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Should PB MM be tax-free/lump sum

Topic closed. 48 replies. Last post 9 years ago by konane.

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Should PB and MM be tax free, lump sum actual amount payout?

Yes! [ 63 ]  [82.89%]
No. [ 4 ]  [5.26%]
I don't care as long as I win it. [ 9 ]  [11.84%]
Total Valid Votes [ 76 ]  
Discarded Votes [ 1 ]  
AuntiePat's avatar - animaniacs10
Just outside of Cleveland, OH
United States
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August 3, 2007
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Posted: August 9, 2007, 10:43 pm - IP Logged

In the good ol US to expect anything not to be taxed is a little unrealistic but that would

be too much like right and we know that will never happen.  On a more realistic note the

taxes should definetly be reduced.  I think its approx 25% just for Federal and that is

just way too high.  They win the lottery everytime somebody wins

Actually the tax for the Feds is closer to 35% which they will tell you when your winnings are  transferred into  your account.  Had a friend who won an OH Lotto Jackpot many years ago with a group from his work and they informed him and each of the others that he/they would owe more at the end of the year to the Feds.  Their excuse is that if a person should make a large contribution to charity that first year--then it would significantly  reduce their tax responsibility so they underwithhold on the basis of the if-come.  What a CROCK--I mean, my church and my daughter's church will both benefit were I to ever win-- but we're not talking 20% of the distribution.

 I'm not sure of their rationale behind not collecting enough tax at the get-go but it still stinks, and you're right CCH, the real winners here are the Feds--as usual.  Even a good tax attorney will only be able to shield so much of this windfall.

    Avatar
    Indiana
    United States
    Member #29196
    December 29, 2005
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    Posted: August 10, 2007, 8:43 am - IP Logged

    AuntiPat is correct about reducing the tax burden.  I've studied this and it doesn't matter how you claim your prize...Trust...LLC or otherwise I can't see a way to significently reduce the Federal Tax burden unless you form a charitable trust and then you loose control of most of the money.  

    I too have heard the stories about lotteries promoting charitable donations as a way to reduce the tax burden.  But I never understood why they would do that.  Being the cynic that I am I always believed they underwitheld taxes so they could make the take home amount seem like it was more than it really was.  Similar to the way they advertise the annuity prize amount even when the winner takes the cash option.  We've all seen winners standing there holding the giant check of the annuity amount and then read the press release and it says they took the cash option.  It's the same concept.  They took home X million after taxes...but they don't tell you they will still owe Y million at the end of the year.

    I live in a state that taxes lottery winnings (as most of us do) and by my calculation if you won a jackpt prize in Indiana the total tax liability for state, county/municipal and feds is 40%.  And that's not as bad as some states! 

    The Feds and the states are the real winners of big jackpots and that stinks!

    Jim 


    Money frees you from doing things you dislike.  Since I dislike doing nearly everything, money is handy.  - Groucho Marx

      Avatar
      NY
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      October 16, 2005
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      Posted: August 10, 2007, 11:23 am - IP Logged

      My vote is yes. I hope MM and PB starts with a cash value lump sum jackpot in the future.

      They already start with a cash value. That's just not what they use when they advertise.

        Avatar
        NY
        United States
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        October 16, 2005
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        Posted: August 10, 2007, 11:35 am - IP Logged

        Actually the tax for the Feds is closer to 35% which they will tell you when your winnings are  transferred into  your account.  Had a friend who won an OH Lotto Jackpot many years ago with a group from his work and they informed him and each of the others that he/they would owe more at the end of the year to the Feds.  Their excuse is that if a person should make a large contribution to charity that first year--then it would significantly  reduce their tax responsibility so they underwithhold on the basis of the if-come.  What a CROCK--I mean, my church and my daughter's church will both benefit were I to ever win-- but we're not talking 20% of the distribution.

         I'm not sure of their rationale behind not collecting enough tax at the get-go but it still stinks, and you're right CCH, the real winners here are the Feds--as usual.  Even a good tax attorney will only be able to shield so much of this windfall.

        The 25% withholding rate wasn't put into place just to deal with jackpot winners. It's a single withholding rate that covers a bunch of things. If a win increases your taxable income by a few hundred grand you're going to owe more than 25% on it. If you win $750 it's not likely to fall into a higher tax bracket, and if you aren't already in the 25% bracket you'll only owe 15%. That will get you a whopping $75 refund later on. Most people fall into the 25% bracket, so a 25% withholding rate works most of the time.  Sure, it suxks when you owe that extra 10% at filing time, but how is that worse than losing the whole 35% up front? If you're a moron and you just put it into a 5 year CD you're going to pay a huge penalty by withdrawing or  borrowing money to pay the tax, but if you're a bit smarter you'll have earned a few bucks on the 10% while you had it. Obviously it's very risky, as well as unlikely, but that extra 10% could potentially triple while you had it.

          AuntiePat's avatar - animaniacs10
          Just outside of Cleveland, OH
          United States
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          August 3, 2007
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          Posted: August 10, 2007, 6:05 pm - IP Logged

          The 25% withholding rate wasn't put into place just to deal with jackpot winners. It's a single withholding rate that covers a bunch of things. If a win increases your taxable income by a few hundred grand you're going to owe more than 25% on it. If you win $750 it's not likely to fall into a higher tax bracket, and if you aren't already in the 25% bracket you'll only owe 15%. That will get you a whopping $75 refund later on. Most people fall into the 25% bracket, so a 25% withholding rate works most of the time.  Sure, it suxks when you owe that extra 10% at filing time, but how is that worse than losing the whole 35% up front? If you're a moron and you just put it into a 5 year CD you're going to pay a huge penalty by withdrawing or  borrowing money to pay the tax, but if you're a bit smarter you'll have earned a few bucks on the 10% while you had it. Obviously it's very risky, as well as unlikely, but that extra 10% could potentially triple while you had it.

          I believe anything over $335,000 is taxed at 35% Federally--although I'm not certain if that rate is based on earned income or unearned income (taxed at a higher rate).  Wouldn't the money you earn off your winnings be taxed at a pretty stiff rate?  The distribution year is the worst for taxes and I would sure feel better knowing that all the money that's left at distribution was mine--but that's just the way I feel.  Since anything you do with the extra 10% would be taxed at capital gains rates--let'em take what they want upfront (that's just for me though)--I'm not enough of an operator to even double that 10% much less triple it--as we have seen this week--real estate and the stock market, both good havens with decent returns in the past, are both risky propositions.  Hopefully, should any of us be faced with that VERY pleasant proposition--we would have someone who REALLY knows the ins and outs of tax law giving us good advice. 

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            NY
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            Posted: August 11, 2007, 3:24 am - IP Logged

            If you're married and filing jointly the 35% rate kicks in at $336,550.  Social Security taxes only apply to earned income, but both earned and unearned income are taxed at the regular rate unless specific conditions are met, such as capital gains on investments that are held long enough.  Anything you earn on the 10% that isn't withheld would be taxed at the same 35% unless it qualifies for the reduced capital gains rate. As a practical matter you aren't likely to have that  money invested for very long, so whatever it earns will probably be normal income.

            Everyone is enough of an operator to double or triple an investment in a short period of time. The only question is if they're brave enough (or foolish enough) to take the risk, and lucky enough to do it at the right time and place. The losses in the market and drops in real estate that you refer to are a good example of why most of us should avoid most of that risk, especially with money that you need back in the near future. On the positive side, if you did double the 10% before you had to send it to the IRS you'd probably also have doubled much of the 50% you got to keep. Of course if you lost half of the 10% there's agood chance you'd have lost a lot of the 50%, and you'd still owe the 10% in taxes. If you turned 60% into 30%  and then sent 10% to the IRS you'd probably be a very unhappy camper. OTOH, if you got to put $5 million into a  5% CD for 6 months before sending it to the IRS you'd have vlittle or no risk, and could expect to make $125 grand. Of course you'd lose about $50 grand of it to taxes.  It's not much (if you've won a jackpot, anyway), but I don't think anybody would prefer to let the IRS earn the $75 grand.

              Todd's avatar - Cylon 2.gif
              Chief Bottle Washer
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              Posted: August 11, 2007, 7:17 am - IP Logged

              <Moved to Jackpot Games forum>

              Please post in the appropriate forum ... thank you.


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                Posted: August 16, 2007, 3:04 pm - IP Logged

                I hope Powerball and Mega Millions continues to roll.

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                  Coastal Georgia
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                  Posted: August 16, 2007, 3:09 pm - IP Logged

                  I hope Powerball and Mega Millions continues to roll.

                  You're in the wrong thread for your ever present hope, J6...

                   

                                                 

                                

                   

                   


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                    Posted: September 12, 2007, 3:21 pm - IP Logged

                    My vote is yes. I hope MM and PB starts with a cash value lump sum jackpot in the future.

                    I also hope that all states take away the sales tax whenever someone wins a jackpot.

                      MYSTME's avatar - chi
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                      belmont
                      Australia
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                      Posted: October 1, 2007, 4:10 am - IP Logged

                      Most Lotteries in the world outside of the US are Tax Free and the prize is paid out lump sum in the actual amount advertized. Do you feel Powerball and MegaMillions should do this as well?

                      no tax on wins in australia, but the money that is not won is given back to the people in grants. the rest goes on wages and such.in other words its more like charity than tax.charity sounds better to me than tax.


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                        Posted: October 4, 2007, 5:38 am - IP Logged

                        definitly should not tax the money winnings

                          TheGameGrl's avatar - character catafly.jpg
                          A long and winding road
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                          Posted: October 4, 2007, 6:38 pm - IP Logged

                          Uncle Jim, what a wonderful commentary you made! I actually think I had some shady relatives that did do that kinda scam in bars. To think they are now probably the politicians that passed the tax law. They get ya no mattah whatcha earn!

                          Not a fan of taxes in the US .

                          I said yes to the survey poll.

                          ~~Is it true, Is it kind,Is it necessary. ~~~

                           Thanks be to the giving numbers: 1621,912,119 02014

                            JackpotWanna's avatar - squiz

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                            Posted: October 9, 2007, 5:07 pm - IP Logged

                            no tax on wins in australia, but the money that is not won is given back to the people in grants. the rest goes on wages and such.in other words its more like charity than tax.charity sounds better to me than tax.

                            I Agree!

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                              Posted: October 15, 2007, 3:08 pm - IP Logged

                              My vote is yes. I hope MM and PB starts with a cash value lump sum jackpot in the future.

                              I Agree!>>>>>>>>>>>>>>>>>>>>>>>>>>>Hurray!    Jester Laugh     White Bounce

                              $O REMEMBER.....Halloween is "HERE"

                              now we can all DRESS-UP like

                              Teddy Kennedy and have HELL

                              of ahhhhhhhAAAAAAHHHHHHH

                                "Boston Tea PARTY"

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                              LOL>>>>>>>TOO>>>>>>>when you sober-up PLAY for JACKPOT

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