Question for Thomas Covenant on taxes after winningPrev TopicNext Topic

• David1

  

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  Jul 31, 2002, 1:51 pm

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  Thomas says:
  Even though they take out 27% fed tax, tax at the end of the year could be as high as 39%. So when you are paying off your credit card bills, keep that in mind. You might need some to pay the rest of the taxes.
  
  Response:
  Really? I thought the 27% was enough. So does it mean by the end of the year you may have to pay the additional 12% of taxes or does it mean you have to pay an additional 39% meaning at the end one would end up paying 66% of taxes? I need some clarification. Or is it possible to just keep it at 27%.
  
  David
  
• Abe

  

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  Jul 31, 2002, 2:26 pm

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  It means that 27% is withheld. That's all it means. Depending on how much you win you could end up paying less than 27% or more than 27%. It all depends on *your* tax bracket.
  
  The 27% withholding is a standard rate they withhold and pass onto the IRS. If you only won $10k and your annual income is low then you'll be paying less than 27% and so you can get a refund on your tax return. If you won $20million in cash then you're already in the highest tax bracket (currently at 38.6% for 2002) and will have to pay some more taxes ontop of what they already withheld.
• Todd

  

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  Jul 31, 2002, 2:28 pm

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  What he's referring to is that even though the gov't withholds 27% at the time the prize is awarded, big lottery winners may have to pay more at the end of the year because their big lottery prize pushes them into a higher tax bracket.
  
  It doesn't make any sense, does it? Well, hopefully you all go out and vote for politicians who support TAX CUTS instead of continuing the tax mess we're in.
  
  For most people fortunate enough to win a big prize, they may be able to live with the additional taxes, because it's "free money". Just imagine you work your whole life to get a big salary, just to have the government step in and take most of it, just because you've been successful. (Penalizing your success!) Sorry for the editorial, but I'm in total agreement that the 27% should be "enough".
  
  -Todd

   

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• Abe

  

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  Jul 31, 2002, 2:29 pm

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  Let's not forget the insanely high state income taxes some states have.. *cough* California! *cough*
  
  9.3% is insane. And all you need is like $37k/year to be in CA's highest bracket. What's with that?!
• Thomas Covenant

  

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  Jul 31, 2002, 4:18 pm

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  You pay 27% withholding, At the end of the year you will be in the highest tax bracket so you will an additional 12% fed tax(total 39%, actually closer to 39.1%) I think the congress has voted a tax decrease, so in 4 or 5 years the max fed tax will be 35%. If you happen to win, check with a tax lawyer for tax shelters. Or what you could do is move to the bahamas and apply for citizenship, but this might be illegal.

  
  Okay, now I believe you can predict lottery numbers
• David1

  

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  Jul 31, 2002, 5:00 pm

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  no text
• David1

  

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  Jul 31, 2002, 5:04 pm

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  Todd, your so correct. I could not agree more. I've always been in favor of tax cuts.
  
  Take care,
  David
• David1

  

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  Jul 31, 2002, 5:07 pm

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• Thomas Covenant

  

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  Jul 31, 2002, 5:15 pm

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  This is how it works. (It is illegal, I am not suggesting you do it) If you win 100 million, The fed gov takes 27%, or 27 million, you take the remaining and move to the bahamas and apply for citizenship. This will save you 12 million bucks. Plus you don't have to pay any taxes on interest you earn off the 73 million bucks.

  
  Okay, now I believe you can predict lottery numbers
• David1

  

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  Jul 31, 2002, 5:20 pm

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  I think its a fantastic idea. But I think the only problem is that it may be illegal. Plus, I rather stay in the good old US of A. Just my preference. But its still a great idea on your part. :-)
  
  Take care,
  David
• Thomas Covenant

  

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  Jul 31, 2002, 5:27 pm

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  Actually people do it all the time. Tax evasion isn't illegal in the bahamas. But according to US law (I think it was passed this year)If you apply for citizenship in another country, the US freezes all your assets at takes everything you own.

  
  Okay, now I believe you can predict lottery numbers
• David1

  

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  Jul 31, 2002, 5:41 pm

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  I just love this country and citizenship too much. I think I would just settle and pay the extra 12%. Or hope my tax lawyer can find me legal ways like tax shelters to save me some of that extra 12%. Or hope taxes would have been cut even more by the time IF I were so fortunate/lucky enough to win.   
  
  Take care,
  David