Welcome Guest
Log In | Register )
You last visited January 18, 2017, 5:17 pm
All times shown are
Eastern Time (GMT-5:00)

Jackpot and Tax

Topic closed. 8 replies. Last post 4 years ago by mathhead.

Page 1 of 1
PrintE-mailLink
Avatar
Inland Empire
United States
Member #118116
October 22, 2011
322 Posts
Offline
Posted: May 26, 2013, 3:30 pm - IP Logged

 I am asking the question again. Can I ask the lottery office to withold the whole 39.6% tax instead of 25%? I know this sounds stupid but I'd rather resolve the tax issue ASAP and forget about it.

    rdgrnr's avatar - walt
    Way back up in them dadgum hills, son!
    United States
    Member #73904
    April 28, 2009
    14903 Posts
    Offline
    Posted: May 26, 2013, 3:35 pm - IP Logged

     I am asking the question again. Can I ask the lottery office to withold the whole 39.6% tax instead of 25%? I know this sounds stupid but I'd rather resolve the tax issue ASAP and forget about it.

    "Can I ask the lottery office to withold the whole 39.6% tax instead of 25%?"

    Yes, you can ask them to.

      Avatar
      Inland Empire
      United States
      Member #118116
      October 22, 2011
      322 Posts
      Offline
      Posted: May 26, 2013, 3:56 pm - IP Logged

       It may sound silly but I don't want to spend the rest of the year worrying about paying extra 14.6% next year. And if I open a business and get some tax deduction...see what I mean?

        rdgrnr's avatar - walt
        Way back up in them dadgum hills, son!
        United States
        Member #73904
        April 28, 2009
        14903 Posts
        Offline
        Posted: May 26, 2013, 3:59 pm - IP Logged

         It may sound silly but I don't want to spend the rest of the year worrying about paying extra 14.6% next year. And if I open a business and get some tax deduction...see what I mean?

        Yes.

          Avatar

          United States
          Member #130795
          July 25, 2012
          80 Posts
          Offline
          Posted: May 26, 2013, 5:54 pm - IP Logged

           I am asking the question again. Can I ask the lottery office to withold the whole 39.6% tax instead of 25%? I know this sounds stupid but I'd rather resolve the tax issue ASAP and forget about it.

          The answer will depend on the particular lottery.  The IRS requires only 25% (28% in some unusual cases).  There is no requirement that a lottery provide for additional withholding, unlike employers who must follow "instructions" on Form W-4.

          But it's no big deal.  If you want to "withhold" an additional 14.6%, just get a calculator, write a check, and file Form 1040-ES for the appropriate period.

          In fact, it might be prudent to do that -- well, properly estimating the additional tax.  If you wait until the following April (i.e. when you file your tax return), you might incur an underpayment penalty.  Usually, the few percentage is nothing to worry about, IMHO.  But a few percentage of $millions is a lot.

          Speculations and discussion here can be fun.  But if you win a jackpot or any large amount, you can afford to hire a tax specialist for a few $100.

            Avatar

            United States
            Member #130795
            July 25, 2012
            80 Posts
            Offline
            Posted: May 26, 2013, 6:06 pm - IP Logged

             It may sound silly but I don't want to spend the rest of the year worrying about paying extra 14.6% next year. And if I open a business and get some tax deduction...see what I mean?

            No!  That is exactly why you would not want to pay an extra 14.6% estimated tax.  It might easily result in an overpayment because you might do something with the windfall that could offset the additional tax.

            Of course, you'll simply get some of it back as a refund.  But you lost the earning and purchasing power of that money in the meantime.  Ordinarily, that's not a big deal; there are many circumstances where I suggest that people risk overpayment for convenience.  But here, we might be talking about $10,000s, $100,000s, perhaps even $millions.  It would be prudent to do it right.  You could certainly afford to.

            I am not suggesting that you "spend the rest of the year worrying about paying extra" tax.  I am suggesting that you do a proper estimate of the year-end tax liability.  Then either put that amount aside (earning a return) or file Form 1040-ES, whichever is best for your circumstances.

              Avatar
              Republic of Texas
              United States
              Member #57557
              January 9, 2008
              1095 Posts
              Offline
              Posted: May 26, 2013, 6:15 pm - IP Logged

              The answer will depend on the particular lottery.  The IRS requires only 25% (28% in some unusual cases).  There is no requirement that a lottery provide for additional withholding, unlike employers who must follow "instructions" on Form W-4.

              But it's no big deal.  If you want to "withhold" an additional 14.6%, just get a calculator, write a check, and file Form 1040-ES for the appropriate period.

              In fact, it might be prudent to do that -- well, properly estimating the additional tax.  If you wait until the following April (i.e. when you file your tax return), you might incur an underpayment penalty.  Usually, the few percentage is nothing to worry about, IMHO.  But a few percentage of $millions is a lot.

              Speculations and discussion here can be fun.  But if you win a jackpot or any large amount, you can afford to hire a tax specialist for a few $100.

              The underpayment penalty kicks in if you owe more at the end of the tax year, but prepaid less taxes this year than your tax liability for last year. Example: Last year your tax liability was $1000. This year, you win a lottery and withholding is $5000. You've already paid in more than last year's tax liability, so even if your tax liability for the lottery win winds up at an additional $3000, you won't incurr penalties. Interest... maybe so, but not penalties.

               

              At least that is how I remember it. Thumbs Up

              face

              singlewinnersinglewinnersinglewinner   

                rdgrnr's avatar - walt
                Way back up in them dadgum hills, son!
                United States
                Member #73904
                April 28, 2009
                14903 Posts
                Offline
                Posted: May 26, 2013, 6:25 pm - IP Logged

                The underpayment penalty kicks in if you owe more at the end of the tax year, but prepaid less taxes this year than your tax liability for last year. Example: Last year your tax liability was $1000. This year, you win a lottery and withholding is $5000. You've already paid in more than last year's tax liability, so even if your tax liability for the lottery win winds up at an additional $3000, you won't incurr penalties. Interest... maybe so, but not penalties.

                 

                At least that is how I remember it. Thumbs Up

                Depends if he's in the Tea Party or supports the Constitution or Freedom and stuff like that too.

                  Avatar

                  United States
                  Member #130795
                  July 25, 2012
                  80 Posts
                  Offline
                  Posted: May 26, 2013, 8:40 pm - IP Logged

                  The underpayment penalty kicks in if you owe more at the end of the tax year, but prepaid less taxes this year than your tax liability for last year. Example: Last year your tax liability was $1000. This year, you win a lottery and withholding is $5000. You've already paid in more than last year's tax liability, so even if your tax liability for the lottery win winds up at an additional $3000, you won't incurr penalties. Interest... maybe so, but not penalties.

                   

                  At least that is how I remember it. Thumbs Up

                  Yes, if all of your "prepaid tax" was done with withholding.  However, if you (also) made any estimated tax payments, and especially if they were unequal, you might incur an underpayment penalty if you fail to cover the abnormally large tax liability for the "quarter" (estimated tax payment period) in which the cash jackpot is paid.  The operative word is "might", a word I used all along.  The devil is in the details; this is not the place to discuss all the ins and outs of US taxes, IMHO.  My initial comments were somewhat over-simplified, commensurate with the level of the question, I hope, and intended to throw a degree of prudent caution into the discussion.