lottery (crime, lawyers, income)

[skfarq]

My dad just won a couple of thousand on the lottery...he is scared to cash it because he is on social secruity(82yrs old) and thinks he will end up paying out the nose in taxes.....does he still pay the same amount in taxes as everybody else???

[Kefir King]

Some of Social Security is taxable income with silly rules too complex to bother with here.

The lottery win is income just like he earned it on a job.

Basically if the win is only a couple thousand and he has no other income except SS, then he will owe no taxes.

If you give me particulars, I'll give you the tax hit if any.


A fair idea is to wait until January to cash the prize...in general, any tax deferred is a tax reduced.


Of course, If you are talking a POWERBALL win for a few million then more discussion is needed...can we meet for drinks?

[omigawd]

I'm pretty sure they take taxes out of your winnings when you claim any lottery prize over $600. I'm not positive, though. He's not going to "pay through the nose" in taxes. At his age, he probably won't have to pay a penny.

[SkyBob]

Originally Posted by Kefir King

A fair idea is to wait until January to cash the prize...in general, any tax deferred is a tax reduced.

Waiting until January will not help matters. The tax bite, whether there is one or not, is effective in the year that the lottery drawing made the ticket a winner.

[StaggerLee22]

Go to a OTB if they're still there or go to a track during regular hours.
You can easily find somebody there to cash the ticket for a few bucks.
Don't let the ticket leave your sight.
....and have in your possession, something of value from the ticket casher.

[Kefir King]

Originally Posted by SkyBob

Waiting until January will not help matters. The tax bite, whether there is one or not, is effective in the year that the lottery drawing made the ticket a winner.

from honeckotoole.com
When lottery winnings are taxed.You report your lottery winnings as income in the
year, or years, you actually or “constructively” receive those winnings.


from Motleyfool.com
When lottery winnings are taxed

You would report the income in the year, or years, the winnings are received. In the case of noncash prizes, this would be the year the prize is received. In the case of cash winnings, the year you report the winnings would depend on whether the lottery prize is payable in installments, or whether you are given the option to elect payment in a lump sum.

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Why should it be different from any other way potential income is taxed, when PAID not when EARNED? Someone with a huge stock appreciation is taxed when he cashes in, not when he first COULD have cashed in.
Making taxes owable on the date of thw drawing might result in the bizarre situation of a man tearing up a ticket but yet owing MILLIONS in taxes on money he never sees.
(Sorry I could not find a crystal clear IRS regulation from their website...no surprise.)

Another wrinkle is a man who wins big in November 2011 and spends the next 11 months seeing lawyers and accountants to figure out how to handle the situation. Has he committed the crime of tax fraud in 2011?