Jackpot and Tax

Reply #8

mathhead — Mon, 27 May 2013 00:40:32 GMT

Yes, if all of your prepaid tax was done with withholding. However, if you (also) made any estimated tax payments, and especially if they were unequal, you might incur an underpayment penalty if you fail to cover the abnormally large tax liability for the quarter (estimated tax payment period) in which the cash jackpot is paid. The operative word is might , a word I used all along. The devil is in the details; this is not the place to discuss all the ins and outs of US taxes, IMHO. My initial co... [ More ]

Reply #7

rdgrnr — Sun, 26 May 2013 22:25:08 GMT

Depends if he's in the Tea Party or supports the Constitution or Freedom and stuff like that too.

Reply #6

Piaceri — Sun, 26 May 2013 22:15:03 GMT

The underpayment penalty kicks in if you owe more at the end of the tax year, but prepaid less taxes this year than your tax liability for last year. Example: Last year your tax liability was $1000. This year, you win a lottery and withholding is $5000. You've already paid in more than last year's tax liability, so even if your tax liability for the lottery win winds up at an additional $3000, you won't incurr penalties. Interest... maybe so, but not penalties.

At least that is how I rem... [ More ]

Reply #5

mathhead — Sun, 26 May 2013 22:06:26 GMT

No! That is exactly why you would not want to pay an extra 14.6% estimated tax. It might easily result in an overpayment because you might do something with the windfall that could offset the additional tax.

Of course, you'll simply get some of it back as a refund. But you lost the earning and purchasing power of that money in the meantime. Ordinarily, that's not a big deal; there are many circumstances where I suggest that people risk overpayment for convenience. But here, we might be talkin... [ More ]

Reply #4

mathhead — Sun, 26 May 2013 21:54:02 GMT

The answer will depend on the particular lottery. The IRS requires only 25% (28% in some unusual cases). There is no requirement that a lottery provide for additional withholding, unlike employers who must follow instructions on Form W-4.

But it's no big deal. If you want to withhold an additional 14.6%, just get a calculator, write a check, and file Form 1040-ES for the appropriate period.

In fact, it might be prudent to do that -- well, properly estimating the additional tax. If you wait... [ More ]

Reply #3

rdgrnr — Sun, 26 May 2013 19:59:27 GMT

Yes.

Reply #2

gogidolim — Sun, 26 May 2013 19:56:27 GMT

It may sound silly but I don't want to spend the rest of the year worrying about paying extra 14.6% next year. And if I open a business and get some tax deduction...see what I mean

Reply #1

rdgrnr — Sun, 26 May 2013 19:35:07 GMT

Can I ask the lottery office to withold the whole 39.6% tax instead of 25%?

Yes, you can ask them to.

Jackpot and Tax

gogidolim — Sun, 26 May 2013 19:30:12 GMT

I am asking the question again. Can I ask the lottery office to withold the whole 39.6% tax instead of 25%? I know this sounds stupid but I'd rather resolve the tax issue ASAP and forget about it.