a "tax" question for those in the know

Reply #22

psykomo — Mon, 18 Aug 2008 21:46:12 GMT

A W....welcome 2D Post (ur root beer)??

My buddy PSYKO did the same DARN THING LOST 5-months INTEREST!

STILL had 2 pay D TX R not get 2 put $$$ in ole ACCOUNT...BUT,

PSYKO has moe money than MOST......little buddy is kinda SLOW

LOL

PSYKOMO

Reply #21

KY Floyd — Sat, 16 Aug 2008 02:53:38 GMT

if it's a fact in the tax code the drawing date is the date ofentitlement, it should be simple for you to copy and paste the code sowe'll all know.

I'd be happy to. Better luck understandng it this time.

A payment of winnings isconsidered made when it is paid, either actually or constructively, tothe winner. Winnings are constructively paid when they are credited to,or set apart for, that person without any substantial limitation orrestriction on the time, manner, or condition of payment.... [ More ]

Reply #20

Stack47 — Fri, 15 Aug 2008 07:18:35 GMT

I was only getting frustrated at the debate Stack was starting, since this isn't a matter of I know you don't.

I found a $2 scratch-off winner in my desk that I believe I got on Christmas 2006. I suppose a once a year lottery player might not have heard the winning multi-million dollar ticket was sold in the same store where they bought their tickets and just happened to find that ticket six months later. Some states give players up to a year to cash their tickets so I imagine many have been... [ More ]

Reply #19

Stack47 — Fri, 15 Aug 2008 06:33:26 GMT

How could you be entitled to your pay before cashing your paycheck?

Paychecks dated after December 31 are considered as income for the next year even though some of it was earned the year before. The question here is when does a lottery prize become income for a tax year.

The IRS gives you 60 days from the drawing, because that's when you become entitled to the prize.

Lottery winnings are other income and until a player validates the ticket and a check is issued, there is no income a... [ More ]

Reply #18

KY Floyd — Fri, 15 Aug 2008 04:58:43 GMT

How could a player be entitled to or get payment before validating the ticket?

How could you be entitled to your pay before cashing your paycheck?

For online games they know exactly when the ticket was sold, and the instant the drawing makes it a winner you're entiltled to your winnings, subject to the time it takes the lottery to go through their procedures and cut the check. Just because you don't present the ticket doesn't mean you couldn't, just as waiting to cash your paycheck doesn... [ More ]

Reply #17

ll123 — Thu, 14 Aug 2008 00:12:39 GMT

i am a tax preparer, to make it simple you will receive a w2G from the lottery in the state where your winnings was won. you will file your taxes in 2009

Reply #16

justxploring — Wed, 13 Aug 2008 23:56:26 GMT

I see your point agree. Of course it's always good to determine what's best for you. I already said that anyone who wins a large amount of money should contact a tax professional. I was only getting frustrated at the debate Stack was starting, since this isn't a matter of I know you don't. The IRS has a rule and it doesn't leave too much up to interpretation unless someone wishes to become argumentative and try to twist its meaning. Stack, in FL you only have a total of 60 days after the date of... [ More ]

Reply #15

AlecWest — Wed, 13 Aug 2008 23:38:48 GMT

justxploring,

Sounds fair ... 25% with a Social Security number, 30% without one. By the way, you earlier said, quote, Anyway, you only pay tax on your prize once, so who cares? You never pay it both years.

Actually, I think EVERYONE should care. If I won a major jackpot in the last two months of this year, the first thing I'd do is visit a tax consultant. And, I'd ask him/her to give me an educated guess on whether taxes for me would go up or whether they'd go down in 2009. I'd claim it... [ More ]

Reply #14

Stack47 — Wed, 13 Aug 2008 20:00:58 GMT

Stack, you can quote me all you want, agree or disagree, but you are not making sense. You can't go to the lottery and say I want the lump sum, but don't pay me.

Nope I'm saying the winners has up to 60 days AFTER validating their ticket to choose either a cash payment or the annuity.

Upon completion of internal validation and claiming procedures established by the Ohio lottery commission, at the time a valid claim is presented for payment of the grand prize jackpot, the estimated cash o... [ More ]

Reply #13

justxploring — Wed, 13 Aug 2008 19:01:50 GMT

Alec, that might depend on the state lottery. The IRS dictates that you must deduct at least 25% if the person is a US citizen with a social security number and 30% if he is not. Some people here have told me that their state deducts tax if the prize is over $600. In Florida it's $5,000. (which is the IRS rule) In any case, all prizes $600 and over are reported to the IRS.

I was very sure I was correct when answering the original question. But just to make sure I was up-to-date on my tax kno... [ More ]

Reply #12

AlecWest — Wed, 13 Aug 2008 17:27:52 GMT

Wow! Thanks for all the helpful advice. If I understand things correctly, this is the scenario that would be copasetic under IRS rules and regulations (and note that I'm discussing a one-time cash-option payout, not an annuity scenario).

If a person wins a jackpot between January 1st and Novenber 1st, 2008, it must be declared as income for the 2008 tax year - regardless of whether the ticket is redeemed in 2008 or 2009. But, if a person wins a jackpot between November 2nd and December 31st,... [ More ]

Reply #11

justxploring — Wed, 13 Aug 2008 16:51:44 GMT

Well, when you win next week, just hold onto the ticket until January and we'll see. You are not interpreting the IRS rule correcting. constructive payment means that the prize was won and the money is available for you. You cannot wait 5 months to collect it and expect to avoid taxes for the year you won. If you win in September and wait until February, you will still have to pay 2008 tax.

If you win during the last 2 months of the year, then you can opt to wait and pay tax for the following... [ More ]

Reply #10

Stack47 — Wed, 13 Aug 2008 15:40:36 GMT

Well, I have to disagree with those who wrote when you get paid. You asked for those in the know and I know. LOL

If what you showed in red is from the IRS, it can't be any clearer than when you get paid and not the drawing date. It could apply to when the ticket is validated but in this scenario the hasn't been validated.

A payment of winnings is considered made when it is paid, either actually or constructively, to the winner. Winnings are constructively paid when they are credited to,... [ More ]

Reply #9

RJOh — Wed, 13 Aug 2008 10:36:47 GMT

If your prize was over $600, the state will send you a W-2G form to be filed with your taxes which will have the tax year on it.

Reply #8

justxploring — Wed, 13 Aug 2008 09:09:33 GMT

Just to add:

Since you did not ask if I wait until Jan or Feb and May is beyond the 60 day period allowed by the IRS, a CPA or Tax Attorney might be able to help you file. Whether or not the IRS would be reasonable and assume that, even if you came forward in Dec, the forms wouldn't be processed on time you'd be paid in Jan 2009 anyway, isn't clear. My guess is that you would not be expected to claim it for 2008, but it isn't really black white.

So the bottom line is - never put a ticket i... [ More ]

Reply #7

justxploring — Wed, 13 Aug 2008 08:31:20 GMT

Well, I have to disagree with those who wrote when you get paid. You asked for those in the know and I know. LOL In this case, since the ticket was purchased in December, you would not have to claim the income for 2008. You have a 60 day window, so it's not always when you claim the ticket. If you won in Sept and claimed it in March, you would not benefit from waiting, since it would be considered 2008 income. Sept does not fall into the 60 day window.

The IRS does this to allow you ample ti... [ More ]

Reply #6

DC81 — Wed, 13 Aug 2008 08:24:20 GMT

I'd tell them time travel .

Reply #5

hennybogan — Wed, 13 Aug 2008 04:47:13 GMT

When the ticket is redeemed.

Another thing to REMEMBER.

If you win say $5,400 in a Pick 4, and you have tickets or scratch offs totaling $5,400 - IT IS A WASH IF YOU ITEMIZE!!! You must keep all of the tickets as receipts in case you are audited.

I know - been there - done that. You can never write off more than what you win.

People think I'm nuts for picking up scratch offs left behind. At tax time, I'm smiling. :-)

p.s. When the lottery commission takes your picture and has... [ More ]

Reply #4

KY Floyd — Wed, 13 Aug 2008 04:29:45 GMT

The I.R.S only look at the date the ticket was claimed not when it was purchased.

What the IRS is interested in is constructive receipt, which is when you become entitled to the money. You become entitled as soon as the drawing makes your ticket a winner, subject to the lottery's validation and check writing policies. In the case of a ticket purchased in late December it's possible that the lottery wouldn't write a check until after January 1st. If you could have had the money before then th... [ More ]

Reply #3

Stack47 — Tue, 12 Aug 2008 16:26:38 GMT

The check will be issued after the ticket is validated so the winner would have no lottery winnings as income for the tax year 2008.

It's possible a jackpot winner could validate the ticket in late December but not get the check until January. They will get a W-2G and it would say in which year the winning considered as income.

contact your lottery office....

That's the best advice because if it's a large jackpot, the winner will probably owe more in taxes and there is a difference b... [ More ]

Reply #2

DC81 — Tue, 12 Aug 2008 10:54:14 GMT

Wow, I was thinking of this exact thing yesterday.... I'm sure I'd be whenever you received the money.

Reply #1

numbergirly — Tue, 12 Aug 2008 10:40:46 GMT

Hi AlecWest....If i'm not mistaking you declare the winnings when you cash in. In other words you would file it on your 2009 taxes. It only counts when you get the money in your hand. The I.R.S only look at the date the ticket was claimed not when it was purchased. That's just my opinion....I could be wrong and I'm sure other LP members will either post their opinions or facts. Just wait for other LP post and compare answers to come up with your own conclusion or, contact your lottery office....... [ More ]

a "tax" question for those in the know

AlecWest — Tue, 12 Aug 2008 10:12:34 GMT

Let's say someone bought a lottery ticket just after Christmas this year but just put it away in a drawer, not checking it. Then in May next year, before the 180-day redemption deadline was reached, they discovered the ticket while cleaning out their drawer - found out it was a winner - and redeemed it.

Question - Does the lottery winner declare the winnings on his 2009 tax return ... or does he have to go back and do an amended return for 2008? In short, do taxes on lottery winnings accrue o... [ More ]