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Collecting Big Winnings

Topic closed. 34 replies. Last post 8 years ago by KY Floyd.

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GamerMom's avatar - tails

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Posted: November 30, 2008, 6:31 pm - IP Logged

I would claim it as soon as possible, especially since i plan on taking the annuity.   I would also pay my taxes as soon as possible; I couldn't relax on my beach front property until I paid off my debts!!!

    JackpotWanna's avatar - squiz

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    Posted: November 30, 2008, 7:50 pm - IP Logged

    I would claim it as soon as possible, especially since i plan on taking the annuity.   I would also pay my taxes as soon as possible; I couldn't relax on my beach front property until I paid off my debts!!!

    I agree.  I would claim the prize as soon a possible.  Paying taxes would be the first thing I'll do on my things to do list. 

      djklaugh's avatar - Lottery-031.jpg
      Portland,Oregon
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      Posted: November 30, 2008, 9:40 pm - IP Logged

      You may be right,but it seems to me that if you won the money in 2008 the IRS would consider it  income earned in 2008.I'll let you know for sure after I win Tuesday nights MegaMillion drawing.~;)

      Until you actually go to the Lottery office in your state and turn in a validated ticket .... they do not know who you are! They just know there is a winner.  The IRS like wise does not know who the winner is or that "you" are the winner until you present the ticket and fill out paperwork giving your Social Security number.  You are taxed on money you receive in a given year and that includes lottery wins. So it is a good idea - if you won a big jackpot this late in the year - to wait until after January 1 to collect it. Not only to give your self time to make plans and talk to financial advisors ... but also so you have more time to get the money into tax deferred investments or find deductions you can tap into.  For smaller prizes it might be a good idea to collect them before January 1 if you  have a significant number of losing tickets to at least partially offset the win.  

      Djklaugh

        Some things have to be believed to be seen.

      "I have not failed. I have just found ten thousand things that don't work".  Thomas Edison

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        Posted: December 1, 2008, 1:13 am - IP Logged

        "Until you actually go to the Lottery office in your state and turn in a validated ticket .... they do not know who you are!"

        They don't have to know your name or social security number to know you're the winner. They know when and where the ticket was sold, and the value of the ticket. That allows them to set the money aside for the person who owns the ticket, and that meets the requirements for constructive receipt. The fact that you don't claim what is rightfully yours doesn't mean you aren't entitled to the money.

        As for whether or not it make sense to wait until next year, that depends on the reason. As a practical matter, you can  reduce your taxes by increasing your deductions, but that won't put more money in your pocket, since deductions require that you used the money for something like medical bills or interest on a mortgage. YMMV, but I don't think it makes sense to pay $100 to a bank or a doctor in order to save $35 in taxes. If you can be sure that the top tax rate won't increase then it definitely makes sense to wait until after 1/1 if possible, but if the top bracket went back up to 39% you'd lose an extra 4% by waiting.

        Assuming you've won a jackpot that has an annuity option there could be one other good reason to wait, or to hurry. At least for MM, the money is invested in government securities, which ar ethen sold to pay winners who choose cash. The value of those secuities will fluctuate depending on interest rates. If the lottery invested in bonds paying 3% and rates dropped to 2.5%, the value of the 3% bonds would increase. If rates rose to 3.5% the value would drop. In the past that hasn't been much of an issue, but lately we've seen some significant changes in rates over a short period of time.

          DC81's avatar - batman39
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          Posted: December 1, 2008, 8:34 am - IP Logged

          Well, they might not go up next year after all as Obama with his advisers (who probably don't want their taxes to go up either, heh) seems to be backing off repealing the Bush Tax Cuts and raising taxes, at least for now.

          I'd rather take the lump sum since I'm sure that I could at the very least get a 5% yearly return (with or without it compounding and doing so daily) with some low risk, likely diversified investments which is still a lot better than what the annuity with the T-Bills low interest rate would currently offer and at 5% with interest compounding daily, it could potentially be an amount that's much higher than the advertised annuity. Okay so if for some reason you just put most of the principal into fixed rate CDARs for 25 years that'd be foolish too but anyway... There are certainly still some generally safe investments out there that could result in more than what the annuity would offer, I think diversity would still be key.

          Besides, after getting the money and having the initial taxes paid, I'd be moving out of this state ASAP and wouldn't have to continue paying the state income taxes year after year whether I lived here or not. The annuity is still going to push you into the highest tax bracket anyway and while they might not go up next year or the year after, they certainly will before you're done collecting and who knows what else might happen. IMO the "safety net" of the annuity is overrated. Someone can be just as foolish with $3 million as they would be with $50M, maybe even more so like some people who ended up selling their annuity due to their foolishness and then had even more problems because for some reason they didn't think they'd need to pay taxes on it. Roll Eyes

          Oh yeah, let's not forget the wonders of the Estate Tax... Puke

          You can't predict random.

            justxploring's avatar - villiarna
            Wandering Aimlessly
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            Posted: December 5, 2008, 12:19 pm - IP Logged

            We've had the "what year do I pay my tax" discussion before.  I'm pretty sure if you win after Nov 1 and collect the money in Jan or later, your W2-G form would be for 2009 because it falls within the 60 day period allowed by the IRS.   In fact, I'm positive some state sites request that players who win during the last week of the year wait until January to claim their prizes so the payment and the tax forms are issued during the same calendar year. 

            I do agree with djklaugh to a point.  Technically, if you won money in August and decided to wait until February to collect it, you are supposed to pay tax for 2008.   However, the IRS certainly isn't going to check the newspaper or the lottery site to see when the ticket was purchase or the drawing was held.  They'll just go by whatever year is on the tax form submitted by the State.   

            Regarding Direct Deposit, I disagree.  Perhaps you can request it, but I was not "jesting."  Call up your local lottery office.  I bet they'll agree with me.   I've never seen any rule that says you have to have Direct Deposit.  In fact.  Here is an answer to a FAQ on the Florida web site.

            Q. How can I claim my Lottery prize from out of state?  

            A. To claim Florida Lottery prizes from out of state, you must fill out the back of your ticket and mail it to the following address:

            Claims Processing
            Florida Lottery
            250 Marriott Drive
            Tallahassee, FL 32399-9939


            Claims Processing will process your ticket and mail you a check for any applicable prize.

              GamerMom's avatar - tails

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              Posted: December 5, 2008, 12:24 pm - IP Logged

              We've had the "what year do I pay my tax" discussion before.  I'm pretty sure if you win after Nov 1 and collect the money in Jan or later, your W2-G form would be for 2009 because it falls within the 60 day period allowed by the IRS.   In fact, I'm positive some state sites request that players who win during the last week of the year wait until January to claim their prizes so the payment and the tax forms are issued during the same calendar year. 

              I do agree with djklaugh to a point.  Technically, if you won money in August and decided to wait until February to collect it, you are supposed to pay tax for 2008.   However, the IRS certainly isn't going to check the newspaper or the lottery site to see when the ticket was purchase or the drawing was held.  They'll just go by whatever year is on the tax form submitted by the State.   

              Regarding Direct Deposit, I disagree.  Perhaps you can request it, but I was not "jesting."  Call up your local lottery office.  I bet they'll agree with me.   I've never seen any rule that says you have to have Direct Deposit.  In fact.  Here is an answer to a FAQ on the Florida web site.

              Q. How can I claim my Lottery prize from out of state?  

              A. To claim Florida Lottery prizes from out of state, you must fill out the back of your ticket and mail it to the following address:

              Claims Processing
              Florida Lottery
              250 Marriott Drive
              Tallahassee, FL 32399-9939


              Claims Processing will process your ticket and mail you a check for any applicable prize.

              right but it sounds to me that's only if you mail it to them.  Heck i would drive down there and not leave it to chance that it would make it there on it's own.

               

              another reason I would claim this year is to give out my 12K gifts and then I can give out 13k in a few weeks!!

                justxploring's avatar - villiarna
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                Posted: December 5, 2008, 12:34 pm - IP Logged

                they send a check? in the mail? surely you jest?!? I was hoping for a direct deposit when I hit the JP!

                I never said that, only that it takes about 2 weeks to process.  Still, getting a check by mail is safe.  I totally agree that sending your ticket(s) through the mail is not safe.   I've never won millions, so I honestly don't know how it works, but I do know that companies mail large checks all the time. 

                Anyway, if a check is made out to you, it would be very difficult, if not impossible, for someone else to cash it.   I'm guessing that even if you wanted to deposit a million dollar check in your own bank, you'd have to wait 30 days until the money was available.  Still, they'd run your social security number, etc.   You can't even open up a checking account without showing proper ID so imagine trying to cash or deposit a huge check. 

                Edit:  Just read your last post.  Guess we were both typing at the same time.  Yes, I see what you mean about the gift, but it wouldn't matter.  You could still write a check in Dec and the recipient could cash it in Jan.   The IRS doesn't have the manpower to run around looking at 300 million bank accounts to see when checks were written.   For example, if you give money to charity on New Year's Eve, you can still deduct it for 2008.  It doesn't mean they have to cash the check and use the money that day.

                As always, people who win large sums of money should contact a CPA or someone who is very familiar with these laws. 

                  GamerMom's avatar - tails

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                  Posted: December 5, 2008, 12:42 pm - IP Logged

                  I never said that, only that it takes about 2 weeks to process.  Still, getting a check by mail is safe.  I totally agree that sending your ticket(s) through the mail is not safe.   I've never won millions, so I honestly don't know how it works, but I do know that companies mail large checks all the time. 

                  Anyway, if a check is made out to you, it would be very difficult, if not impossible, for someone else to cash it.   I'm guessing that even if you wanted to deposit a million dollar check in your own bank, you'd have to wait 30 days until the money was available.  Still, they'd run your social security number, etc.   You can't even open up a checking account without showing proper ID so imagine trying to cash or deposit a huge check. 

                  Edit:  Just read your last post.  Guess we were both typing at the same time.  Yes, I see what you mean about the gift, but it wouldn't matter.  You could still write a check in Dec and the recipient could cash it in Jan.   The IRS doesn't have the manpower to run around looking at 300 million bank accounts to see when checks were written.   For example, if you give money to charity on New Year's Eve, you can still deduct it for 2008.  It doesn't mean they have to cash the check and use the money that day.

                  As always, people who win large sums of money should contact a CPA or someone who is very familiar with these laws. 

                  You are right you said issue a check, not mail it.  I guess i just assumed it would be mailed

                   

                  My paycheck is sent fed ex twice a month.  I feel safe with it being sent that way.  It's not that a lottery check would be cashed by anyone else, it's that it would get lost or held up in snail mail.  Plus you are right, it would be a PITA to try to cash it.  Just seems like direct deposit would be manditory.

                    justxploring's avatar - villiarna
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                    Posted: December 5, 2008, 12:59 pm - IP Logged

                    I also prefer Direct Deposit.  Some companies won't send checks any more by mail.  I think the Federal Government only sends Social Security checks by Direct Deposit now, but I'm not 100% positive.  It's much safer as long as there aren't any glitches. 

                    Believe me, I hear what you are saying.  Without getting too specific, 2 years ago I rolled over my IRA and the insurance company put my entire life savings in the mail.  I was shocked and also very angry.  Like you, I automatically assumed it would be wired.  When you are taking money "out" they don't care! They didn't mind paying for an electronic transfer when I put the money "in."   Same thing happened to a friend of mine.  She asked Vanguard to rollover some money into Fidelity and thought it would be handled electronically.  Her check never arrived, but all she lost was time.  It turned out to be a benefit, since she had been in mutual funds and the market went down during the 2 weeks the check was missing. 

                    I can't say for all banks, but I even had trouble getting my own money out of Bank of America when I closed a small CD.  I had to show my license and a second form of ID and was asked for my social security number, mother's maiden name and the bank rep was the same person who opened my account 6 months earlier!  So I don't think it's all that easy to cash checks, although I know there is a lot of fraud.  Maybe that's why the government wants Direct Deposit, not just for the recipient's safety, but to keep cheaters from collecting the benefits of dead people, which does happen BTW.

                      djklaugh's avatar - Lottery-031.jpg
                      Portland,Oregon
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                      Posted: December 6, 2008, 2:26 am - IP Logged

                      Perhaps one of the reasons the big lotteries send checks for lump sum payouts has to do with the FDIC limits on insurance for accounts. Currently the limits are (from the FDIC website)

                      "Deposits at FDIC-insured institutions are insured up to at least $250,000 per depositor until December 31, 2009. On January 1, 2010, FDIC deposit insurance for all deposit accounts—except for certain retirement accounts—will return to at least $100,000 per depositor. Insurance coverage for certain retirement accounts, which include all IRA deposit accounts, was increased permanently to $250,000 per depositor in 2006."

                      You would have to check with your bank ... and probably make special arrangements to make a really large deposit.  One of the reasons the CDARS system was sent up was to handle and insure large sums of money.  

                       

                      I would also guess that when sending a large check through the mails the Lotteries either use Fedex or some kind of courier service and might require you signing for delivery.... don't know for sure .... guess someone here needs to win a big Jackpot and find out :)

                      You might be able to get electronic deposit for an annuity payout but again I think that depends on your bank.   

                      Djklaugh

                        Some things have to be believed to be seen.

                      "I have not failed. I have just found ten thousand things that don't work".  Thomas Edison

                        DC81's avatar - batman39
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                        Posted: December 6, 2008, 2:52 am - IP Logged

                        *Imagines taking a check worth a monstrous amount of money to a small local bank.*

                        While the look on their face would be amusing and everything, I dunno if I'd do that. I think the account with the bank that I'd have set up beforehand would need to be a bank that's in the area near the Lottery HQ and hopefully it's a big bank and get to meet whomever is in charge, heh. On the other hand, it doesn't seem like big banks do CDARs. Not like it matters too much since I'd have no intentions in keeping the full amount in a bank, even as a "protected" CDARs. A smaller bank might be the better choice anyway since they're not the ones who are in trouble.

                        You can't predict random.

                          jarasan's avatar - new patrick.gif
                          Harbinger
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                          Posted: December 6, 2008, 8:05 pm - IP Logged

                          I never said that, only that it takes about 2 weeks to process.  Still, getting a check by mail is safe.  I totally agree that sending your ticket(s) through the mail is not safe.   I've never won millions, so I honestly don't know how it works, but I do know that companies mail large checks all the time. 

                          Anyway, if a check is made out to you, it would be very difficult, if not impossible, for someone else to cash it.   I'm guessing that even if you wanted to deposit a million dollar check in your own bank, you'd have to wait 30 days until the money was available.  Still, they'd run your social security number, etc.   You can't even open up a checking account without showing proper ID so imagine trying to cash or deposit a huge check. 

                          Edit:  Just read your last post.  Guess we were both typing at the same time.  Yes, I see what you mean about the gift, but it wouldn't matter.  You could still write a check in Dec and the recipient could cash it in Jan.   The IRS doesn't have the manpower to run around looking at 300 million bank accounts to see when checks were written.   For example, if you give money to charity on New Year's Eve, you can still deduct it for 2008.  It doesn't mean they have to cash the check and use the money that day.

                          As always, people who win large sums of money should contact a CPA or someone who is very familiar with these laws. 

                          Use a return receipt, insure it appropriately, and sign the back of the winning ticket, it'll be pretty safe.  It'll definitely be safer than for eg. returning a pair of glasses to Nicole Brown Simpson or being a security guard at the WalMart in LI. NY. before a Christmas sale.

                            justxploring's avatar - villiarna
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                            Posted: December 6, 2008, 8:31 pm - IP Logged

                            Use a return receipt, insure it appropriately, and sign the back of the winning ticket, it'll be pretty safe.  It'll definitely be safer than for eg. returning a pair of glasses to Nicole Brown Simpson or being a security guard at the WalMart in LI. NY. before a Christmas sale.

                            So true!  Driving to the Lottery Office is probably more dangerous than mailing the ticket.  (especially in Florida this time of year.)

                              Avatar
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                              Posted: December 7, 2008, 2:56 am - IP Logged

                              Use a return receipt, insure it appropriately, and sign the back of the winning ticket, it'll be pretty safe.  It'll definitely be safer than for eg. returning a pair of glasses to Nicole Brown Simpson or being a security guard at the WalMart in LI. NY. before a Christmas sale.

                              "insure it appropriately"? I'd love to see the look on the postal worker's face when they ask if you want additional insurance and you say "Yes, for $50 million dollars, please." Unfortunately, the insurance limit on registered mail is "only" $25,000. Extrapolating the cost for that, sending a $50 million ticket would cost about 60 grand.

                              When the first really big PB jackpot of 295 million was won about 10 years ago the lawyer who handled the claim sent the ticket by armored car. I've got no idea how much it cost, but I'll bet it was less than 60 grand.