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Small Winnings Tax Question

Topic closed. 41 replies. Last post 7 years ago by justxploring.

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mjwinsmith's avatar - moon

United States
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June 8, 2002
16065 Posts
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Posted: September 26, 2009, 8:53 am - IP Logged

You want to hear that you don't have to pay the taxes that you owe, well, as far as I know, all lottery winnings are tax-able, as Raven said.

This does not mean that everybody pays the money that they owe.

Chances are good that many or even most who win smaller lottery prizes don't report them as taxable income, that does not mean that it is right.

Is it right to pay taxas on lottery prizes? "I would say, NO", legal, but not right, yet 2 wrongs don't make 1 right.

For legal advice, ask somebody who is qualified to give it.

Here on Tx, we were told that we could get a state lottery in lieu of a state tax and we did, therefore the lottery is a tax all of itself, Is it right to tax the tax? I say, No, but the law is the law.

-------

Religion-wise, the Bible says to pay taxes if you owe them, so the thing is, Do you owe them? Legally you do or would if you won (I guess), Ask somebody who is qualified to answer the question.

I am on the same page as you Lantern, I think they already know the answer they just want to hear somebody say they don't have to pay tax on Lottery winnings. Hogwash, you are legally bound to pay tax on the "Gain" on the $20,000.00 less losses on Lottery winnings. The fact that there is no receipt is NO EXCUSE. 

Now having said that, the legal end of it, note there is no record of your winnings, i.e. w2p for Lottery winnings if you go around and cash the tickets at different places. But you might want to have to cover your ass if the IRS calls and want to know about a transaction to your account for $20,000.00 [any amount over $10,000.00 gets reported to the government] regardless of where or who it came from. You feel where I am coming from here. If you cash the tickets and keep the cash without depositing it to your bank account then who would be the wiser??

So let's review, win big TAX is due if on the DOWN LOW keep it to yourself.

    tiggs95's avatar - Lottery-036.jpg

    United States
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    Posted: September 26, 2009, 9:20 am - IP Logged

    So if you hit a cash 3 for 350.00 you going to call the IRS and tell them you owe them taxes?..This I gotta see..

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      Illinois
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      September 25, 2009
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      Posted: September 26, 2009, 1:46 pm - IP Logged

      the  earlier post says if you deposit over 10,000 in bank, the bank is going to call IRS?  Any amount over 10,000?   Does thatt happen for all  money transactions in all finanacial institutions in U.S?

        DC81's avatar - batman39
        MI
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        August 31, 2007
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        Posted: September 26, 2009, 4:10 pm - IP Logged

        the  earlier post says if you deposit over 10,000 in bank, the bank is going to call IRS?  Any amount over 10,000?   Does thatt happen for all  money transactions in all finanacial institutions in U.S?

        I think it's just deposits that banks report. But yeah, 10,000 and up they report to the IRS.

        You can't predict random.

          mjwinsmith's avatar - moon

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          Posted: September 26, 2009, 6:08 pm - IP Logged

          I think it's just deposits that banks report. But yeah, 10,000 and up they report to the IRS.

          Currency Reporting - Money Laundering

          The Currency Transaction Report (CTR) came into existence with the passage of the Currency and Foreign Transactions Reporting Act, better known as the Bank Secrecy Act (BSA), in 1970.

          When the first version of the CTR was introduced the only way a suspicious transaction of less than $10,000 was reported to the government was if a bank teller called an agent and provided the information. This was due, primarily, to the concern by financial institutions about the Right to Financial Privacy. On October 26, 1986, with the passage of the Money Laundering Control Act, the Right to Financial Privacy was no longer an issue. As part of the Act, Congress had stated that a financial institution could not be held liable for releasing suspicious transaction information to law enforcement. As a result, the next version of the CTR had a suspicious transaction check box at the top. This was in effect until April 1996 when the Suspicious Activity Report (SAR) was introduced.

          Currency reporting has changed since its introduction in 1970. There are now several different requirements for several different types of financial institutions as well as non-financial institutions.

          The various currency forms, their reporting requirements, and the number filed in calendar year 2008 are shown in this chart:

           

           Report Requirements Filed in CY 2008 
           Currency Transaction Report (CTR) Filed by financial institutions that engage in a currency transaction in excess of $10,000 15,449,549
           Currency Transaction Report Casino (CTRC) (Includes both Form 8362 & Form 8852) Filed by a casino to report currency transactions in excess of $10,000. 452,075
           Report of Foreign Bank and Financial Accounts (FBAR) Filed by individuals to report a financial interest in or signatory authority over one or more accounts in foreign countries, if the aggregate value of these accounts exceeds $10,000 at any time during the calendar year. 349,667
           IRS Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business Filed by persons engaged in a trade or business who, in the course of that trade or business, receives more than $10,000 in cash in one transaction or two or more related transactions within a twelve month period. 173,345
          Suspicious Activity Report (SAR)Filed on transactions or attempted transactions involving at least $5,000 that the financial institution knows, suspects, or has reason to suspect the money was derived from illegal activities. Also filed when transactions are part of a plan to violate federal laws and financial reporting requirements (structuring)733,543
           Suspicious Activity Report Casino (SARC) Filed on transactions or attempted transactions if it is conducted or attempted by, at, or through a casino, and involves or aggregates at least $5,000 in funds or other assets, and the casino/card club knows, suspects, or has reason to suspect that the transactions or pattern of transactions involves funds derived from illegal activities. Also filed when transactions are part of a plan to violate federal laws and transaction reporting requirements (structuring).11,162
          Registration of Money Services Business (RMSB) Each Money Services Business (MSB), except one that is a money services business solely because it serves as an agent of another MSB, must  register. 21,263
           Suspicious Activity Report by Money Services Businesses  (SARM) Filed on transactions or attempted transactions if it is conducted or attempted by, at, or through a MSB, involving or aggregating funds or other assets of at least $2,000 in funds or other assets, and the MSB knows, suspects, or has reason to suspect that the transactions or pattern of transactions involves funds derived from illegal activities. Also filed when transactions are part of a plan to violate federal laws and transaction reporting requirements (structuring) or when the transaction has no business or apparent lawful purpose and the MSB know of no reasonable explanation for the transaction after examining the available facts. When transactions are identified from a review of records of money orders or travelers checks that have been sold or processed, an issuer of money orders of traveler's checks shall be required to report a transaction or a pattern of transactions that involves or aggregates funds or other assets of at least $5000. 531,763
           Suspicious Activity Report by the Securities & Futures Industries Filed on transactions, or attempted transactions, if it is conducted by, at, or through a broker-dealer, it involves aggregates funds or other assets of at least $5,000, and the broker-dealer knows, suspects, or has reason to suspect that the transaction involves funds derived from illegal activities or is intended or conducted in order to hide or disguise funds or assets derived from illegal activity.  Also filed when transactions are designed, whether through structuring or other means, to evade filing requirements.  Also filed when transaction has no business or apparent lawful purpose or is not the sort in which the particular customer would normally be expected to engage, and the broker-dealer knows of no reasonable explanation for the transaction after examining the available facts.  Also filed when the transaction involves the use of the broker-dealer to facilitate criminal activity15,105
          Designation of Exempt Person Used by bank or other depository institution to designate an eligible customer as an exempt person from currency transaction reporting rules. 52,149

           



            United States
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            December 12, 2004
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            Posted: September 26, 2009, 6:23 pm - IP Logged

            yeah,your tax status applies too.if you're a self employed professional gambler then you keep tabs on all winnings,and also all losses which you can match against winnings.here we have a place on back of ticket to sign,but i've only been asked to sign,after a straight pik 4 win of around 1400 dollars.also in a casino if you win $15.00,you don't have to report it usually.

              Jack-C's avatar - us
              San Diego, CA
              United States
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              May 24, 2008
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              Posted: September 26, 2009, 6:26 pm - IP Logged

              Thank you very much mjwinsmith for that info.

              Notice that the last few items have the amount of $5,000.  That is the amount that is reported from the online lottery transactions to banks in the United States from overseas.

                Dorisdoright's avatar - hiro bird2_neg.jpg
                Michigan
                United States
                Member #2356
                September 20, 2003
                216 Posts
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                Posted: September 26, 2009, 6:36 pm - IP Logged

                Any  individual winning lottery ticket

                Michigan

                Prizes up to $600: Can be cashed at any retailer.  The Lottery does not withhold any taxes because they do not know.

                Prizes from $601 to $5,000:   The Lottery does not withhold any taxes but is required to report the lottery winnings to the IRS and Michigan Department of Treasury.  The winner will then be required to report the income in the tax year it is won.

                Prizes over $5,000:   For any Michigan Lottery prize over $5,000, the Lottery is generally required to withhold an estimated 25 percent in federal tax and 4.35 percent in state tax.  These withholdings do not necessarily satisfy a winner's tax liability; they are simply estimates.  We recommend that all winners contact the IRS, Michigan Department of Treasury and trusted tax professionals to determine whether additional tax payments will be required

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                  Monkey Butt, USA
                  United States
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                  Posted: September 26, 2009, 6:59 pm - IP Logged

                  good info. I'm 22, still a student and my parents actually did the details of my taxes in the past years. Sad to say,  I haven't much (you can say near 0)  experience filing my own  income tax. 

                  It's nice to hear no tax is taken out of the check you receive that day, but  what form would the lottery give you? Is it supposed to be filled out and sent out  April 15?   If you somehow omiss it and it didn't end up filed,  would be in  deep doo-doo?

                  I take my paperwork to an accountant. A few bucks and my taxes are filed online and I get a printed copy of my paperwork. If I get any money back it goes straight to my account. If I owe I mail them a postal moneyorder before the tax deadline to keep from paying interest. The form the lottery commission gives you is called a W2-G. It looks just like your regular W-2 you get from your employer when you file at the end of the year. You would treat this form just like it is a W-2 from a second job. You know if you worked more than one job during the year then you would get a W-2 from every job you held that year. At least you're supposed to. Anyway, all income over $599 is reported to the IRS but no taxes is taken out. It sort of remind me of working as a contractor where you are responsible for paying your own taxes. I would say any money that has been reported to the IRS should be reported as income. Because the IRS has a record of this transaction.

                  EX: A few years back I had to pay a few IRS bills because I did not report the interest from a savings account and interest from a checking account. The total amount for both accounts added up to less than $30. But because it had been reported to the IRS it was supposed to be listed as income. What led to this discovery by the IRS was something that I did to bring attention to myself. If not I never would've been audited. How do I know? I know a few people that work for the IRS and I called the eternal 1-800 number and was told the same thing after chatting with the customer service person.

                  Learn from my mistake. If it is money that has been reported to the IRS then report it as income when you file your taxes. If the money has not been reported to the IRS...........

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                    Monkey Butt, USA
                    United States
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                    August 23, 2007
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                    Posted: September 26, 2009, 7:26 pm - IP Logged

                    PERDUE...Sorry but you are so wrong..If a dollar ticket is less then 600.00 you can cash them all at one time..I tried it and did it..Like I said in my other post I cashed 3 tickets at 400.00 each and they gave me 1,200.00 and no taxes..It's the law..When I play the ponies I buy trifectas at 1.00 instead of 2.00 so if the tri was to pay over 600.00 I don't have to pay taxes..Look it up..

                    I am not familiar with how KY retailers treat winning lottery tickets. But I do know that here in my neck of the woods in TX it is up to the retailer as to wheather or not you can cash in that amount of tickets. The fact that you were able to cash in $1,200 worth of tickets at one time then count yourself as very blessed.  Because, I know here in my neck of the woods, had you tried to do that you would've had to either do it at 3 separate visits or go to the lottery office to redeem them or ended up doing this Bang Head. Why? Because the retailers are in the business of making money and they are not too happy with seeing their cash walk out the door at one time. Yes they will be reimbursed from the lottery commission but by handing out that type of cash, they are now faced with having to make a run to the bank for more cash. That is why a lot of people usually go to the grocery stores. Not that the grocery stores are any more happier to do it.

                    Plus it depends of the time of day you are trying to redeem your tickets. They may not have the cash on hand yet. It is no different than when you are trying to break a $100. Unless you are a paying customer a lot of places really don't want to give change because it leaves them short when they have to make change for their paying customers. I am not saying you are not a paying customer. No, not at all. I am only giving it to you the way it was given to me. I learn things because I run my mouth and ask questions almost everywhere I go. So I usually end up learning things that the average customer would not know.

                    I have met resistance when I've tried to cash in $20 $10 $50 or multiple $2 tickets. Why, because if all you are doing is cashing tickets, the retailers are not making a sale. ie... no income (sales) for them.


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                      Posted: September 26, 2009, 7:49 pm - IP Logged

                      yeah,we don't have a lot of gamblers here,so h&r block acts like they aren't sure how to treat winnings vs losses.

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                        Monkey Butt, USA
                        United States
                        Member #54569
                        August 23, 2007
                        1124 Posts
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                        Posted: September 26, 2009, 8:51 pm - IP Logged

                        Currency Reporting - Money Laundering

                        The Currency Transaction Report (CTR) came into existence with the passage of the Currency and Foreign Transactions Reporting Act, better known as the Bank Secrecy Act (BSA), in 1970.

                        When the first version of the CTR was introduced the only way a suspicious transaction of less than $10,000 was reported to the government was if a bank teller called an agent and provided the information. This was due, primarily, to the concern by financial institutions about the Right to Financial Privacy. On October 26, 1986, with the passage of the Money Laundering Control Act, the Right to Financial Privacy was no longer an issue. As part of the Act, Congress had stated that a financial institution could not be held liable for releasing suspicious transaction information to law enforcement. As a result, the next version of the CTR had a suspicious transaction check box at the top. This was in effect until April 1996 when the Suspicious Activity Report (SAR) was introduced.

                        Currency reporting has changed since its introduction in 1970. There are now several different requirements for several different types of financial institutions as well as non-financial institutions.

                        The various currency forms, their reporting requirements, and the number filed in calendar year 2008 are shown in this chart:

                         

                         Report Requirements Filed in CY 2008 
                         Currency Transaction Report (CTR) Filed by financial institutions that engage in a currency transaction in excess of $10,000 15,449,549
                         Currency Transaction Report Casino (CTRC) (Includes both Form 8362 & Form 8852) Filed by a casino to report currency transactions in excess of $10,000. 452,075
                         Report of Foreign Bank and Financial Accounts (FBAR) Filed by individuals to report a financial interest in or signatory authority over one or more accounts in foreign countries, if the aggregate value of these accounts exceeds $10,000 at any time during the calendar year. 349,667
                         IRS Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business Filed by persons engaged in a trade or business who, in the course of that trade or business, receives more than $10,000 in cash in one transaction or two or more related transactions within a twelve month period. 173,345
                        Suspicious Activity Report (SAR)Filed on transactions or attempted transactions involving at least $5,000 that the financial institution knows, suspects, or has reason to suspect the money was derived from illegal activities. Also filed when transactions are part of a plan to violate federal laws and financial reporting requirements (structuring)733,543
                         Suspicious Activity Report Casino (SARC) Filed on transactions or attempted transactions if it is conducted or attempted by, at, or through a casino, and involves or aggregates at least $5,000 in funds or other assets, and the casino/card club knows, suspects, or has reason to suspect that the transactions or pattern of transactions involves funds derived from illegal activities. Also filed when transactions are part of a plan to violate federal laws and transaction reporting requirements (structuring).11,162
                        Registration of Money Services Business (RMSB) Each Money Services Business (MSB), except one that is a money services business solely because it serves as an agent of another MSB, must  register. 21,263
                         Suspicious Activity Report by Money Services Businesses  (SARM) Filed on transactions or attempted transactions if it is conducted or attempted by, at, or through a MSB, involving or aggregating funds or other assets of at least $2,000 in funds or other assets, and the MSB knows, suspects, or has reason to suspect that the transactions or pattern of transactions involves funds derived from illegal activities. Also filed when transactions are part of a plan to violate federal laws and transaction reporting requirements (structuring) or when the transaction has no business or apparent lawful purpose and the MSB know of no reasonable explanation for the transaction after examining the available facts. When transactions are identified from a review of records of money orders or travelers checks that have been sold or processed, an issuer of money orders of traveler's checks shall be required to report a transaction or a pattern of transactions that involves or aggregates funds or other assets of at least $5000. 531,763
                         Suspicious Activity Report by the Securities & Futures Industries Filed on transactions, or attempted transactions, if it is conducted by, at, or through a broker-dealer, it involves aggregates funds or other assets of at least $5,000, and the broker-dealer knows, suspects, or has reason to suspect that the transaction involves funds derived from illegal activities or is intended or conducted in order to hide or disguise funds or assets derived from illegal activity.  Also filed when transactions are designed, whether through structuring or other means, to evade filing requirements.  Also filed when transaction has no business or apparent lawful purpose or is not the sort in which the particular customer would normally be expected to engage, and the broker-dealer knows of no reasonable explanation for the transaction after examining the available facts.  Also filed when the transaction involves the use of the broker-dealer to facilitate criminal activity15,105
                        Designation of Exempt Person Used by bank or other depository institution to designate an eligible customer as an exempt person from currency transaction reporting rules. 52,149

                         


                        I know this is off topic but do not be surprised if you have to show id and fill out paperwork if you plan to purchase more than one  postal moneyorder over $800 to $900 dollars. I discovered this when I purchased money orders of various amounts that were about $2,300 in all. I was told by the window clerk that I had to get approval from her supervisor before I could purchase the money orders. No joke. The clerk said something about money laundering and I had to show my ID and fill out some kind of paper stating where the moneyorders were being sent. For real. 

                        The same thing can be said about any transactions $10K or more. Although I do believe the leeway about it being $10K or less varies from financial institution to financial institution. If you recall a few years back the max you could withdraw from your account at the atm per 24hr period was $250 then it was bumped to $500 now I think it is either $1,000 or $1,500 not sure.

                        So if you do have a large amount of lottery money $10K $20K or more, from cashing in $500 tickets what is to be done with the cash if you are not comfortable having that type of cash around the house. Do you put it into a safety deposit box? Bury it in the backyard? Trust it to Grandma's old family bible? Put it under the mattress?

                        Once it hit the system, deposit into an account, you'd better have a airtight paper trail. Because it will be viewed as funny money. If you cash in that many tickets you better get those receipts showing how much was paid so that when/if the tax man does show up you have some sort of proof of winning during that time period.

                        Why take the chance or invite the headache?

                        As far as the government is concerned, any money you receive is considered income. Yet no one bothers to keep a journal of the money given to them as gifts for their birthday-christmas-wedding-graduation-anniversary-gas money-doing favors-money found-etc... to report to the IRS as income. Go figure. Bottom line is this, if the money has not been reported to the IRS as income, then don't sweat it.

                        But as anyone with common sense knows, get it in writing so the responsibility falls to the tax preparer or the tax man depending on who gave the information.

                          tiggs95's avatar - Lottery-036.jpg

                          United States
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                          Posted: September 27, 2009, 6:03 am - IP Logged

                          In any state you can cash up to 599.00 and as many of them as you want without paying any tax..I never cash a big ticket at a small joint I always go to Krogers..If a store can't cash your ticket they should not be selling lottery tickets..It is so simple..You buiy a ticket at a store they have to cash it if you win and if they won't don't buy tickets from that store in  Texas or Tuimbucktoooo...Good luck..

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                            Monkey Butt, USA
                            United States
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                            August 23, 2007
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                            Posted: September 27, 2009, 9:54 am - IP Logged

                            In any state you can cash up to 599.00 and as many of them as you want without paying any tax..I never cash a big ticket at a small joint I always go to Krogers..If a store can't cash your ticket they should not be selling lottery tickets..It is so simple..You buiy a ticket at a store they have to cash it if you win and if they won't don't buy tickets from that store in  Texas or Tuimbucktoooo...Good luck..

                            You are correct up to a point. What you need to realize is that you were very blessed to be able to cash $1,200 worth of tickets at the same time. I will state again here in TX the retailer is not obligated to cash your ticket. They (retailer) do it because they want to not because they have to.

                            Don't believe me, read it for yourself at the TX Lottery site txlotto.org click on FAQ scroll down to question number 14.

                            It says, "all retailers are authorized but not required to pay prizes of $599 or less."

                            Now I don't know about what happens in KY, but here in TX the retailers don't have to if they don't want to.

                            I know that it's funky but it's a very funky fact. Like it or not that is just the way it is.


                              United States
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                              December 12, 2004
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                              Posted: September 27, 2009, 9:58 am - IP Logged

                              i wish i was truly blessed,what am i chopped liver?