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Payment of Lottery Prizes

Topic closed. 23 replies. Last post 9 years ago by justxploring.

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justxploring's avatar - villiarna
Wandering Aimlessly
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Posted: December 20, 2007, 3:41 pm - IP Logged

I know more than 1 person who paid good money to a tax professional who made errors.   Fortunately they were able to send in an amended tax return.  It's amazing how many people are unfamiliar with the lottery rules anyway. I know a very intelligent, successful financial advisor who hasn't a clue about lump sum payments, etc. The amount of jackpot winners in Florida are maybe 7 or 8 a year, right?  So how many times do you actually think an accountant or attorney will have a client that won the lottery? It would be like going to a surgeon with a rare disease that strikes 1 in every 23 million people. He would need to consult someone else and read up on the disease.

Anyway, this entire discussion started out by mentioning a small win like four4me brought up, not millions of dollars.  Now you are talking about annuity payments!  (which I would never take) I don't want to have the last word here (looks like it, doesn't it)? so someone post a comment. Anything. Like the weather! 

Smiley

    Coin Toss's avatar - shape barbed.jpg
    Zeta Reticuli Star System
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    Posted: December 20, 2007, 7:22 pm - IP Logged

    OK, just to post:

    "Hello, you've reached the law offices of Q.P. Cash and Ann Nuitee, if you've won a jackpot, press 1, if you want the flight schedule for planes to Geneva, press 2, for the Bahamas and the Cayman Islands, press 3. Have a lucky day."

    Lep

    Those who run the lotteries love it when players look for consistency in something that's designed not to have any.

    Lep

    There is one and only one 'proven' system, and that is to book the action. No matter the game, let the players pick their own losers.

      TheGameGrl's avatar - character catafly.jpg
      A long and winding road
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      Posted: December 20, 2007, 8:05 pm - IP Logged

      Cute Coin Toss! I'm calling that hot line for the Caymans!

      Justex- Good post and good replies from folks! Its always a blessing when folks can assist in weaving thru the IRS verbage.

      I agree the IRS is the highest one for paying into so it makes sense to concentrate on that foremost. I only mentioned the local because last year I got nailed on local for a lottery win from my state. I had no idea I had to pay that since the state didnt take any out.

      Best to you!

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

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

        psykomo's avatar - animal shark.jpg

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        Posted: December 20, 2007, 8:46 pm - IP Logged

        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.

        Great post>>>>>>>>JP:

        My reason to say great post is tied to a LP new's ARTICLE^^^^^^

        QUOTE:

        IT's about the truth in Goverment" Busald said,..............................

        telling player the "truth doesn't hurt your sales" ^^^^^^^^^^^^

        LOL>>>>>post a >>>JP:

        PSYKOMO 

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          Posted: December 21, 2007, 3:08 am - IP Logged

          justxploring....I have a different take on the situation you outlined above, winning in Sept or Oct and waiting until January.  First what I would do is break down the IRS statement as follows:

          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.

          What this says to me is that the money is mine when there is no restriction on the condition of payment.  Well, claiming the ticket should be considered the point in time when there is no furthur condition for payment from my end.  Up until that point in time there is a big condition for the payment, submitting the claim for the winning ticket. The way I see it, if you wanted to wait, for whatever reason (heck it's your money and you are free to do as you choose) you are considered paid when the lottery validates your ticket.

           A few other things;

          The second part of the IRS statement refers to after the winner becomes entitled to the prize.  Based on the above the winner is entitled to the prize upon claiming the prize, not the drawing/winning date.

          I am not either a lawyer or tax person.  Consult professionals for advice.  The above is only my opinion based upon reading the information you posted.

          My biggest concerns would be deciding between cash or annuity (I know everyone has thoughts on this issue), lining up advisors (tax, legal, estate, financial) and since in my state (CA) one can not remain anonymous but does not have to attend a press conference, what will my plan be to hide from the prying press and those people looking for a handout.

          If you and the IRS have a difference of opinion on how it works, who do you suppose is going to win the argument?

          Let's look at what the IRS says again: payment of winnings is considered made when it is paid, either actually or constructively 

          You see the part that says "actually or constructively"?  There's a reason they don't just say "when it is paid".  As soon as the state runs the winning numbers through the computer they can identify the winner, even though they don't have a name. It's whoever owns the ticket(s) with those numbers. They'll start getting ready whether the winner comes forward or not, and in a short time they'll be ready to make the payment. At that point there is no "substantial limitation or restriction on the time, manner, or condition of payment". You're free to claim your ticket as soon as the lottery office opens after you've won, or you can wait until 30 seconds before the ticket expires, but what matters is whether or not you can have the money. If you can have it, it's constructively yours. When your paycheck is ready you can get it right away or you can let it sit in the payroll office until the day before it's too old for the bank to cash it. You don't think you can put off paying taxes on the money you earn this year by saving your paychecks until next year, do you? The lottery is no different. The money is yours as soon as the lottery is willing to give it to you.

          The only wiggle room you'll get is if they allow you a reasonable amount of time to make some financial decisions before claiming  your prize. Where a state allows you to choose between cash or annuity they give you 60 days to make that decision. If you actually spend the time consulting with advisors for 60 days before claiming a prize where you've already had to choose there's certainly a reasonable argument that you should have the same 60 days as those who are choosing cash or annuity. There's considerable opinion that you are entitled to take some time to get advice, especially since many states suggest exactly that, but I'm not aware of any test cases.

            justxploring's avatar - villiarna
            Wandering Aimlessly
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            Posted: December 21, 2007, 3:43 am - IP Logged

            Cute Coin Toss! I'm calling that hot line for the Caymans!

            Justex- Good post and good replies from folks! Its always a blessing when folks can assist in weaving thru the IRS verbage.

            I agree the IRS is the highest one for paying into so it makes sense to concentrate on that foremost. I only mentioned the local because last year I got nailed on local for a lottery win from my state. I had no idea I had to pay that since the state didnt take any out.

            Best to you!

            Sorry about the tax, but that means you won something!  Hurray!

            Good for you.   I haven't won anything that even required a claim form yet.  I'm just very careful with taxes because I got bad advice a very long time ago.  I cannot be all things to myself, and I know I need to consult with experts from time to time, but self-education contributes to self-empowerment which keeps the consumer from getting into too much trouble.

            By the way, I called the IRS this year when filing and they were very helpful & friendly. 

            Speaking of islands, for years I've seen a bank online called MLNbank.com and often wondered if it's legitimate. Rates have dropped, but they still offer a 5 year CD for 8.5%  I've always been afraid of investing money in offshore accounts.  Anyone ever had experience with this institution?

              sirbrad's avatar - Lottery-062.jpg
              PA
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              Posted: December 21, 2007, 7:09 am - IP Logged

              When I won 6300 in nj they sent me 4600 after withholdings. Then I had to add 6300 income to my next tax return! But you can deduct whatever you spent to win.

              When The Jack Man won PB he got 113 million lump sum "after taxes".

              In general anything over 600 dollars the machine says "FILE CLAIM" and you have to fill out a form, send to Lottery HQ (or go in person i guess???) and then wait for the check a few weeks later, as they immediately withhold income taxes, because they're afraid you might spend it before the next tax time.

              When I won $2600 on the Big 4, I got all the cash up front and the store files the claim to get the money back. I must say I was ecstatic. They said anything over $2500 I would have to wait. So I saved a lot buy having two winning tickets 50/50 for $2500 and $100 boxed/straight. :)

                bashley572's avatar - starwars14
                West Side of Sunny Florida
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                Posted: December 21, 2007, 7:38 am - IP Logged

                Justxploring -

                MLN Bank - interesting.  I just looked them up...

                Millennium Bank is a subsidiary of United Trust of Switzerland, SA, a Swiss-registered private trust company that was founded in 1931. United Trust of Switzerland is located in the heart of Geneva's financial district and has its registered office in the Canton of Zug. United Trust of Switzerland's extensive experience in the financial services sector

                Unless you know someone (or a large firm here in US) you trust that has been dealing with them for years I wouldn't work with them.  Its a whole new game playing with your money outside the US.  Often you find out AFTER you have given them your money that you can't get it back.  Good luck!!

                Money won is twice as good as money earned!

                  justxploring's avatar - villiarna
                  Wandering Aimlessly
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                  Posted: December 22, 2007, 8:08 pm - IP Logged

                  Justxploring -

                  MLN Bank - interesting.  I just looked them up...

                  Millennium Bank is a subsidiary of United Trust of Switzerland, SA, a Swiss-registered private trust company that was founded in 1931. United Trust of Switzerland is located in the heart of Geneva's financial district and has its registered office in the Canton of Zug. United Trust of Switzerland's extensive experience in the financial services sector

                  Unless you know someone (or a large firm here in US) you trust that has been dealing with them for years I wouldn't work with them.  Its a whole new game playing with your money outside the US.  Often you find out AFTER you have given them your money that you can't get it back.  Good luck!!

                  I agree.  That's why I never took the chance.  I've opened accounts online in the past, but only with US Banks and also ones that were covered by FDIC and I knew were recommended.  Even your local bank might offer a higher rate for an account opened online.

                  Speaking of foreign investments, when I visited Costa Rica there were many Americans investing in "The Brothers" and it wasn't a bank, but sort of a "secret" that everyone seemed to know about. These people told me they were earning around 3% interest a month.  One woman from NH told me that's how she built her resort.  I'm not sure, but I think the money had to stay in Costa Rica.  I read later that the government shut them down.  I asked if they were connected with organized crime and was told that was not the case, but they invested in new land developments.  I haven't a clue, but let's try Google.

                  Aha! (I love the internet) 

                   http://www.post-gazette.com/localnews/20030511thebrothers0511p5.asp