Welcome Guest
Log In | Register )
You last visited December 9, 2016, 8:10 pm
All times shown are
Eastern Time (GMT-5:00)

lottery taxes

Topic closed. 52 replies. Last post 11 years ago by Chewie.

Page 2 of 4
PrintE-mailLink
Avatar
Georgia
United States
Member #6215
August 12, 2004
153 Posts
Offline
Posted: November 13, 2005, 4:44 pm - IP Logged

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

    Avatar
    Sparta, NJ
    United States
    Member #18331
    July 9, 2005
    1977 Posts
    Offline
    Posted: November 13, 2005, 4:55 pm - IP Logged

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

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

    Cheers

    |||::> *'`*:-.,_,.-:*''*:--->>> Chewie  <<<---.*''*:-.,_,.-:*''* <:::|||

    I only trust myself - and that's a questionable choice

      dvdiva's avatar - 8ball

      United States
      Member #2338
      September 17, 2003
      2063 Posts
      Offline
      Posted: November 13, 2005, 4:56 pm - IP Logged

      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 the tickets she bought on Nov 20th. On Jan 10 2006 she finds the lottery tickets and discovered that she won 40 million. She drives down to the lottery office on the same day to claim the prize.

      The real question is do both Bob and Amy have to pay tax for 2005 or 2006?

      Is only Bob liable for tax since he clearly knew he won before claiming?

        Avatar
        Louisville, KY
        United States
        Member #15734
        May 20, 2005
        203 Posts
        Offline
        Posted: November 13, 2005, 5:05 pm - IP Logged

        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!

        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 2006. Hence the phrase, "You must report income in the year that you receive it." Since I RECEIVED the income in 2006, it is subject to tax IN 2006.

        I have prepared many a tax return, and while I'm no professional, this is one area where I DO KNOW what I am talking about.

          Avatar
          Louisville, KY
          United States
          Member #15734
          May 20, 2005
          203 Posts
          Offline
          Posted: November 13, 2005, 5:08 pm - IP Logged

          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 the tickets she bought on Nov 20th. On Jan 10 2006 she finds the lottery tickets and descovered that she won 40 million. She drives down to the lottery office on the same day to claim the prize.

          The real question is do both Bob and Amy have to pay tax for 2005 or 2006?

          Is only Bob liable for tax since he clearly knew he won before claiming?

          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.

            Avatar
            Louisville, KY
            United States
            Member #15734
            May 20, 2005
            203 Posts
            Offline
            Posted: November 13, 2005, 5:15 pm - IP Logged

            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 apparently overpay him all year.

            YOU ARE ONLY SUBJECT TO TAXES ONCE ON ANY PRIZE, UNLESS IS IT AN ANNUITY. THE ANNUITY IS SUBJECT TO TAXES EVERY YEAR YOU RECEIVE AN INSTALLMENT.

              Avatar
              Sparta, NJ
              United States
              Member #18331
              July 9, 2005
              1977 Posts
              Offline
              Posted: November 13, 2005, 5:17 pm - IP Logged

              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 the tickets she bought on Nov 20th. On Jan 10 2006 she finds the lottery tickets and discovered that she won 40 million. She drives down to the lottery office on the same day to claim the prize.

              The real question is do both Bob and Amy have to pay tax for 2005 or 2006?

              Is only Bob liable for tax since he clearly knew he won before claiming?

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

              Cheers

              |||::> *'`*:-.,_,.-:*''*:--->>> Chewie  <<<---.*''*:-.,_,.-:*''* <:::|||

              I only trust myself - and that's a questionable choice

                BaristaExpress's avatar - BaristaExpressMX zpsfb0d8b5d.png
                Magnolia, Delaware
                United States
                Member #18795
                July 20, 2005
                789 Posts
                Offline
                Posted: November 14, 2005, 12:37 am - IP Logged

                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 like stolen scratch off tickets can be deactivated state wide as soon as the lottery office knows about the theft, but not before, so that makes those tickets good until they deactivate them! 

                A drawn game is different! The lottery knows when, where and what time that ticket was sold! Why, because as soon as those numbers are processed and a printout is given to you, all info from that ticket is sent to the lottery office computers to be logged! This is how the lottery knows more than the public as to where and when the ticket was sold! Damn man get it together! This is why everyone here even wonders who won when the winner doesn't step forward soon enough! We may get a little info from the lottery as to what state and what county in that state, but they hardly ever give what store sold it, until the winner has done something to let the lottery know they are the winner! Unlike the West family! Heck remember the Air Force guy, prime example for you!

                I wouldn't brag about doing taxes (even your own as you stated) because you don't even know the difference between an instant game and a drawn game! I never implied anything about any instant game and claiming it and when the taxes are due for that game! I think everyone here knows when you file in April (whatever year) it's for the year before, but apparently not you though! Oh that's right you have done your own taxes.

                Now for your double taxing issue! Your not being taxed twice on the lottery winnings just because you have to pay the additional 13% over and beyond the IRS first withholding of 25% before you see your check! Heck dude with that amount of money you just won your going to be in the top taxable income bracket of 38%! So, what is difference between 38% & 25%?  it's 13% just in case you can't subtract! So now you owe the IRS another 13% on your lottery winnings for the year you won the lottery!

                Also doesn't a lottery game such as MM or PB stop climbing in dollar amounts as soon as they know a winner is out there somewhere? The game gets reset doesn't it? Hell yes it does! Since that happens what makes you think you're now not responsible for the taxes on the money that you legally won in that specific year! The lottery recognizes the fact that their is a winning ticket out there so the game is reset! That makes it a legally won game, regardless of you having the option of claiming it anywhere from 180 to 365 days from the date of the actual drawing! Now read carefully what was said above in this paragraph only! The key words are the game is reset after a winning ticket is known to exist (turned in or not) So that makes it a legally won game in the year the drawing was held! 

                 

                Keep dreaming the impossible dream, it just may come true! Thumbs Up

                  Tenaj's avatar - michellea
                  Charlotte NC
                  United States
                  Member #17406
                  June 18, 2005
                  4053 Posts
                  Offline
                  Posted: November 14, 2005, 1:03 am - IP Logged

                    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.

                  TwitchIn North Carolina you do.  Yes Nodum 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.

                   

                   

                  takeemtothebank

                    dvdiva's avatar - 8ball

                    United States
                    Member #2338
                    September 17, 2003
                    2063 Posts
                    Offline
                    Posted: November 14, 2005, 1:06 am - IP Logged

                    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.html

                    For 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't get the cash until the 15th of January so they won the case against them that they had access to the money. Turns out it has to be unfettered access and if you don't have the actual cash then it's not unfettered.

                    For the current MM drawing it's 46 days between when you could cash it (the 16th) and the first of January. If it rolls then it would be 41 days. If it takes 60 days like Powerball between when you claim and get the cash then it wouldn't matter anyways.

                    You can do a google search for salles800 and read the pdf on the case about unfettered access. 

                      Avatar
                      Louisville, KY
                      United States
                      Member #15734
                      May 20, 2005
                      203 Posts
                      Offline
                      Posted: November 14, 2005, 2:48 am - IP Logged

                      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 like stolen scratch off tickets can be deactivated state wide as soon as the lottery office knows about the theft, but not before, so that makes those tickets good until they deactivate them! 

                      A drawn game is different! The lottery knows when, where and what time that ticket was sold! Why, because as soon as those numbers are processed and a printout is given to you, all info from that ticket is sent to the lottery office computers to be logged! This is how the lottery knows more than the public as to where and when the ticket was sold! Damn man get it together! This is why everyone here even wonders who won when the winner doesn't step forward soon enough! We may get a little info from the lottery as to what state and what county in that state, but they hardly ever give what store sold it, until the winner has done something to let the lottery know they are the winner! Unlike the West family! Heck remember the Air Force guy, prime example for you!

                      I wouldn't brag about doing taxes (even your own as you stated) because you don't even know the difference between an instant game and a drawn game! I never implied anything about any instant game and claiming it and when the taxes are due for that game! I think everyone here knows when you file in April (whatever year) it's for the year before, but apparently not you though! Oh that's right you have done your own taxes.

                      Now for your double taxing issue! Your not being taxed twice on the lottery winnings just because you have to pay the additional 13% over and beyond the IRS first withholding of 25% before you see your check! Heck dude with that amount of money you just won your going to be in the top taxable income bracket of 38%! So, what is difference between 38% & 25%?  it's 13% just in case you can't subtract! So now you owe the IRS another 13% on your lottery winnings for the year you won the lottery!

                      Also doesn't a lottery game such as MM or PB stop climbing in dollar amounts as soon as they know a winner is out there somewhere? The game gets reset doesn't it? Hell yes it does! Since that happens what makes you think you're now not responsible for the taxes on the money that you legally won in that specific year! The lottery recognizes the fact that their is a winning ticket out there so the game is reset! That makes it a legally won game, regardless of you having the option of claiming it anywhere from 180 to 365 days from the date of the actual drawing! Now read carefully what was said above in this paragraph only! The key words are the game is reset after a winning ticket is known to exist (turned in or not) So that makes it a legally won game in the year the drawing was held! 

                       

                      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.

                        BaristaExpress's avatar - BaristaExpressMX zpsfb0d8b5d.png
                        Magnolia, Delaware
                        United States
                        Member #18795
                        July 20, 2005
                        789 Posts
                        Offline
                        Posted: November 14, 2005, 9:13 am - IP Logged

                        Holy chit, your a tax preparer! What a scary thought!ROFL

                        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!

                        Keep dreaming the impossible dream, it just may come true! Thumbs Up

                          BaristaExpress's avatar - BaristaExpressMX zpsfb0d8b5d.png
                          Magnolia, Delaware
                          United States
                          Member #18795
                          July 20, 2005
                          789 Posts
                          Offline
                          Posted: November 14, 2005, 11:35 am - IP Logged

                          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.html

                          For 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't get the cash until the 15th of January so they won the case against them that they had access to the money. Turns out it has to be unfettered access and if you don't have the actual cash then it's not unfettered.

                          For the current MM drawing it's 46 days between when you could cash it (the 16th) and the first of January. If it rolls then it would be 41 days. If it takes 60 days like Powerball between when you claim and get the cash then it wouldn't matter anyways.

                          You can do a google search for salles800 and read the pdf on the case about unfettered access. 

                          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 case and the government won theirs, about what tax year they had to claim their lottery winnings in! Even if they appeal and win the next round, what do you think their attorney bills are going to amount too? It could surpass what they should have just gone and paid in the first place! And not to mention all the headaches and expense it cost them when fighting the government! Our Government has an endless amount of money and top lawyers to use to fight against you with! Besides if the Government lost the next round, they'll just change the tax law or close the loop hole before the next battle! So, Do you think it was worth it in the long run to the Thomas family? I Sure As Hell Don't!

                          Keep dreaming the impossible dream, it just may come true! Thumbs Up

                            Preppy's avatar - scene sunoverlake.jpg
                            Los Angeles County, CA
                            United States
                            Member #2161
                            August 24, 2003
                            30 Posts
                            Offline
                            Posted: November 14, 2005, 1:01 pm - IP Logged

                            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 being paid until next year.”

                             

                            Under prior federal law (until October 1998), the tax treatment of lottery winnings paid as installments depended upon when the winner of the prize was permitted to elect to receive the prize as a lump sum payment or an annuity. If the election was required to be made at the time the ticket was purchased, an individual who chose to receive the prize as an annuity was liable for tax in the year when each installment payment was made. If a lump sum payment was chosen, the entire tax liability occurred in the year when the prize was won. 

                             

                            If the individual has the option of choosing between a lump sum payment and an annuity after the prize has been won, prior federal law required the individual to pay taxes at the time the prize is won, even if the annuity option is chosen.  In short, winners given the option of receiving a lump-sum or an annuity had to pay taxes on the lump-sum, even if they chose payments over time.

                             

                            Congress changed the tax law as part of the appropriations bill for 1999. Their motive was not to help players, but to raise money for Medicare.

                             

                            Under the new law, the I.R.S. will be able to collect in full for the entire life of the annuity.”

                             

                            The statute has only a few requirements, which are easy to meet:

                             

                            1. The winner must be given the option of receiving a lump-sum or a "qualified prize;"
                            2. The winner has to decide within 60 days of becoming entitled to the prize;
                            3. A "qualified prize" is a jackpot that is payable over a period of at least ten years.

                            If all requirements are met, the winner who chooses the "qualified prize" only pays income taxes as the payments are actually received.

                             

                             This provision is effective for prizes to which the taxpayer first becomes entitled after October 21, 1998. The provision also applies to a prize to which the taxpayer became entitled on or before October 21, 1998, if the option is exercised during the 18-month period beginning on July 1, 1999, and ending on December 31, 2000.

                              Avatar
                              Sparta, NJ
                              United States
                              Member #18331
                              July 9, 2005
                              1977 Posts
                              Offline
                              Posted: November 14, 2005, 1:52 pm - IP Logged

                              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 Issues
                              The 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 1992-582, the taxpayer won the New Jersey lottery on 12/29/87 but did not receive payment until 1/22/88. The Tax Court held that winnings were includable in income in 1988, the year in which the payment was actually received. In arriving at its decision, the court rejected the Service's argument that the taxpayer could have driven 68 miles to Trenton in the last two days of the year to demand payment "on the spot." The court considered such a requirement a "substantial limitation," thereby negating the application of the constructive receipt doctrine.

                              Cheers

                              |||::> *'`*:-.,_,.-:*''*:--->>> Chewie  <<<---.*''*:-.,_,.-:*''* <:::|||

                              I only trust myself - and that's a questionable choice