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Questions about tax!

Topic closed. 9 replies. Last post 8 years ago by BORGUSX.

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Eden Prairie, MN
United States
Member #49875
February 18, 2007
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Posted: May 10, 2009, 4:16 pm - IP Logged

1.When people talk about paying 35% of their winning in taxes,is that the federal or state taxes?

2.Does anyone have a tip in order to reduce their tax liability,besides telling them to get a financial advisor?

3.How about if your winning was less than $100 USD,does the IRS want you to file it and I heard something about that you get a tax deduction or something up to how much you won,can someone clarify this with an example,please?

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    Espanola NM
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    March 25, 2009
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    Posted: May 10, 2009, 5:45 pm - IP Logged

    1.   35% applies to the federal IRS taxes.  The top bracket for federal purposes is above $375,000.   Since most jackpots fall in this range....you have to pay the top rate.   Keep in mind you don't have to pay the whole 35% right away.   The lottery automatically withholds 25% of it before they even write you a check.   So you are only responsible for the remaining 10% debt.   The IRS also makes sure you pay that debt via estimated taxes which are due quarterly in the year they are incurred.    So you can't just wait until April 15th to pay the entire 10%.  You have to pay in chunks beforehand.

     

    2.   Save your recripts for everything you purchase.   Alot of it can be deducted especially when it comes to medical, educational, and charitable purposes.   The best advice is to visit with a tax professional though.

     

    3.  Technically you should report ALL income regardless of amount.  However, the lottery itself only issues a 1098 for amounts over $600.    Save all of your lottery tickets including the losing ones.   It is my understanding that losses are deducted from the winnings each yr to give you a net gain.

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      Eden Prairie, MN
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      February 18, 2007
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      Posted: May 10, 2009, 6:10 pm - IP Logged

      1.So,if I won $20 USD for example,and lost $30 USD,then will my tax deduction will be $20 USD or what is the deal here?

      2.Why do you have to pay quarterly in taxes,but not wait until April 15?

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        Espanola NM
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        March 25, 2009
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        Posted: May 10, 2009, 6:34 pm - IP Logged

        1. You are correct.  The most you could deduct using gambling losses would be $20 since all you won was $20.     

        You can only count as much in losses as you won. So if you spent $100 on lottery tickets and won $75, you can only deduct $75. The other $25 is just part of the price of playing the game.

        But make sure that this deduction, along with your other itemizations, is more than the standard amount. You always want to use the method that will provide you a bigger deduction.

        Even thought technically you might be able to avoid taxes on $3,000 you won by claiming $3,000 in bad bets, that's still less than the standard deduction of $5,700 allowed a single taxpayer on 2009 returns. If you have no other deductions to itemize, it doesn't make sense to forfeit the standard deduction's other $2,700 just because you can claimgambling losses. If, however, your wagering losses are large enough tohelp boost your already substantial itemized deductions, then fill out the Schedule A.


        2.   The IRS works on a "pay-as you-go" system.  Even though people don't realize it.....they don't just pay taxes one day a yr.  They pay taxes all-yr round.   That is why at work your employer usually withholds payroll taxes from your paycheck each time.  The estimated schedule due dates are April 15th, June 15th, September 15th, and December 15th.

          grandpajohn's avatar - Lottery-050.jpg
          williamsburg,ohio
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          Posted: May 10, 2009, 7:54 pm - IP Logged

          It depends in what state you live in is how much tax you will pay.In Ohio for example where I live it is 25% federal and 6% state 31% total and also in the town I live in is a 1% income tax I would have to pay but in other towns in Ohio may not have a income tax so they wouldn't have to pay that.Some states don't have the state tax so they are just out of the 25%.

          "Don't Give Up.Don't Ever Give Up"

          Jim Valvano ex N.C.State basketball coach Thumbs Up

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            Eden Prairie, MN
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            Posted: May 10, 2009, 8:27 pm - IP Logged

            1.I always thought a deduction is something that is minus or in other words,an expense,but if you match your deduction with your winning,then huh? Winning is the opposite of deducting which I think it mean an expense.

             

            2.Even thought technically you might be able to avoid taxes on $3,000 you won by claiming $3,000 in bad bets, that's still less than the standard deduction of $5,700 allowed a single taxpayer on 2009 returns. If you have no other deductions to itemize, it doesn't make sense to forfeit the standard deduction's other $2,700 just because you can claimgambling losses. If, however, your wagering losses are large enough tohelp boost your already substantial itemized deductions, then fill out the Schedule A.

            You just lost me,here since I never file a tax form in my life. So,can you clarify it even more?

            3.So,for most people,they just have to file taxes for April 15th and their employer will take care of the other three dates?

            I am so lost,lol!

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              Espanola NM
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              March 25, 2009
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              Posted: May 10, 2009, 10:01 pm - IP Logged

              1.   The  rational is the IRS doesn't want to encourage gambling.  So that why they limit the deductions to amount that you win.   For example if you lose $10,000 in lottery tickets and all you claim in winnings is $800.   The government is not gonna subsidize the irresponsible loss of $10,000.   The government will let you break-even by allowing you to claim losses up to the winnings. So in this example you can deduct the $800 of losses against the $800 of winnings

              2.  When filing you have two options.  You can use the standard deduction which is a $5700 flat deduction regardless of your actual expenses.   Or you can itemize deductions.  You only have one choice. Standard or itemized.   Most people choose the option that maximizes their allowable deductions. 

              3.  Essentially that is the idea.    Since the lottery isn't in the business of writing you a check every week like your employer.....the lottery only withholds 25% on the day they write you your BIG CHECK. They are only gonna pay you once.    Even though 25% sounds like alot.    Anytime you deal with the large sums of money that comes from a jackpot....keep in mind you still owe 35% overall.   When the lottery withholds 25%....you still owe 10% of whatever the prize is for that tax yr.    10% of a jackpot is still alot of money! So you want to make sure you follow the IRS payment plan rules.

              4.  As you can see alot of this tax stuff can be confusing.    I know the basics since I have a Finance and Accounting degree.   But it is always a good idea to contact a professional who does this for a career.  They can look at the individual details that pertain to each indivudal taxpayer's file.  Remember you not just paying taxes on your lottery winning.  You also have to include the other normal-life income/expenses that differentiate each taxpayer. Research and interview multiple professionals in your area when the time arrives.    If you do that it makes your life easier and then you won't be responsible for any tax mistakes that could lead to penalties and interest that the gov. charges to those who underpay.

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                Eden Prairie, MN
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                Posted: May 10, 2009, 11:59 pm - IP Logged

                1.How much would you be charged if you do hire someone to do your taxes and so on? 

                2.Is the 25% that you mention about the federal tax?  So,is it federal tax plus state tax plus ten percent?

                3.So,do you know which option allow you to maximizes your allowable deduction?

                4.So,is it the more you deduct,the less tax you have to pay?

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                  Espanola NM
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                  March 25, 2009
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                  Posted: May 11, 2009, 12:12 am - IP Logged

                  1.   That varies depending on various issues.   The only thing I can suggest is visit multiple professionals and then make a educated choice on the one you feel most comfortable with.  Some professionals go by a flat rate.  Others go by comission on the assets being managed.

                  2.  Yep.  The 25% withheld is only for the feds.  Each state has a different amount that they withheld and charge.   If you are lucky....there are some states that don't charge you income taxes. Must be nice to live in those states.

                  3.  I can't give you a clear answer.  Each person is different and have individual details that are unique to them.   A tax professional will tell you which one to follow based on your entire portfolio.

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                    Eden Prairie, MN
                    United States
                    Member #49875
                    February 18, 2007
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                    Posted: May 11, 2009, 11:53 am - IP Logged

                    1.How about you win a money prize,but you have to pay to get the form faxed,are you tax on the money prize or the money prize minus the amount of the charge for faxing the form to claim the prize?

                    2.How about you are raising money for yourself from people's donation is that count as an income?

                    I know it is kind of count off topic from the lottery department,but at least it is still related to tax.