Since 2007 is coming to an end, I was wondering what I would do if I won a jackpot in the next 2 weeks (I can only hope!) because I've read so many different versions of the tax laws. I'm also not sure if smaller prizes like $50,000 are paid right away or if there is still a waiting period.
Here is a statement from the IRS
When Paid
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, or set apart for, that person without any substantial limitation or restriction on the time, manner, or condition of payment. However, if not later than 60 days after the winner becomes entitled to the prize, the winner chooses the option of a lump sum or an annuity payable over at least 10 years, the payment of winnings is considered made when actually paid. If the winner chooses an annuity, file Form W-2G each year to report the annuity paid during that year.
So if you win in Sept or Oct and wait until Jan, there is no advantage, since 60 days will have passed and you'll still need to pay 2007 taxes, as the law clearly states that winnings are paid when credited or set apart for the claimant. In the meantime, you also won't be earning interest on your money, so that might also be a consideration while a ticket is sitting in your sewing basket or tool box.
In Nov and Dec you can wait until Jan, but no later than 60 days after the actual drawing, because the IRS is saying here that the date of payment is the one considered.
Since many State web sites say that often a winner must wait for all the paperwork to be processed, winning any substantial amount in Dec and collecting it the same year seems unlikely. PA advises
"Typically, it takes approximately 4-6 weeks to process your claim once it has been received at our Headquarters location. If your claim is received at Lottery Headquarters in mid- to late-December, claims processing may be delayed until the new year to ensure that prize payments and tax forms are issued in the same calendar year."
Maybe people are wondering...why the heck does she care? No, I didn't win anything. I was just curious, since I've often read press releases where someone wins a big jackpot in late Dec and claims the prize immediately and thought "Why didn't he just wait a few days?" I guess it really doesn't matter, except that I'd probably want to spend at least a couple of weeks making plans before running to the lottery office.