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Federal Taxes??

Topic closed. 6 replies. Last post 11 years ago by MrBobb.

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New Member
Destin, Florida
United States
Member #25768
November 11, 2005
2 Posts
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Posted: November 11, 2005, 6:35 am - IP Logged

Please don't think I'm stupid or naive but I have a question about lottery winnings and federal taxes. I know if you win the lottery and you take the annuity, you pay taxes on that every year that you recieve it. And I know you pay a tax payment before recieving your money with the lump sum. But my question is, if you win the jackpot and take the lump sum and quit your job are you still required to pay federal taxes every year? I feel kinda dumb asking this question. Please don't be to hard on me. I'm only 18 and just really understanding the tax thing now that I'm on my own.

    Raven62's avatar - binary
    New Jersey
    United States
    Member #17843
    June 28, 2005
    51178 Posts
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    Posted: November 11, 2005, 6:59 am - IP Logged

    Federal Income Tax

    If you take the Winnings in one lump sum you pay Tax when you receive it.

    If you put the Winnings after Taxes in the Bank, the Winnings earn Interest.

    You then pay Tax on the Interest each year. 

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      New Member
      Destin, Florida
      United States
      Member #25768
      November 11, 2005
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      Posted: November 11, 2005, 7:12 am - IP Logged

      Thank you. So if I won, that would mean that I will still be in the high tax bracket every year until my money get low? I think I'm confusing myself. Were you saying that only the interest is taxed and not my total asset amount? I know a financial advisor would explain all of this to me but I haven't won anything, I'm just trying to get an insight on the lottery and how it works.

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        United States
        Member #24339
        October 21, 2005
        23 Posts
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        Posted: November 11, 2005, 7:13 am - IP Logged

        You only have to pay taxes if you're earning money....now my question is...payments or annuity...do the taxes you pay if you win...does any of that go to FICA?  or is all just income tax?

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          Louisville, KY
          United States
          Member #15734
          May 20, 2005
          203 Posts
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          Posted: November 11, 2005, 7:37 am - IP Logged

          The only taxes deducted are Federal & State (if your state taxes them). FICA & Medicare are not deducted, since this is not money earned while working.

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            Louisville, KY
            United States
            Member #15734
            May 20, 2005
            203 Posts
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            Posted: November 11, 2005, 7:43 am - IP Logged

            Thank you. So if I won, that would mean that I will still be in the high tax bracket every year until my money get low? I think I'm confusing myself. Were you saying that only the interest is taxed and not my total asset amount? I know a financial advisor would explain all of this to me but I haven't won anything, I'm just trying to get an insight on the lottery and how it works.

            Basically, what happens is this:

            1. You Win. Start Screaming.

            2. You go to lottery HQ and fill out a claim.

            3. You now have a decision: a) You can take payments over a certain amount of time (i.e., MM, 26 years). With this option, you will pay taxes on EACH & EVERY installment payment you receive, along with taxes on any interest you make by putting the money in the bank, plus regular employment income taxes, or b) You can take one lump sum. With this option, you are taxed on the cash value of the advertised JP, but this is the ONLY time you pay tax on the winnings. Any further taxes you pay would be the result of interest income, which you are taxed on every year. There are other situations in either scenario where you may have to pay additional tax, such as the gift tax. A financial advisor is best, but this is a general outline.

            4. Choose your option, and live life to the fullest.

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              Alabama
              United States
              Member #17830
              June 27, 2005
              309 Posts
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              Posted: November 11, 2005, 8:37 am - IP Logged

              The following threads will provide some useful information:

              "Planning On Winning A Jackpot?" http://www.lotterypost.com/thread/122659

              "Lottery horror stories" http://www.lotterypost.com/thread/121205

               

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