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a "tax" question for those in the know

Topic closed. 22 replies. Last post 8 years ago by psykomo.

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AlecWest's avatar - alec
Vader, Washington
United States
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January 5, 2006
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Posted: August 13, 2008, 7:38 pm - IP Logged

justxploring,

Sounds fair ... 25% with a Social Security number, 30% without one.  By the way, you earlier said, quote, "Anyway, you only pay tax on your prize once, so who cares?  You never pay it both years."

Actually, I think EVERYONE should care.  If I won a major jackpot in the last two months of this year, the first thing I'd do is visit a tax consultant.  And, I'd ask him/her to give me an educated guess on whether taxes for me would go up or whether they'd go down in 2009.  I'd claim it in 2009 if taxes were expected to go down - or claim it in 2008 if taxes were expected to go up.  Serious dollars might be involved.

Regards - J. Alec West

    justxploring's avatar - villiarna
    Wandering Aimlessly
    United States
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    November 5, 2005
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    Posted: August 13, 2008, 7:56 pm - IP Logged

    justxploring,

    Sounds fair ... 25% with a Social Security number, 30% without one.  By the way, you earlier said, quote, "Anyway, you only pay tax on your prize once, so who cares?  You never pay it both years."

    Actually, I think EVERYONE should care.  If I won a major jackpot in the last two months of this year, the first thing I'd do is visit a tax consultant.  And, I'd ask him/her to give me an educated guess on whether taxes for me would go up or whether they'd go down in 2009.  I'd claim it in 2009 if taxes were expected to go down - or claim it in 2008 if taxes were expected to go up.  Serious dollars might be involved.

    Regards - J. Alec West

    I see your point & agree.  Of course it's always good to determine what's best for you. I already said that anyone who wins a large amount of money should contact a tax professional.  I was only getting frustrated at the debate Stack was starting, since this isn't a matter of "I know & you don't."  The IRS has a rule and it doesn't leave too much up to interpretation unless someone wishes to become argumentative and try to twist its meaning.  Stack, in FL you only have a total of 60 days after the date of the drawing to take the money in a lump sum.  In any case, you'll just keep saying I'm wrong, so why pick at everything?  I'm not going to keep defending what I said. (but if KY Floyd wants to post another comment, be my guest. LOL) 

    Anyway, the Lottery confirmed what I wrote.  I'm sure you can call the IRS and ask them the same tax question.  I've asked them lots of questions in the past and they never ask for your name or social security number.  You can also call your state lottery office. 

    Just an off-topic analogy:  I once worked in a furniture store with 3 men.  It was a slow day and we were talking about where we've lived and one man said he was from Atlanta.  I said something about it being the capital of GA and he insisted I was wrong.  The manager was from TN and said he wasn't sure what the capital was, but he knew I was wrong when I said it was Nashville, since that was only the capital of country music. lol  No kidding, they actually called the library and, when they couldn't get a confirmed answer, they called the Georgia State Capitol.  Even after they both got their answers, they still said "Well, I know it was Savannah, maybe it changed."  (yes, about 200 years ago!)   

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      lumberton
      United States
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      September 29, 2005
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      Posted: August 13, 2008, 8:12 pm - IP Logged

      I see your point & agree.  Of course it's always good to determine what's best for you. I already said that anyone who wins a large amount of money should contact a tax professional.  I was only getting frustrated at the debate Stack was starting, since this isn't a matter of "I know & you don't."  The IRS has a rule and it doesn't leave too much up to interpretation unless someone wishes to become argumentative and try to twist its meaning.  Stack, in FL you only have a total of 60 days after the date of the drawing to take the money in a lump sum.  In any case, you'll just keep saying I'm wrong, so why pick at everything?  I'm not going to keep defending what I said. (but if KY Floyd wants to post another comment, be my guest. LOL) 

      Anyway, the Lottery confirmed what I wrote.  I'm sure you can call the IRS and ask them the same tax question.  I've asked them lots of questions in the past and they never ask for your name or social security number.  You can also call your state lottery office. 

      Just an off-topic analogy:  I once worked in a furniture store with 3 men.  It was a slow day and we were talking about where we've lived and one man said he was from Atlanta.  I said something about it being the capital of GA and he insisted I was wrong.  The manager was from TN and said he wasn't sure what the capital was, but he knew I was wrong when I said it was Nashville, since that was only the capital of country music. lol  No kidding, they actually called the library and, when they couldn't get a confirmed answer, they called the Georgia State Capitol.  Even after they both got their answers, they still said "Well, I know it was Savannah, maybe it changed."  (yes, about 200 years ago!)   

      i am a tax preparer, to make it simple you will receive a w2G from the lottery in the state where your winnings was won. you will file your taxes in 2009

        Avatar
        NY
        United States
        Member #23835
        October 16, 2005
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        Posted: August 15, 2008, 12:58 am - IP Logged

        "Well, I have to disagree with those who wrote "when you get paid."  You asked "for those in the know" and I know.  LOL"

        If what you showed in red is from the IRS, it can't be any clearer than "when you get paid" and not the drawing date. It could apply to when the ticket is validated but in this scenario the hasn't been validated.

        "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."

        "You have a 60 day window, so it's not always when you claim the ticket."

        The 60 day window applies to choosing between cash option and the annuity after validating the ticket.

        "However, if not later than 60 daysafter 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 you won in Sept and claimed it in March, you would not benefit from waiting, since it would be considered 2008 income.  Sept does not fall into the 60 day window."

        How could a player be entitled to or get payment before validating the ticket?

        Lotteries offer advanced play and some even offer yearly subscriptions so it's possible a player could forget to check their ticket or just wait until the last drawing date before checking them. Can you imagine the outrage during an election year if the IRS added penalties and late charges for not filling on time because an 80 year-old jackpot winner waited until the advance play or subscription was up before checking their tickets?

        "So, yes, you would be okay if you claimed the prize in Jan or Feb and paid taxes for next year and the Dec drawing would have no bearing on it."

        On my ticket where it says I have up to 180 days to claim the winnings and not 60 days. Is there even smaller print that I can't see saying I might be subject to IRS penalties if I wait that long? 

        Do lotteries fill out W-2G forms and send copies to the IRS in December with "player to be named later"?

        If "those in the know" say in which tax year depends on when the ticket is validated, I'll agree.

        "How could a player be entitled to or get payment before validating the ticket?"

        How could you be entitled to your pay before cashing your paycheck?

        For online games they know exactly when the ticket was sold, and the instant the drawing makes it a winner you're entiltled to your winnings, subject to the time it takes the lottery to go through their procedures and cut the check. Just because you don't present the ticket doesn't mean you couldn't, just as waiting to cash your paycheck doesn't change when you earned it. Subject to collecting the funds from other states, lottery jackpots are set apart for the winner once the lottery knows there is a winner, even though they don't know who the winner is, just as your employer sets money apart when they write your paycheck. To the IRS that's constructive receipt. How long you want to wait is your concern, not theirs.

        "However, if not later than 60 daysafterthe winner becomes entitled to the prize, the winner chooses the optionof a lump sum or an annuity payable over at least 10 years, the paymentof winnings is considered made when actually paid."

        It can't get any clearer than "if not later than 60 days after the winner becomes entitled." Ohio can give you as long as they like to make the choice. The IRS gives you 60 days from the drawing, because that's when you become entitled to the prize.

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          Kentucky
          United States
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          February 14, 2006
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          Posted: August 15, 2008, 2:33 am - IP Logged

          "How could a player be entitled to or get payment before validating the ticket?"

          How could you be entitled to your pay before cashing your paycheck?

          For online games they know exactly when the ticket was sold, and the instant the drawing makes it a winner you're entiltled to your winnings, subject to the time it takes the lottery to go through their procedures and cut the check. Just because you don't present the ticket doesn't mean you couldn't, just as waiting to cash your paycheck doesn't change when you earned it. Subject to collecting the funds from other states, lottery jackpots are set apart for the winner once the lottery knows there is a winner, even though they don't know who the winner is, just as your employer sets money apart when they write your paycheck. To the IRS that's constructive receipt. How long you want to wait is your concern, not theirs.

          "However, if not later than 60 daysafterthe winner becomes entitled to the prize, the winner chooses the optionof a lump sum or an annuity payable over at least 10 years, the paymentof winnings is considered made when actually paid."

          It can't get any clearer than "if not later than 60 days after the winner becomes entitled." Ohio can give you as long as they like to make the choice. The IRS gives you 60 days from the drawing, because that's when you become entitled to the prize.

          "How could you be entitled to your pay before cashing your paycheck?"

          Paychecks dated after December 31 are considered as income for the next year even though some of it was earned the year before. The question here is when does a lottery prize become income for a tax year.

          "The IRS gives you 60 days from the drawing, because that's when you become entitled to the prize."

          Lottery winnings are other income and until a player validates the ticket and a check is issued, there is no income and no W-2G was issued.

          "Ohio can give you as long as they like to make the choice. The IRS gives you 60 days from the drawing, because that's when you become entitled to the prize."

          The Ohio Lottery code mirrors the IRS code so if a player decides within 60 days, it becomes income when it's actually paid. If they wait it becomes the date the ticket was validated. Now if it's a fact in the tax code the drawing date is the date of entitlement, it should be simple for you to copy and paste the code so we'll all know.

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            Kentucky
            United States
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            February 14, 2006
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            Posted: August 15, 2008, 3:18 am - IP Logged

            I see your point & agree.  Of course it's always good to determine what's best for you. I already said that anyone who wins a large amount of money should contact a tax professional.  I was only getting frustrated at the debate Stack was starting, since this isn't a matter of "I know & you don't."  The IRS has a rule and it doesn't leave too much up to interpretation unless someone wishes to become argumentative and try to twist its meaning.  Stack, in FL you only have a total of 60 days after the date of the drawing to take the money in a lump sum.  In any case, you'll just keep saying I'm wrong, so why pick at everything?  I'm not going to keep defending what I said. (but if KY Floyd wants to post another comment, be my guest. LOL) 

            Anyway, the Lottery confirmed what I wrote.  I'm sure you can call the IRS and ask them the same tax question.  I've asked them lots of questions in the past and they never ask for your name or social security number.  You can also call your state lottery office. 

            Just an off-topic analogy:  I once worked in a furniture store with 3 men.  It was a slow day and we were talking about where we've lived and one man said he was from Atlanta.  I said something about it being the capital of GA and he insisted I was wrong.  The manager was from TN and said he wasn't sure what the capital was, but he knew I was wrong when I said it was Nashville, since that was only the capital of country music. lol  No kidding, they actually called the library and, when they couldn't get a confirmed answer, they called the Georgia State Capitol.  Even after they both got their answers, they still said "Well, I know it was Savannah, maybe it changed."  (yes, about 200 years ago!)   

            "I was only getting frustrated at the debate Stack was starting, since this isn't a matter of "I know & you don't.

            I found a $2 scratch-off winner in my desk that I believe I got on Christmas 2006. I suppose a once a year lottery player might not have heard the winning multi-million dollar ticket was sold in the same store where they bought their tickets and just happened to find that ticket six months later. Some states give players up to a year to cash their tickets so I imagine many have been cashed the following tax year and some after the April 15 filing deadline. Since the lotteries are required to withhold taxes, I assumed they know the tax laws and when I read in the Ohio Lottery code, entitlement is when the ticket is validated, I assumed that is when it becomes income.

            So there is nothing to debate because a lottery prize either becomes income on the drawing date, when the ticket is validated, or when the prize is paid. Floyd says it's the drawing date and hopefully will post that info from the tax code and we'll all know for sure.

            "Stack, in FL you only have a total of 60 days after the date of the drawing to take the money in a lump sum."

            At one time in Ohio, we had to decide cash or payments when we purchased the ticket.

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              NY
              United States
              Member #23835
              October 16, 2005
              3502 Posts
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              Posted: August 15, 2008, 10:53 pm - IP Logged

              "How could you be entitled to your pay before cashing your paycheck?"

              Paychecks dated after December 31 are considered as income for the next year even though some of it was earned the year before. The question here is when does a lottery prize become income for a tax year.

              "The IRS gives you 60 days from the drawing, because that's when you become entitled to the prize."

              Lottery winnings are other income and until a player validates the ticket and a check is issued, there is no income and no W-2G was issued.

              "Ohio can give you as long as they like to make the choice. The IRS gives you 60 days from the drawing, because that's when you become entitled to the prize."

              The Ohio Lottery code mirrors the IRS code so if a player decides within 60 days, it becomes income when it's actually paid. If they wait it becomes the date the ticket was validated. Now if it's a fact in the tax code the drawing date is the date of entitlement, it should be simple for you to copy and paste the code so we'll all know.

              "if it's a fact in the tax code the drawing date is the date ofentitlement, it should be simple for you to copy and paste the code sowe'll all know."

              I'd be happy to. Better luck understandng it this time.

              A payment of winnings isconsidered made when it is paid, either actually or constructively, tothe winner. Winnings are constructively paid when they are credited to,or set apart for, that person without any substantial limitation orrestriction on the time, manner, or condition of payment. However, if not later than 60 daysafter the winner becomes entitled to the prize, the winner chooses theoption of a lump sum or an annuity payable over at least 10 years, thepayment of winnings is considered made when actually paid.

                psykomo's avatar - animal shark.jpg

                United States
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                May 30, 2004
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                Posted: August 18, 2008, 5:46 pm - IP Logged

                Let's say someone bought a lottery ticket just after Christmas this year but just put it away in a drawer, not checking it.  Then in May next year, before the 180-day redemption deadline was reached, they discovered the ticket while cleaning out their drawer - found out it was a winner - and redeemed it.

                Question - Does the lottery winner declare the winnings on his 2009 tax return ... or does he have to go back and do an amended return for 2008?  In short, do taxes on lottery winnings accrue on the date of the drawing or on the date of ticket redemption?

                A&W....welcome 2D Post (ur root beer)??

                My "buddy" PSYKO did the same DARN THING & LOST 5-months INTEREST!

                STILL had 2 pay D TX>>>>>>>R not get 2 put $$$ in ole ACCOUNT...BUT,

                PSYKO has moe money than MOST......little buddy is kinda SLOW<<<<<<

                LOL

                PSYKOMO