Lottery Taxes

Reply #78

paulkbarnes — Sun, 03 Aug 2008 20:40:03 GMT

The 25% that they take out initially is just the start. If you won $1M, you would be in the highest tax bracket. (Currently 35%) You will receive a 1099 form the following January or February stating the amount you won and how much was taken out for taxes. You will file this with your 1040 form along with your W-2's from work. The 25% actually covers your winnings up to about $300,000. After that your tax rate goes up. If you add your salary plus lottery winnings then subtract taxes taken out fr... [ More ]

Reply #77

sirbrad — Sun, 03 Aug 2008 07:45:18 GMT

It was a hypothetical question just to see how long the greedy arm of the IRS is. Also one could live easily and not go through all the hassle that way of filing taxes. Especially if they have no family and millions of dollars that would be left over. Some people do not have beneficiaries, and want to use most of their money if possible, and do not care about getting more rich.

I would invest in CD's before that however, as some interest is better than none. But if I have $200 million dollars... [ More ]

Reply #76

eproducer — Sat, 02 Aug 2008 13:17:57 GMT

No.

Reply #75

Stack47 — Fri, 01 Aug 2008 15:20:17 GMT

Had the taxes remained the same and had they continued to balance the spending budget, there would be no reason to consider raising them now. When they continued to spend more than they made after lowering the taxes, eventually the taxes will have to raised just to pay the interest. Hopefully it will be the other party raising the taxes while in control so they can use lowering the taxes to get back in control. Haven't the two parties been repeating that process for a number of years now?

For... [ More ]

Reply #74

justxploring — Fri, 01 Aug 2008 08:12:36 GMT

So I will ask again, what if I have a million dollars just sitting in a non-interest bearing account or my own safe for years? Can I be taxed on it again and again?

As Auntie Pat wrote, the answer is no. You won't get taxed on money just because you have it in a safe or no interest checking account, but why would you want to do that? Although there are plenty of ways to invest where taxes are deferred (as long as you don't withdraw the interest) I don't understand why someone would be so... [ More ]

Reply #73

AuntiePat — Fri, 01 Aug 2008 07:49:54 GMT

Reply #72

psykomo — Wed, 30 Jul 2008 23:10:27 GMT

,,,,,,,,,,, DON't WORRY

YOU shouda WON the JACKPOT 2004 thru 2008

THE DEMORAT's HAVE promised to ^^^^^^^^^^raise TAXE$$$

THEY R too LOW now THEY SAY!!!!!!!

STOP play'n those SILLY JACKPOT GAME'$$$

LOL

PSYKOMO

Reply #71

pigsNtrees — Tue, 29 Jul 2008 21:40:05 GMT

Thanks for the info.

Reply #70

justxploring — Mon, 28 Jul 2008 18:47:24 GMT

This is the way I understand it:

If your taxable income (total salary, interest, lottery prizes, etc., less every possible deduction) is $549,700. Then you would pay $94,601 + an additional $70K ($200K x 35%) = $164,601 total tax due

That's approx 30% of your total taxable income. Although I think it's fair, since they are still paying a lot more tax, this is why many people resent the wealthy getting a tax break. Someone making $50,000 a year might end up paying the same percentage of hi... [ More ]

Reply #69

pigsNtrees — Mon, 28 Jul 2008 18:16:07 GMT

Thanks all for all the good info and entertaining reading.

Now I get the part where they take out 25% for taxes on your win. I get that after they take out the 25%, you only pay taxes on the money you earn from your winnings and not the original win.

Now here is where I get confused. This is from the link that Uff Da gave....

Schedule Y-1 Married Filing Jointly or Qualifying Widow(er)

If taxable income is over $349,700

But not over--no limit

The tax is:$94,601.00 plus 35% of th... [ More ]

Reply #68

Uff Da! — Thu, 24 Jul 2008 13:11:03 GMT

Sirbrad, please go back and read some of the explanations given to you above. You are never taxed an additional 10%. Your tax rate is based upon your total adjusted gross income less deductions and credits. Perhaps the following chart will help you.

http://www.irs.gov/formspubs/article/0,,id=164272,00.html

With most investments you are not going to have withholding of estimated taxes at all. (There are some exceptions, like when you make a withdrawal of money from an IRA.) If a large porti... [ More ]

Reply #67

sirbrad — Thu, 24 Jul 2008 07:07:00 GMT

Also, are you taxed an additional 10% the next year on the original amount or the amount after the 25% deduction

Reply #66

CCHS13 — Thu, 24 Jul 2008 00:06:44 GMT

Appreciate the response kloud9y2k and thanks for the link Uff Da

Reply #65

Uff Da! — Wed, 23 Jul 2008 23:43:43 GMT

The best source of information on the gift tax - and on the estate tax, too - is probably the IRS website. You might want to check out this publication:

http://www.irs.gov/pub/irs-pdf/p950.pdf

Reply #64

sirbrad — Wed, 23 Jul 2008 06:24:04 GMT

You can do what you want, I am simply saying why create more unnecessary attention and act like an idiot? I already know how to act and speak very well, as I am a professional entertainer; so I do not need the book thanks. Also one need not be a jackpot winner to be educated properly, or teach all of the aspects involved with claiming a prize. Most of it is sound logical advice, but not to everyone.

But I think since the author has a bachelor's degree in business administration, and a masters... [ More ]

Reply #63

MaddMike51 — Wed, 23 Jul 2008 03:13:33 GMT

You go ahead and follow the books directions when you go to collect your millions if you win the lottery.And don't forget to take the book with you in case you forget how to act or what to say.

I'll go collect my check as myself when I win.I don't need a book to tell me what to do.And I can pretty much figure what to say on my own.

By the way,how many lotterys has the author of this book won?What makes him an expert on anything other than telling people how to dress and act

Reply #62

sirbrad — Wed, 23 Jul 2008 02:24:31 GMT

Well this act is a very logical thing to do if you want to keep others and more media at bay. Drawing more attention to yourself is a pretty stupid thing to do, and even a more security risk to you and your family. The goal is to be as boring as possible, put everyone to sleep, get out of there, and go and start enjoying life. Not to attract even more herds of people after you. With great power comes great responsibility. But go ahead and knock yourself out if you want.

The person that wrote

Reply #61

MaddMike51 — Wed, 23 Jul 2008 00:51:09 GMT

Well,I'd rather be myself than to act like a robot and do what the book says to do.Who wrote this book anyway....Miss Manners?.

Reply #60

sirbrad — Wed, 23 Jul 2008 00:07:29 GMT

Well if that is how you want to remember your once in a lifetime big moment go ahead. You will also be attracting a lot more attention and many others will remember you even better as well. The media feeds off of negativity so you would be doing exactly what they want, and drawing more unnecessary attention on yourself.

Reply #59

kloud9y2k — Tue, 22 Jul 2008 19:49:04 GMT

It's not tax evasion if the money is foreign money, invested in foreign places, and not paid to an American.

Reply #58

DC81 — Tue, 22 Jul 2008 05:58:09 GMT

Until the IRS looks into it and finds out, then you get a nice visit for tax evasion.

I don't understand why people think they can beat the IRS, don't forget what branch of government was responsible for bringing down the Mafia while the others failed. Just pay whatever you owe (or might get back) and be done with it. Just don't follow where your money goes or you'll get a big headache from our government's stupidity and horrible spending issues.

Reply #57

kloud9y2k — Tue, 22 Jul 2008 02:32:25 GMT

I would personally place my money offshore in one of the many ways which will create a tax vacuum as I call it, that is where no taxes may go and no taxes may reach your money. But don't ask me how to do it, I let my attorney and accountants do that. I of course watch every penny or the equivalent for the location it is stored.

Reply #56

kloud9y2k — Tue, 22 Jul 2008 02:27:29 GMT

I do not know the full ramifications of the gift tax but I do know some items pertaining to your question.

The IRS keeps record of any dollar amount being removed, deposited, and transferred around which is 10,000 and over. I have received large sums of money, more than 10,000 and more than 13,000, from relatives and offshore locations and the bank adds a line to my transfers which says gift on it.

They have know way to tell if you bought a bunch of items and gave them to someone as gifts.... [ More ]

Reply #55

psykomo — Tue, 22 Jul 2008 02:06:03 GMT

TT U MaddMike 51:

WE respect U the LP and I AM (IN) a studio tonite try'in to make a HIT for UUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUU!!!!!!?????

SORRY YOU R anyone get's FLUSTRATED'ed to ANY PSYKOMO POST!!!

WE PLAY the LOTTERY from TIME to TIME BUT wish all LP memer's

LUCK $$$$$$$$$$$$

PSYKOMO

Reply #54

MaddMike51 — Tue, 22 Jul 2008 01:51:15 GMT

I guess that makes even,Psykomo.About 90% of the time I scratch my head at what you say.

Reply #53

psykomo — Tue, 22 Jul 2008 01:39:13 GMT

HELL MM51:

even psyko does not know wathhaa tonk'in????????BOUT BUT^^^

I RESPECT every WORD IF U SAY-IT

CAUSE, YOU have researched PSYKOMO and KNOW A WINNER

LOL

PSYKOMO

Reply #52

MaddMike51 — Tue, 22 Jul 2008 01:17:55 GMT

Hell,I gotta take a pass on what your books says.I don't own any Sunday best clothes.Do ya s'pose they'd let me wear cut off jeans and a carshow t-shirt?I cuss up a storm in mixed company and will probably let lose with a few choice words out of habit.Do ya s'pose they'll bleep out what I say?When they ask me what I'm going to do with all that money,I'll probably say something like any damn thing I want,why the f*** do you ask? .Hell,if I act like my normal self I'll turn their required press co... [ More ]

Reply #51

psykomo — Tue, 22 Jul 2008 01:16:35 GMT

sirbrad:

the PARTY tax PARTY just got$$ started!$$$$$$$$$$$$$$$$$$$

Tell the cumgre$$ (why) raise TAX!!

?????????????????????????????????????????????????????????????

ARE YOU having FUN with the SELL-OUT$$$$but raise UR gas taxe's!

TRANSLATION:

CHECK-OUT PSYKO (HE trie's 2222222 enjoy LP

PS: YES, I want ALL to KNOW I enjoy my new car...,

Reply #50

sirbrad — Tue, 22 Jul 2008 00:58:30 GMT

The book also covers all the types of advisors and legal consultants you should put together as teams. Very in-depth for such a little book. Can't wait to start the other one.

Reply #49

psykomo — Tue, 22 Jul 2008 00:54:03 GMT

YES YES JXP:

YOU WANT to pay EXTRX 10 cent's a gallon to the GAS TAX trust fund that

cumgre$$ has proposed YES if you deliver pizza's or DRIVE a (CAR)!!!!!!

UR RICH RICH ??????????????????????????????????????????????$$$$$$$$$$$$$$$$$$$

have U UR RICH friend's HEARD?

THE DEMO's in cumgre$$ would like U to walk

THE pillsberry doe BOUY does EXIST today...

THANK's 2222222 OUR CUMGRESS NO BUD USA sold

TRANSLATION:

IF YOU depend on a WINNFALL like the LOTTERY VOTE DEMO... [ More ]

Reply #48

sirbrad — Tue, 22 Jul 2008 00:40:22 GMT

Depends on the person I guess. The examples stated to be positive, make no promises, wear your Sunday best, act as though the cameras/microphones are on you from the time you walk in until you get back to the car, do not use profanity or slang, make derogatory or slanderous comments, project your voice clearly and loudly so everyone in the press hall hears you, be polite and helpful to the press, hold and display promotional checks correctly, etc.

Most common sense, but still good inform... [ More ]

Reply #47

psykomo — Mon, 21 Jul 2008 23:50:36 GMT

REALLY G@@D POST sirbrad:

NO, for the past 5 year's I have PLAYED the LOTTERY consider MYSELF

A DARN BIG D@G@@DER to EDUCATION all good thing's that D LOTTERY

STAND's UP YES PSYKOMO want's to help

ALL the POOR people who need HELP,,,,,,,ANYWAY I can !!!!!!!

BUT, now UR demorat cumgre$$$ want's to RAISE UR GAS tax 10(cent's)

RAISE HELL all U rich people who DRIVE

BUT, if U WALK or RIDE the BUS VOTE DEMOORAT$$$

LOL (al gore may send his LIMO to Quick-Pick U-up... [ More ]

Reply #46

DC81 — Mon, 21 Jul 2008 15:00:02 GMT

In a disguise and acting out of their own character and pretending to be someone else or preferably just have a lawyer claim it for your trust that you've set up. Anything to get your name and face out of the papers is how I'd want to go about it.

Reply #45

CCHS13 — Mon, 21 Jul 2008 14:25:22 GMT

sirbrad I appreciate the response

Reply #44

MaddMike51 — Mon, 21 Jul 2008 13:59:08 GMT

So,just how should a person that just won a fortune dress act at a press conference

Reply #43

sirbrad — Mon, 21 Jul 2008 06:34:32 GMT

The book I am reading now says you can give $22,000 a year to as many people as you want, it is dated 2006. Course it says may be liable if over $12,000 here http://www.irs.gov/newsroom/article/0,,id=107815,00.html

Not sure if it is the same now or more. Not too bad, and in my area that would be a good living for most. You would be giving someone a career! I also love all the tips and sample press conference questions, and how you should dress and act etc. I have been rehearsing those for ab... [ More ]

Reply #42

sirbrad — Mon, 21 Jul 2008 03:52:30 GMT

Just started the Lottery Winner's Guide book, and all I can say is wow! Covers everything from the moment you are holding the winning on. A small little book that gets to the point very quickly, and is very informative about every aspect of the lottery, even taxes, home security, assembling your team, emotions, press conferences, claims process, and much more. Anyone else have this? Can't wait to get through it and move on to the more larger Infinite Financial Freedom book.

Reply #41

KY Floyd — Mon, 21 Jul 2008 01:21:48 GMT

I didn't say anything at all about a safe deposit box at the bank, but if you read it again perhaps you'll figure out what I did say. FWIW, rental of a safe deposit box is a service and if your state has a sales tax you can expect to pay sales tax, just as you would when renting anything else.

Reply #40

justxploring — Sun, 20 Jul 2008 17:52:49 GMT

I agree....and I know this for sure! This doesn't only apply to the wealthy. Even if you earn a small amount of additional income working from home or get a lot of tips at your job, you're supposed to do this so you don't owe much more than $1,000 when you file. It's a crap shoot. Most people are never audited, but there are flags that alert the IRS.

Reply #39

Raven62 — Sun, 20 Jul 2008 17:40:00 GMT

Anytime you receive sizable income where no Taxes have been withheld You should review your Tax situation: If you find yourself owing Taxes: You should consider filing an Estimated Tax Form inorder to avoid the possibility of a Tax Penalty for Under Payment of Taxes.

Reply #38

Stack47 — Sun, 20 Jul 2008 17:23:51 GMT

The real problem is when no taxes are withheld like with winning $5000 by hitting a pick-4 straight. In Ohio a player could hit five times, have five different clerks fill out a voucher form, and collect the entire $25,000 the same day without any taxes being withheld. You could get a double hit because it could move you to a higher tax bracket and you would have to write a check on April 15.

Reply #37

Stack47 — Sun, 20 Jul 2008 17:06:34 GMT

A good tax person can give the winner a list of options that would greatly reduce the additional taxes and possibly give them a nice return. It would be nice to actually have that problem and be able to explain how we avoided paying additional taxes.

Reply #36

Stack47 — Sun, 20 Jul 2008 15:41:13 GMT

Think of the lottery winnings of $1 million as an extra weekly pay check . Taxes were withheld, you filed on or before April 15 the following year, and you either got a refund or paid what you owed. Your tax obligations on the $1 million are done just like your tax obligations on every other weekly pay check.

Reply #35

sirbrad — Sun, 20 Jul 2008 03:44:40 GMT

But then that is it right? No more tax on the original $1 million, only on the interest if any the following year

Reply #34

Raven62 — Sat, 19 Jul 2008 15:07:32 GMT

After reviewing your Tax situation: If you find yourself in a Tax Bracket greater than 25%: You should consider filing an Estimated Tax Form inorder to avoid the possibility of a Tax Penalty for Under Payment of Taxes.

Reply #33

Todd — Sat, 19 Jul 2008 14:24:17 GMT

S-

That was a really great descriptive post, nicely done! I'm going to mark it as one of my favorites to refer back to in the future.

I would just like to add one caveat to the initial part about owing an additional $75K. If the person employs the use of tax shelters they can possibly avoid paying additional taxes, and it is not out of the realm of possibility to get a partial refund on that withheld 25%.

Reply #32

Todd — Sat, 19 Jul 2008 13:56:55 GMT

The lottery does not tax you. The IRS does. Maybe that's where the confusion lies.

Just like your company doesn't tax you. The IRS does. It all goes to the same place.

Reply #31

fja — Sat, 19 Jul 2008 13:49:51 GMT

I would suggest that if you have a tax CD (turbo tax for instance) that you start a simulated file and plug in 1 million dollars in winnings and see where it lands you,,,,then you can put the initial 25%tax and see how much more you owe ,,,then fill out a state form and if needed a city form....

Then play with it to see what different scenarios look like

Even if you talk to a good tax person, if you do not understand, it will still sound like foriegn language,,Then you have to trust that t... [ More ]

Reply #30

Stack47 — Sat, 19 Jul 2008 10:54:57 GMT

The amount of taxable interest is added to you wages etc. and becomes part of your adjusted gross income. If you had no wages for the year, you would only be taxed on the interest. The percentage of taxes you'll pay depends on your filing status, number of exemptions and deductions.

So would I owe more taxes the next year on the original million after the 25% witheld?

Let's say you won $1 million a couple of weeks ago and got a check for $750,000 today (July 19, 2008). The lottery will w... [ More ]

Reply #29

Stack47 — Sat, 19 Jul 2008 10:08:51 GMT

I don't want to confuse Sirbad but if he's reading this, you're only taxed ONCE by the lottery.

How many times do you have to be told the lotteries WITHHOLD federal and state taxes the same way your employer WITHHOLDS federal state taxes from your paycheck?

There is no lottery tax in my state.

I don't know (and this to answer STACK47).... those team of financial experts will get you a diversify portfolio with a mixture of high, low risk in stock, bonds, munis, CD's, T-Bills ( that mai... [ More ]

Reply #28

sirbrad — Sat, 19 Jul 2008 06:07:38 GMT

Yeah also the dreadful 50% estate tax, or inheritance tax? That is another thing I can't stand about the IRS, you won the money so you should be able to spend or give as much of it to whoever you want. They are just mad and greedy and don't want anyone else getting the money but them. How can they take 50% of what they already taxed at 35

Reply #27

CCHS13 — Sat, 19 Jul 2008 06:04:21 GMT

Informative thread, can someone shed some light on the dreadful gift tax for me. How is it that they know what and who you gave money too. Do they check withdrawls and deposits. I heard its something like 10,000 or 13,000 is the max a gift can be then a tax has to be paid on it. Is it just on cash or if I were to purchase things for someone else would the gift tax apply. Thanks in advance

Reply #26

sirbrad — Sat, 19 Jul 2008 06:02:42 GMT

Yeah I would most likely have a diversified portfolio, I just heard a lot of ridiculous statements about being taxed at 35% each year on one lottery jackpot win, which as I said sounded ridiculous. Not that I would put anything past the IRS. Heck I could live great on a 5% CD over several years from $600,000 up, and compound interest from the scraps.

Thanks to all for clearing most of this up. I was only using the money in a safe as an example, but I know some people who do that. I prefer a b... [ More ]

Reply #25

Mega-ThinkTank — Sat, 19 Jul 2008 05:50:40 GMT

There is no tax on the purchase of a safebox, dude. You know upfront what you paying for on a safebox to park your money. You can convert your winning into several Cashier Check and park it in a safebox in the bank and pay a small measly fee for it and not a DAMN THING THE IRS CAN DO ABOUT IT.

Reply #24

Mega-ThinkTank — Sat, 19 Jul 2008 05:46:52 GMT

Todd,

Your first 4 paragraphs is exactly as I was saying in my first thread. I don't want to confuse Sirbad but if he's reading this, you're only taxed ONCE by the lottery. What you earn on interests after investing your winnings, is SEPARATED from another lottery taxation. There is no more taxation from the Lottery after they take out the initial taxes to claim your prize.

You can hold all that money in your house and will never be taxed on it again. If you invest it, you're right (Sirbad... [ More ]

Reply #23

KY Floyd — Sat, 19 Jul 2008 05:09:56 GMT

What percentage do they tax the rest of your income at

Reply #22

KY Floyd — Sat, 19 Jul 2008 05:09:52 GMT

People who try to avoid paying taxes by keeping their money in a safe instead of investing it are stupid, even if they do happen to be rich. How much tax do you think the IRS would expect on the interest your money earns from sitting in a safe

Reply #21

Clairvoyance — Sat, 19 Jul 2008 05:03:22 GMT

After the initial taxes are taken from the winnings, buy a good safe and have it put into the wall of your home, hidden of course and get a good alarm system. The money can sit there forever and never be taxed again!!! What do you think a lot of rich folks do to avoid paying taxes on that kind of money? If you don t want to pay taxes on interest then keep the money OUT OF THE SYSTEM! Its that simple. If its not in the system it cant be taxed again.

If you put the money into the system then ya... [ More ]

Reply #20

sirbrad — Sat, 19 Jul 2008 04:45:54 GMT

Yeah I prefer to have my money now as opposed to later. If it were up to me I would not even give them it, unless of course the interest was good and I had enough already.

Reply #19

sirbrad — Sat, 19 Jul 2008 04:42:43 GMT

What if I have other income? Then I could just let the million sit pretty. They could only tax me on my income from a regular job right? Of course I personally would invest in interest bearing accounts, I am just hypothetically speaking and seeing what the options are tax-wise. I could easily live off of one million in principle, but would prefer to grow and sustain more wealth.

Reply #18

sirbrad — Sat, 19 Jul 2008 04:37:35 GMT

Thanks that is what I initially suspected as it makes sense. So they would just tax the interest as I also thought. What percentage would they tax it at? So would I owe more taxes the next year on the original million after the 25% witheld? I would not mind the interest taxes as you would still make a lot of money. But all this tax crap just puts a damper on winning the lottery. Everytime someone's wins the IRS does too, which is crap.

Reply #17

DC81 — Sat, 19 Jul 2008 02:47:41 GMT

Of course, but I mean that I would expect to pay the other 10% at tax time, not up front. But yeah, I'd certainly be consulting a tax attorney or two to figure out the best way to legally keep as much of it out of the incompetent hands of Uncle Sam.

Reply #16

Todd — Sat, 19 Jul 2008 02:32:37 GMT

You can't tell them to withhold an amount other than 25%. It's either a law or regulation. But I'm sure the IRS wouldn't mind getting an advance tax payment from you after the money is in your hands. Not sure what the wisdom in that is though.

If you win the jackpot, please don't do anything before getting a top-flight tax attorney. They will save you from yourself

Reply #15

DC81 — Sat, 19 Jul 2008 02:08:42 GMT

Meh, I just keep it simple and assume that I'd still have to pay the extra 10% at tax time so I'd stick with having to pay out at least 40% (rounded up and including MI state income tax) so then at tax time I'd be ready to pay whatever I may have to pay. Obviously during the time in between I'd be looking to reduce the taxes but I'd still made sure that extra 10+% would be covered if I do have to pay it. Also, that 10% would be on the original amount, not what was left over from the taxes alread... [ More ]

Reply #14

fja — Sat, 19 Jul 2008 01:00:06 GMT

With Todd

I always try to work up to break even when I do my taxes....no big refund coming back,,,no big payment in April...gives me more cash to work with month to month....

Reply #13

Stack47 — Sat, 19 Jul 2008 00:56:36 GMT

I hope the IRS isn't moderating this thread because it looks like some people have never filled out a tax form.

Reply #12

Todd — Sat, 19 Jul 2008 00:54:12 GMT

It's not really too complex.

The first year you get taxed on the jackpot that you earned .

In following years you would get taxed on any interest you earned on the prize, but obviously the prize money itself is not re-taxed.

Again, all this stuff is exactly like any income earned in a paycheck, nothing special, and not rocket science.

BTW, that 25% withholding is not a magic number that cannot be breached. If you give a lot to charity in the first year or do something else that woul... [ More ]

Reply #11

fja — Sat, 19 Jul 2008 00:52:01 GMT

If you win, and pay the initial tax on the winnings and then turn it into cash in a safe, no you will not be taxed on it the following year(after the year you have won)....if you do not work for the entire year and still have 1 million dollars sitting in your safe, your earned income will be zero....No taxes paid to any government agency and no tax refund back to you....(the Government is betting that you can't do that and still have 1 million in your safe).

Reply #10

Stack47 — Sat, 19 Jul 2008 00:51:34 GMT

If you already paid all the taxes on the $1 million, the answer is no. If you invest the same $1 million, you will be taxed on whatever income you get from the investments. A 5% yearly interest rate will make you $50,000 and you will owe taxes on the $50,000.

Reply #9

Stack47 — Sat, 19 Jul 2008 00:44:45 GMT

Lotteries withhold 25% from the winnings just like an employer withholds a percentage of your wages in each pay period. Sometime in January, the employer gives the employees a W-2 form that states how much the wages were and how much was withheld for taxes. If somebody won $1 million they would get a W-2G form from the lottery stating they won that amount and $250,000 was withheld for taxes. The winner would fill out a form 1040 the same as they did the year before with the exception of line 21

Reply #8

sirbrad — Sat, 19 Jul 2008 00:30:52 GMT

So I will ask again, what if I have a million dollars just sitting in a non-interest bearing account or my own safe for years? Can I be taxed on it again and again

Reply #7

KY Floyd — Sat, 19 Jul 2008 00:12:01 GMT

It's really simple. It's called income tax because it's a tax on income. You don't pay income tax on stuff that isn't income. How much income tax you pay depends on your total taxable income, and the source of the income, but has nothing to do with what bank the income comes from. Barista express is wrong. Interest income is regular income and is taxed at the same rate as other earned income. Capital gains are exactly what the name says: gains on capital, which is an increase in the value of an... [ More ]

Reply #6

sirbrad — Fri, 18 Jul 2008 23:13:32 GMT

Yeah that is what I was saying. Taxing interest depending on the investment makes sense, but not continuing to tax the principle, otherwise everyone would be broke in a few years. I would personally spread my money out in various investments, and low risk munis and mid-term CD's, which would be way more than enough for me to live great depending on the jackpot. I would shoot for tax exempt munis at the highest rate, and with the least risk.

Reply #5

sirbrad — Fri, 18 Jul 2008 23:08:56 GMT

But you do not get back the 25% like you do from your employer right? Also how can they continue to tax you if you do not earn money in interest, and just want to save a million dollars in cash? If they continued to tax you on that you would eventually have nothing! Taxing interest would make sense, but not the principle that earns no interest year after year. In that case how would anyone be able to stay rich if they just wanted to save the money and not receive interest? Also ar CD's taxed... [ More ]

Reply #4

Todd — Fri, 18 Jul 2008 19:18:34 GMT

Your description is not really accurate.

With your income from your job, the amount of taxes withheld is calculated based on what the company estimates you will be paid for the entire year. They then divide that amount by the number of paychecks in the year, and that's what they take out.

Then, in April, you calculate your taxes against what you actually earned (as opposed to the company's estimate a year before), plus whatever expenses you are able to deduct. If you did not pay enough in... [ More ]

Reply #3

BaristaExpress — Fri, 18 Jul 2008 17:52:51 GMT

So, if the IRS was to continue to tax his money, they would be taxing his actual winnings that's sitting in the bank untouched -- that doesn't make sense. That would mean his living off interests would get smaller and smaller so again, I doubt they continue to tax your jackpot winnings after taxing it at the actual rate the first time.

Your right it makes no sense, that's because they are taxing the earnings your getting from the amount in the bank! That's call Capital Gains and that's whats... [ More ]

Reply #2

Mega-ThinkTank — Fri, 18 Jul 2008 17:26:58 GMT

Excellent question. After reading your question and reading Todd's responds, it seems like the jackpot you win, will continue to get taxed after you already paid whatever the tax rate to claim the money.

I sort of doubt it's like income tax on money you earned from work. People go to work, get a check and pay tax on their earnings, per check. If you're a jackpot winner, that ONE win should be like a ONE-time of working. Therefore, they should tax it just that ONE time and no more. If I win it... [ More ]

Reply #1

Todd — Fri, 18 Jul 2008 12:11:24 GMT

Just think of it like income tax on money you earned from work.

When they withhold the 25%, that's like your employer withholding money from your paycheck. The amount they withhold is an estimate of what you will owe in taxes, based not only on your income, but also what tax breaks you will get by paying mortgage interest, medical expenses, retirement contributions, etc.

The lottery withholds the 25% in exactly that same way. I really hate when people say, Your taxes are REALLY 35%. No, th... [ More ]

Lottery Taxes

sirbrad — Fri, 18 Jul 2008 09:22:13 GMT

I asked this question long ago but still never got a definite answer. Say you win $1,000,000 and the 25% is already paid, (PA) would you still be taxed on this income year after year? I don't see how you could, as it would not be income anymore after the first year and taxes already taken out. I keep hearing some say taxed at 35% or something like that, what does this mean exactly?

The will take 35% of your money each year? I don't think so, if that was the case you would have nothing pretty... [ More ]