When do the taxes officially hit you on a big win?Prev TopicNext Topic

• TheOtherOne

  

  Nashville, TN
  United States
  Member #86,736
  February 9, 2010
  513 Posts
  Offline
  Jan 21, 2011, 11:55 am

  ▲▼

  Let's say someone wins a large jackpot of $100 Million on December 15, 2010. however they do not *claim* the winnings until January 15, 2011.

  At tax time, would this person owe the taxes from the winning when they do their taxes the following January/February of 2011

  OR

  would the taxes not hit until 2012, based on the person claiming the win in 2011?
• ressuccess

  

  United States
  Member #93,160
  June 23, 2010
  3,141 Posts
  Offline
  Jan 21, 2011, 3:30 pm

  ▲▼

  When somebody wins the jackpot, their taxes would be only one time if they take the cash option. If they take annual payments, tax will occur once a year if they step forward right away.
• savagegoose

  

  adelaide sa
  Australia
  Member #37,135
  April 11, 2006
  3,341 Posts
  Offline
  Jan 21, 2011, 4:51 pm

  ▲▼

  i think theytake a nice chunk out of the pile before you get to even see $1 from it, but then  apparently you still will owe the taxman a fair chunk come tax time. on $100M win ts fair to say the top tax bracket so what ever is left over from the %25 take at payout.  say %15 if top tax rate is %40

  " Still swinging, still missing "
  2014 = -1016; 2015= -1409; 2016  = -1171; 2017 = -1257 ; 2018 = - 1380 =  TOT =  - 6233

  keno historic = -2291 ; 2015= -603; 2016= -424; 2017 =-427; 2018= -223   TOT = -3968

  :
• temptustoo

  

  usa
  United States
  Member #89,194
  April 2, 2010
  2,826 Posts
  Offline
  Jan 21, 2011, 4:57 pm

  ▲▼

  win   and then  I will  tell  u
• TheOtherOne

  

  Nashville, TN
  United States
  Member #86,736
  February 9, 2010
  513 Posts
  Offline
  Jan 21, 2011, 5:50 pm

  ▲▼
  In response to savagegoose

  Quote: Originally posted by savagegoose on Jan 21, 2011

  i think theytake a nice chunk out of the pile before you get to even see $1 from it, but then  apparently you still will owe the taxman a fair chunk come tax time. on $100M win ts fair to say the top tax bracket so what ever is left over from the %25 take at payout.  say %15 if top tax rate is %40

  yeah, they take a big chunk right away, but they have to have someone claim it before they can take that chunk, right?

  And then after that they come back and take more taxes from the individual. I just wonder when they get it...I am guessing its after the person claims it.
• savagegoose

  

  adelaide sa
  Australia
  Member #37,135
  April 11, 2006
  3,341 Posts
  Offline
  Jan 21, 2011, 5:58 pm

  ▲▼

  yeah in not to clear on the tax rules there. as in if its decided on when the moneys won, i have heard talk about postponing your claimn to get that extra tax year before paying up but not sure on how it was decided , maybe do a search.

  " Still swinging, still missing "
  2014 = -1016; 2015= -1409; 2016  = -1171; 2017 = -1257 ; 2018 = - 1380 =  TOT =  - 6233

  keno historic = -2291 ; 2015= -603; 2016= -424; 2017 =-427; 2018= -223   TOT = -3968

  :
• Stack47

  

  Kentucky
  United States
  Member #32,651
  February 14, 2006
  10,301 Posts
  Offline
  Jan 21, 2011, 9:44 pm

  ▲▼
  In response to TheOtherOne

  Quote: Originally posted by TheOtherOne on Jan 21, 2011

  Let's say someone wins a large jackpot of $100 Million on December 15, 2010. however they do not *claim* the winnings until January 15, 2011.

  At tax time, would this person owe the taxes from the winning when they do their taxes the following January/February of 2011

  OR

  would the taxes not hit until 2012, based on the person claiming the win in 2011?

  Some say the drawing date is the determining factor but it's not "income" until the winner actually gets the money.  State lotteries allow at least 6 months to cash a ticket so somebody winning in December could wait until after they filed their taxes on or before April 15.  It's possible the winner may have not known they won; could they be penalized for ignorance? 

  There were drawings on December 31 and lottery offices weren't open until the January 2 at the earliest. Would the jackpot winnings be declared income for 2010 or 2011?

  By waiting, a $10 million winner could collect a years worth of interest on the $900,000 they would probably owe the IRS, but the interest would also be taxed at around 35% so it might not be worth it. Personally I would pay the remaining 9% Federal tax as quickly as possible to avoid any future tax problems.
• Justwinbaby

  

  Columbus, OH
  United States
  Member #96,387
  August 28, 2010
  86 Posts
  Offline
  Jan 22, 2011, 12:05 am

  ▲▼
  In response to TheOtherOne

  Quote: Originally posted by TheOtherOne on Jan 21, 2011

  Let's say someone wins a large jackpot of $100 Million on December 15, 2010. however they do not *claim* the winnings until January 15, 2011.

  At tax time, would this person owe the taxes from the winning when they do their taxes the following January/February of 2011

  OR

  would the taxes not hit until 2012, based on the person claiming the win in 2011?

  The lottery will subtract 25% for federal withholdings plus any applicable state tax depending on the state in question. Because it is $100 million, the winner of said prize would be responsible for 35% in federal taxes, meaning he or she would still owe the IRS the 10% that was not withheld from the winnings. However, because the earnings year would be 2011 since the prize was claimed in 2011, the remaining 10% would not be due until April 15, 2012.

  Now let's complicate matters just a bit. Let's say a person were to claim their winnings in December 2010 and an initial payment was made to them with the rest of the payment coming in January 2011. I know Michigan, for instance, will release $1 million to the winner though the rest of the prize can take 2 to 6 weeks to arrive. The winner would then be responsible for paying taxes on the winnings in both 2011 and 2012 since the winnings were split in two separate earning years. So that person would 10% on the $1 million and then another 10% on the payment received in 2011. 

  There are instances where a person could prepay although most tax experts would not advise you to so unless you derived a benefit from it. Some states like Iowa, for example, allow deductions for federal taxes paid. But not all states allow for these deductions.