I was on a game show in August and won 25K. I received the money Saturday, December 23, 2006 and deposited the check in the bank that same day. The funds will not be available for use until January 3, 2007 due to a period required to guarantee the funds are available, at which time the check will clear. My question is--Can I pay taxes on the money in 2008 since I won't technically receive the money until 2007, or am I stuck paying taxes on the money next April, 2007. It would really help me out if I can hold off until the 2008, but I don't want the IRS coming after me!!!
2006-12-25 01:03:44 · 6 answers · asked by Marissa G 1 in Business & Finance ➔ Taxes ➔ United States
Ray gives a very good comprehensive answer, with some additional freebies to think about.
If you are a cash basis taxpayer (which most people are), you constructively received your money on December 23, 2006. Your bank's policy regarding availability of funds is of no concern to the IRS. Different banks have different policies, sometimes dependent on their relationship with the customer.
You have time to think about a retirement plan contribution for 2006 (if you or your spouse has one at work, there are restrictions so please check with a tax professional before you invest). You would, however, have to invest before you file your return. The charitable contribution is best acted upon by December 31st, if you want to do that.
Although you will probably owe taxes, do not delay just because of that. In fact, there is an argument for preparing them sooner, so that you know what sort of bill you are looking at.
Enjoy your winnings!
2006-12-26 01:52:29 · answer #1 · answered by skip 6 · 2⤊ 0⤋
First of all congratulations! The money is due for taxes in 2006 but you're better off paying it now anyway since you have the money that you might not have at this time next year. You can offset the cost by putting some of the money into a retirement plan so that you won't have to pay taxes on that money until you are 59-1/2. Don't spend it all. Pay off any credit cards you have. Why continue to pay 12-20% interest? Think of the money as "extra" and don't rush out to blow it. You can also consider donating some of the money to charity for that tax credit. That $25K may put you into a higher tax bracket so talk to a tax specialist (fees are deductible) and look into investing your windfall rather than blowing it on consumer goods. That $25,000 over the next 10, 25 or 40 years can build significant cash even after paying taxes.
2006-12-25 01:36:32 · answer #2 · answered by Anonymous · 2⤊ 1⤋
Sorry, but the money was earned and received in 2006. Unless you have an accountant, who can show you a way to carry it over, you are stuck to pay the taxes in April 2007.
2006-12-25 01:06:25 · answer #3 · answered by Beau R 7 · 2⤊ 1⤋
The money was "YOURS' when you won in in August(2006). You received a check in December(2006), that was dated sometime before you received it...therefore it is Taxable income for the 2006 tax year
2006-12-25 01:13:55 · answer #4 · answered by The answer man in Pa 2 · 3⤊ 0⤋
I'm A tax preparer and you must pay it in 2007 sorry to tell you that you can't carry it over. because you recived the check this year even though you won't actully have the cash in hand till next year. so pay it in april and you won't have any worrys.
2006-12-25 01:13:46 · answer #5 · answered by wlkingcloud 1 · 2⤊ 1⤋
CALL THE 1-800 NUMBER FOR IRS AND ASK THEM THEY ARE REALLY HELPFUL(sometimes)
2006-12-25 01:13:00 · answer #6 · answered by Anonymous · 1⤊ 1⤋