can i file unearned income on lottery winnings when filing income taxes?

Question

was unemployed during 2006 due to an injury but got lucky and won $10,000 on a lottery ticket the state took $2,500 in taxes as soon as I claimed my prize,I have 2 kids and was wondering what I do on taxes

Answer 1

Congratulations on your winnings. They couldn't have come at a better time.

You didn't tell us which state you live in, so I can't comment on that. Most states do NOT tax their own states lottery winnings. Are you sure the withholding was given to the state and not to the federal government?

Lottery winnings are income and must be reported on your tax return 1040 line 21. Unfortunately, they are not earned income and don't qualify you for the earned income tax credit. That is a real bummer. Your unemployment is also income, but like lottery winnings, it is unfortunately not earned income. It, too, won't help your earned income credit.

So, you probably definitely need to file a federal tax return. Enter the amounts from the W-2G properly. Enter the unemployment amounts from the 1099-G, enter your two children (you get the Child Tax Credit even if you don't get the Earned Income Tax Credit), and when all is said and done, you probably won't have any tax liability. Don't fill out a Schedule A unless you really need to. Chances are you won't need to.

Good luck! Hope this helps :)

Answer 2

Lottery winnings are reported as Other Income on Line 21 of the 1040. If you itemize deductions, the $2,500 withheld by the state can be claimed on line 5 of the Schedule A with other state withholding. If part of the $2,500 was withheld for Federal taxes, that part would be treated the same as withholding from a paycheck. You should receive a W-2G showing the amount you won and all taxes withheld.

Note: gambling winnings including lottery winnings are treated as EARNED income by the IRS.

Answer 3

Lottery winnings are earned income, and must be reported on your federal tax return. The $2500 that was withheld would have gone to the feds. You'll get a 1099 at the end of the year showing the winnings and withholding, and you'll use that to file your tax return. If you had very little other income, you might get most of the $2500 back as a refund.

The lottery winnings won't count toward the Earned Income Credit, if that was part of your question.

Good luck.

Answer 4

yo steve and judy, let me know what college taught you that lottery was earned income. i want to make sure i don't send my kids there. hell, you even said it doesnt qualify for earned income credit then you said it was earned income. ever here of unearned income? lottery, unemployment, capital gains are all unearned income.

Answer 5

Ask H&R Block.

Answer 6

http://www.irs.gov/contact/index.html

contact the IRS help section. they will be able to tell you