]

Reply #19

NoCompLotto! — Sun, 13 Nov 2005 22:08:46 GMT

The answer to The real question is do both Bob and Amy have to pay tax for 2005 or 2006? is: 2006. Neither of them are liable for 2005 lottery prize taxes. They are only liable for 2006 lottery prize taxes.

Reply #18

NoCompLotto! — Sun, 13 Nov 2005 22:05:44 GMT

Barista...If you made money for 2006 in 2007, would you pay it in both years? NO! You are NEVER subject to double taxation on the same income. Regardless of what the news media says, read IRS Publication 17 entitled Your Federal Income Tax. One of the most popular phrases in that book is You must report income in the year that you receive it. If I won anything in 2005, AND RECEIVED IT IN 2005, I am subject to taxes in 2005. If I win in 2005, AND RECEIVE IT IN 2006, I am subject to taxes in 2... [ More ]

Reply #17

dvdiva — Sun, 13 Nov 2005 21:56:48 GMT

Well that's hardly an answer (from me anyways). Who knows what would happen. Even having your answer by a volunteer from the IRS help line (1 800 829 1040) may not give you what the IRS will try to pull if you win. I'll give two examples.Bob finds out he is a lottery jackpot winner on Dec 1 of 2005. He wins 20 million from his state lottery. He decides to wait until Jan 10 2006 to file for the check from the lottery on advise from a tax lawyer he saw in mid December.Amy is ditz. She misplaced th... [ More ]

Reply #16

Chewie — Sun, 13 Nov 2005 21:55:06 GMT

What you do, is, get the best lawyer money can buy.

Reply #15

wantin2win — Sun, 13 Nov 2005 21:44:02 GMT

Thank you - this is very enlightening. Now I'll know what to do when I win the big one.

Reply #14

dvdiva — Sun, 13 Nov 2005 21:16:24 GMT

I'm thinking it's when you get the money not the drawing date. Otherwise you wouldn't have one year or 180 days to claim. Otherwise anyone waiting until after April 15 to claim a prize from the previous year would be hit with penalties for not filing on income they didn't know about if it was a ticket they forget to check.

Reply #13

Chewie — Sun, 13 Nov 2005 21:05:06 GMT

Probably because the MM employees know as much about taxes as you and I do. Did you read the link I provided? From some one who knows:Other Constructive Receipt IssuesThe constructive receipt doctrine has been applied in other contexts with respect to lottery prize winners. Reg. 1.451-2(a) provides, in pertinent part, that income is not constructively received if the taxpayer's control of its receipt is subject to substantial limitations or restrictions. (Emphasis added). In Paul, TCM 1992-58... [ More ]

Reply #12

dvdiva — Sun, 13 Nov 2005 20:48:37 GMT

If I could read and understand that than I'd probably be in law school. I was hoping for the cliff notes version.

Reply #11

BaristaExpress — Sun, 13 Nov 2005 20:09:10 GMT

OK NoCompLotto, if that was true, why was it when the last MM draw that was held on Dec 31, 2004 (a Friday) the MM officals even said if there was a winner that night for that draw it was going to have to be claimed on that years taxes! That would mean the 2004 tax year! That was even stated on the news that night with that news stations so called tax expert! The reason is, Because that's the year the lottery was held in and won in, so the taxes will be due for that TAX YEAR, PERIOD

Reply #10

BaristaExpress — Sun, 13 Nov 2005 19:55:21 GMT

Besides dvdiva, when you call the IRS with your questions, the answers you'll Receive Will Be FREE! Hell, even the phone call is FREE! Just dial their 1-800 number, how hard is that

Reply #9

NoCompLotto! — Sun, 13 Nov 2005 19:54:38 GMT

You are NOT TAXED UNTIL YOU CLAIM THE PRIZE. It is not possible for the government to track down the winner before the lottery does. The day you claim the prize is the year you are responsible for it. If you claim the prize on 1/2/2006, your winnings are taxed in tax year 2006, NOT 2005, regardless of the draw date. Any lottery official will tell you this.

Reply #8

BaristaExpress — Sun, 13 Nov 2005 19:47:58 GMT

Dvdiva, I swear you have a very hard head! Yes, the IRS is going to get his taxes from your check when you claim it in 2006, but you are going to be required to claim it on your 2005 tax year, because that's the year you won the lottery! Also the IRS is going to make sure you pay the additional 13% tax he didn't collect when they took the first 25% as a installment payment on the whole 38% you would owe for the tax year 2005! This is why it's going to be claimed on your 2005 tax year when you fi... [ More ]

Reply #7

Chewie — Sun, 13 Nov 2005 19:45:30 GMT

The answer is in the link I provided. You have to read. (Nothing about taxes is siimple.) then contact the lawyers who are considered fellows in tax law. Every one else is a wannabe.

Reply #6

dvdiva — Sun, 13 Nov 2005 19:04:50 GMT

I would like to know the answer to the first point. If you don't get the money until 2006 do you have to pay tax on it for 2005 or 2006.At least I live in WA and play MM in WA so the state tax question is irrelevent.

Reply #5

Chewie — Sun, 13 Nov 2005 17:41:19 GMT

I haven't heard of two months, but one month is the number published in NJ. I assume that is the collect the winnings from all the states timeline (clerks transfer to states, state transfer to winning state, etc.) and to get the tax people on board for the winfall.Personally, the timeline doesn't bother me. I would claim immediately, to start the process of transfer. Get a loan, using the publlicity and Lottery Director as validation. Spend the month consulting with those smarter then me.... [ More ]

Reply #4

Todd — Sun, 13 Nov 2005 17:20:04 GMT

I suppose technically that's true, although I'm not sure everyone understands how complicated it can be.For example, if you were to buy a winning lottery ticket in a state that has higher taxes than your state of residence, you would pay your home state tax rate on the winnings in your state, plus you would pay the difference between the two states to the state you bought it in. Thus, the net state taxes you pay is the higher rate of the two states.

Reply #3

ryanm — Sun, 13 Nov 2005 17:12:57 GMT

I believe you pay the taxes in the state where you bought the ticket. Rest assured, you will never have to pay taxes in more than one state for the same income.

Reply #2

Lawrence Connor — Sun, 13 Nov 2005 17:06:10 GMT

Does it always take two months to be able to collect

Reply #1

Chewie — Sun, 13 Nov 2005 17:03:27 GMT

1. https://www.lotterypost.com/threads122659p1.htm2, Doesn't matter untl you win.

lottery taxes

runnideer — Sun, 13 Nov 2005 14:30:53 GMT

Two questions 1. Your lottery ticket is a November (2005) drawing. You realize the following day you are the grand prize winner. It will take until the following January (2006) to get everything order to collect your winnings. Are you taxed for 2005 income or at the time you recieve your payment?2. If you do not live in state ( collect taxes on lottery winnings) which you brought the tticket, do you pay taxes to both that state and the one you live in?Thanks