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When the jackpot gets that high I could care less what I paid in taxes, cause whatever I end up with will be waaaaay more than I or anyone of us on this site could ever earn in 2 lifetimes
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Quote: Originally posted by Shelby Mustang on Feb 11, 2015
When the jackpot gets that high I could care less what I paid in taxes, cause whatever I end up with will be waaaaay more than I or anyone of us on this site could ever earn in 2 lifetimes
The extra 5-mill could go a long way in helping others if you not interested in keeping it for yourself.
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"Here in MO you can opt out and take the full amount with an agreement to pay the full taxes at tax time."
I'm guessing you've misunderstood something. Maybe only part of it, or maybe the entire concept. Missouri is free to do what they want about withholding state income taxes, but the withholding of federal income taxes is a federal requirement and Missouri can't change that.
Many (most?) states make withholding voluntary for distributions from some investments. In theory, perhaps Missouri would allow somebody to opt out of withholding on a $50 million payment from a retirement fund, but the vast majority of exempt payments are far smaller. I think it's very unlikely that they'd have a "requirement" for withholding on lottery winnings and then let winners decide to opt out of the requirement.
Even if it turns out you could opt out, it's a risky proposition. In a safe investment you might earn a small percentage of the amount you invest, and that amount will be even smaller after you pay the income taxes on it. If you're stupid enough to invest it in something that offers a chance to earn a significant return you've also got a chance to lose far more than you're likely to earn. You're speculating about an after-tax return of perhaps $3 million, while potentially risking the entire $98 million.
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Quote: Originally posted by KY Floyd on Feb 11, 2015
"Here in MO you can opt out and take the full amount with an agreement to pay the full taxes at tax time."
I'm guessing you've misunderstood something. Maybe only part of it, or maybe the entire concept. Missouri is free to do what they want about withholding state income taxes, but the withholding of federal income taxes is a federal requirement and Missouri can't change that.
Many (most?) states make withholding voluntary for distributions from some investments. In theory, perhaps Missouri would allow somebody to opt out of withholding on a $50 million payment from a retirement fund, but the vast majority of exempt payments are far smaller. I think it's very unlikely that they'd have a "requirement" for withholding on lottery winnings and then let winners decide to opt out of the requirement.
Even if it turns out you could opt out, it's a risky proposition. In a safe investment you might earn a small percentage of the amount you invest, and that amount will be even smaller after you pay the income taxes on it. If you're stupid enough to invest it in something that offers a chance to earn a significant return you've also got a chance to lose far more than you're likely to earn. You're speculating about an after-tax return of perhaps $3 million, while potentially risking the entire $98 million.
KY
When playing in a syndicate or claiming the prize as a trust they can be set up so that each member
receives a full share after filling out the necessary tax forms which makes them responsible for taxes
on the money they receive. As far as investments go there are those with guaranteed returns. When
the annual payment option is chosen the lottery invest the cash value and that's where the annual
payments come from. I could be wrong as things change but that's the way it use to be. Everyone
who wins a giant JP should form a trust and claim it anonymously if their state allows it.
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I mentioned that very thing in this November thread: $321 MILLION: Mega Millions jackpot is red hot and KY Floyd had this to say about making money off the difference - 14.6% - between the 25% initial withholding and the total 39.6% due the federal govt. I read up on it some, not wanting to take a single source as gospel and it looked like he was correct. I follow a Forbes financial writer (who has written several articles about the lottery) on Twitter (not that I'm an avid user of that particular social media) and asked her but she never did reply.
United States
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Quote: Originally posted by RL-RANDOMLOGIC on Feb 11, 2015
KY
When playing in a syndicate or claiming the prize as a trust they can be set up so that each member
receives a full share after filling out the necessary tax forms which makes them responsible for taxes
on the money they receive. As far as investments go there are those with guaranteed returns. When
the annual payment option is chosen the lottery invest the cash value and that's where the annual
payments come from. I could be wrong as things change but that's the way it use to be. Everyone
who wins a giant JP should form a trust and claim it anonymously if their state allows it.
RL
I guess the question I would first pose to you is, what investment do you know of that will guarantee you a 5% return for a period not exceeding 12 months.
I'm sorry to say that American Greed is filled with stories of people losing their shirts from "guaranteed investments". The "guarantee" gets them every time.
Escrow accounts get looted, Ponzi schemes get revealed, financial institutions fail, advisors pilfer, insurers lie. Nothing is a guarantee. Some investments are simply a safer risk than others. I remember a time when real estate investing was a guarantee. People will always buy houses they said. People will walk away from their cars, give up their retirement accounts, but they'll never walk away from their homes. 2008 saw that guaranteed belief system turn on its head.
I'm not understanding why you would take the risk. What's the point? If you had $330, would you risk $98 of that $330 for the chance of getting an extra 5 bucks? And for all the reasons to take a risk, taxes shouldn't be one of them. Make some charitable donations and lower your tax burden that way. You're planning to donate some of it anyway. Make the donation work for you.
Kentucky United States
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February 14, 2006
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Quote: Originally posted by RL-RANDOMLOGIC on Feb 11, 2015
KY
When playing in a syndicate or claiming the prize as a trust they can be set up so that each member
receives a full share after filling out the necessary tax forms which makes them responsible for taxes
on the money they receive. As far as investments go there are those with guaranteed returns. When
the annual payment option is chosen the lottery invest the cash value and that's where the annual
payments come from. I could be wrong as things change but that's the way it use to be. Everyone
who wins a giant JP should form a trust and claim it anonymously if their state allows it.
RL
Couldn't find any withholding exemptions for pools, syndicates, or trusts on the Forms W-2G and 5754 instructions but I'm positive the Federal tax rules for Missouri are the same as every other state.
If more than one person shares in the winnings from a single wager, the total amount of the winnings (minus the amount wagered) will determine the amount of the proceeds for purposes of reporting and withholding. Do not allocate winnings to each winner before determining whether the withholding or reporting thresholds were reached.
For example, E purchases a sweepstakes ticket for $1 on behalf of himself and S, who contributes an equal amount of the ticket price and who will share equally in any winnings. The ticket wins $5,002. Because the winnings ($5,002 - $1 = $5,001) are more than $5,000, you must withhold 25% of $5,001. You must prepare Form W-2G for E and a separate Form W-2G for S using the information furnished to you on Form 5754.
United States
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Quote: Originally posted by Stack47 on Feb 11, 2015
Couldn't find any withholding exemptions for pools, syndicates, or trusts on the Forms W-2G and 5754 instructions but I'm positive the Federal tax rules for Missouri are the same as every other state.
If more than one person shares in the winnings from a single wager, the total amount of the winnings (minus the amount wagered) will determine the amount of the proceeds for purposes of reporting and withholding. Do not allocate winnings to each winner before determining whether the withholding or reporting thresholds were reached.
For example, E purchases a sweepstakes ticket for $1 on behalf of himself and S, who contributes an equal amount of the ticket price and who will share equally in any winnings. The ticket wins $5,002. Because the winnings ($5,002 - $1 = $5,001) are more than $5,000, you must withhold 25% of $5,001. You must prepare Form W-2G for E and a separate Form W-2G for S using the information furnished to you on Form 5754.
Stack
I don't want this to turn into a tax class such as filing a W-9 and having a TIN, etc...
I was making a simple observation about the time between the date of the claim until
the deadline for filing on Apr-15-2016. No money is safe even if it's locked away in a safe
cemented into your basement floor, fact is, that 97% of all US money does not even exist.
As for safe investments there is no such thing but the more money you have the safer it
gets. Walk into a bank and tell them you have $100,000.00 to deposit and ask what they
can do for you. Better yet win a major JP and they will be lining up with offers. Many people
lost out in the housing bubble and others lost everything in stocks but some made out like
bandits. I think everyone would do well to at least learn a little about how the banking industry
works. Most will never have that kind of money and even banks come and go but that's another
story. I hope that I never get so rich that I can toss out a few million as if it means nothing.
Investing a few dollars to maybe win big, well I do it quite often, matter of fact I do it every time
I buy a lottery ticket. If I don't buy a ticket then I am sure not to loose but it's also a sure thing that
Topic 306 - Penalty for Underpayment of Estimated Tax
The United States income tax is a pay-as-you-go tax, which means that you must pay tax as you earn or receive your income during the year. You can do this either through withholding or by making estimated tax payments. If you do not pay your tax or you pay an insufficient amount of tax through withholding, you might also have to pay estimated taxes. If you did not pay enough tax throughout the year, either through withholding or by making estimated tax payments, you may have to pay a penalty for underpayment of estimated tax. Generally, most taxpayers will avoid this penalty if they either owe less than $1,000 in tax after subtracting their withholding and estimated tax payments, or if they paid at least 90% of the tax for the current year or 100% of the tax shown on the return for the prior year, whichever is smaller. There are special rules for farmers and fishermen, certain household employers and certain higher income taxpayers. Please refer to Publication 505, Tax Withholding and Estimated Tax, for more information.
Generally, taxpayers should make estimated tax payments in four equal amounts to avoid a penalty. However, if you receive income unevenly during the year, you may be able to vary the amounts of the payments to avoid or lower the penalty by using the annualized installment method. Use Form 2210 (PDF), Underpayment of Estimated Tax by Individuals, Estates, and Trusts, to see if you owe a penalty for underpaying your estimated tax.
The law allows the IRS to waive the penalty if:
1.You did not make a required payment because of a casualty, disaster, or other unusual circumstance and it would be inequitable to impose the penalty, or
2.You retired (after reaching age 62) or became disabled during the tax year for which you should have made estimated payments or in the preceding tax year, and the underpayment was due to reasonable cause and not willful neglect.
Refer to the Form 1040 Instructions (PDF) or the Form 1040A Instructions (PDF) for where to report the estimated tax penalty on your return.
* you don't need to buy every combination, just the winning ones *
Kentucky United States
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February 14, 2006
10,305 Posts
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Quote: Originally posted by RL-RANDOMLOGIC on Feb 11, 2015
Stack
I don't want this to turn into a tax class such as filing a W-9 and having a TIN, etc...
I was making a simple observation about the time between the date of the claim until
the deadline for filing on Apr-15-2016. No money is safe even if it's locked away in a safe
cemented into your basement floor, fact is, that 97% of all US money does not even exist.
As for safe investments there is no such thing but the more money you have the safer it
gets. Walk into a bank and tell them you have $100,000.00 to deposit and ask what they
can do for you. Better yet win a major JP and they will be lining up with offers. Many people
lost out in the housing bubble and others lost everything in stocks but some made out like
bandits. I think everyone would do well to at least learn a little about how the banking industry
works. Most will never have that kind of money and even banks come and go but that's another
story. I hope that I never get so rich that I can toss out a few million as if it means nothing.
Investing a few dollars to maybe win big, well I do it quite often, matter of fact I do it every time
I buy a lottery ticket. If I don't buy a ticket then I am sure not to loose but it's also a sure thing that
I won't win either.
RL
I was just making sure when you said "Here in MO you can opt out and take the full amount with an agreement to pay the full taxes at tax time.", you were aware of 25% will be withheld for Federal taxes regardless where you live or how you collect. The winner will still owe about another 14% and they can invest that amount until the tax time. The last thing a jackpot winner needs is IRS problems because of creative accounting.
Topic 306 - Penalty for Underpayment of Estimated Tax
The United States income tax is a pay-as-you-go tax, which means that you must pay tax as you earn or receive your income during the year. You can do this either through withholding or by making estimated tax payments. If you do not pay your tax or you pay an insufficient amount of tax through withholding, you might also have to pay estimated taxes. If you did not pay enough tax throughout the year, either through withholding or by making estimated tax payments, you may have to pay a penalty for underpayment of estimated tax. Generally, most taxpayers will avoid this penalty if they either owe less than $1,000 in tax after subtracting their withholding and estimated tax payments, or if they paid at least 90% of the tax for the current year or 100% of the tax shown on the return for the prior year, whichever is smaller. There are special rules for farmers and fishermen, certain household employers and certain higher income taxpayers. Please refer to Publication 505, Tax Withholding and Estimated Tax, for more information.
Generally, taxpayers should make estimated tax payments in four equal amounts to avoid a penalty. However, if you receive income unevenly during the year, you may be able to vary the amounts of the payments to avoid or lower the penalty by using the annualized installment method. Use Form 2210 (PDF), Underpayment of Estimated Tax by Individuals, Estates, and Trusts, to see if you owe a penalty for underpaying your estimated tax.
The law allows the IRS to waive the penalty if:
1.You did not make a required payment because of a casualty, disaster, or other unusual circumstance and it would be inequitable to impose the penalty, or
2.You retired (after reaching age 62) or became disabled during the tax year for which you should have made estimated payments or in the preceding tax year, and the underpayment was due to reasonable cause and not willful neglect.
Refer to the Form 1040 Instructions (PDF) or the Form 1040A Instructions (PDF) for where to report the estimated tax penalty on your return.
Interesting RJOH, especially that part about the 4 equal parts of paying estimated taxes, especially if you collected your winnings within the next 4-6 weeks. Obviously you would have to change your career title to gaming/gambling. Next challenge I see would be offsetting those 3 remaining tax quarters with losses or perhaps donations to charities...Of the 14.6% due, you would have to have some pretty shrewd advisers and accountants to make gosh darn sure that the IamGod Redistribution Specialists weren't knocking at your door with a big empty Santa bag saying,"Fill er up".
Glad I don't have that problem........................................................................Yet
NY United States
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October 16, 2005
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Quote: Originally posted by CDanaT on Feb 12, 2015
Interesting RJOH, especially that part about the 4 equal parts of paying estimated taxes, especially if you collected your winnings within the next 4-6 weeks. Obviously you would have to change your career title to gaming/gambling. Next challenge I see would be offsetting those 3 remaining tax quarters with losses or perhaps donations to charities...Of the 14.6% due, you would have to have some pretty shrewd advisers and accountants to make gosh darn sure that the IamGod Redistribution Specialists weren't knocking at your door with a big empty Santa bag saying,"Fill er up".
Glad I don't have that problem........................................................................Yet
"Next challenge I see would be offsetting those 3 remaining tax quarters with losses"
Amen. Who wouldn't want to lose $25 million to get a deduction that will save $10 million in taxes?
I see people talking about reducing taxes by charitable donations or investment losses all the time. With charities you're at least doing somehting beneficial, but I have the feeling that a lot of people don't realize that reducing their taxes will mean there's less money in their pocket, too.