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If a 70 year old person won the lottery. Of course the IRS would
Withhold a certain amount. But at the end of the year tax filing. This person
Filed married jointly, and his income was from social security and a
Small pension of $11,000.
Would he just have to declare the pension as income?
If a person wins the Florida state lottery, on any winning over 5000 they are instructed to witthold taxes. Means, that if you win, the taxes are already taken out.
So to answer your question, you file your taxes as you usually do and declare your income of ssi and the pension. You don't have to declare the lottery winnings. You will get a receipt for your winnings, less taxes.
Tick
This is not correct. Gambling winnings are reportable as income. Yes, any winnings over $5K are required to have withholding of 28.6% taken out. But this is withholding! It does not represent your actual tax liability. The income is reported along with any other taxable income when you file your return and your ACTUAL tax liability is determined. So if the amount of winnings is significant it could put you in a different tax bracket.
Florida, however, has no state income tax, so that wouldn't be an issue.
Thanks for correcting. I assumed wittholding was just that and that the 28% or so taken out would be the actual tax and not have to be reported at income tax time.Quote:
Originally Posted by ScottGem
What then happens at tax time? You report your winnings as income, and you have already paid wittholding tax, what taxes do you pay on it then ? The 28.6% all over again.
I am asking because when your employer wittholds a certain amount of income tax on your pay cheque, you receive (what we call a W2) that states how much tax was taken out and that's it; we have paid our income tax.
Just need an explanation
Tick
The lottery agency sends a W2G to the winners for each year they get a payment (for winners who choose an annuity option). This is reported on your tax return in EXACTLY the same way your salary or other taxable income is reported. Your actual tax is then calculated after taking out deductions and tax credits from the gross taxable income. This amount is then compared to the total amounts withheld from your income. If you had more withheld then you owe, you get a refund, otherwise you have to pay. Note, this is for US taxpayers. Because of our complex tax laws, it is rare for the actual amount withheld to equal your tax liability. This may be different in Canada. BTW, according to my brief research Canada lotteries are not taxable income, at least for Canadian citizens.
Most people advise lottery winners, especially big prize winners, to consult with an attorney and/or tax specialists BEFORE claiming their prize. There may be ways of mitigating the tax bite and other legal issues.
Quote:
Originally Posted by ScottGem
FYI only. Our Premier wants tax levied on lottery winnings. They tried it in Saskatchewan at l5% but when sales of lottery tickets dropped off, they cancelled the tax. It varies province to province.
Tick
Wonderful answers. So they must report Social Security as taxableQuote:
Originally Posted by Oneill474
Income. I was a little uncertain about that aspect. Understood Scott interpretation very well.
I'm not sure if they have to report the SS. It depends on whether they get a 1099R or not.
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