Tax question: What is the policy on taxes and lottery numbers?

Question

I recently took my tax documents in because i wanted to see how much i'd get back if i filed. I was told that i wouldn't be getting anything back because i had lottery winnings which contributed to that. OK, i called the Michigan Lottery Main Branch in Lansing to ask about that and they told me that if i had winnings that were $5,000 and less, it wouldn't be taxed. They said that if it's $5,001 and up, then taxes are taken out right then and there. But when i told a tax advisor this, i was told that i should've asked them to take out taxes then. Who do i listen to regarding this? If i ask to get taxes taken out then so it never affects me later and i get told no because that is their "policy", then what am i to do? Should i go ahead and file my lottery winnings with everything else and take it or hold them back, file everything else, and just take the $? I'm kinda caught in a bind because i really need this $! What should I really do? Need an EXPERIENCED tax advisor! HELP! HELP! HELP!

Answer 1

when they tell you its "not taxed," that simply means that they dont WITHHOLD taxes from it. All income is federally taxable from lotteries, gambling etc. You are to declare it as income and pay federal tax on it. "Should have" is of course not helpful at this point. Suck it up, take your hit, and learn from it.

Answer 2

Here's the deal: ALL winnings are taxed, be it from gambling or lottery or sweepstakes or whatever. Doesn't matter if the state withheld taxes on your winnings when they paid you or not -- you're still liable to pay the winnings tax. You have two choices: (1) File your taxes claiming the lottery winnings and get nothing back, or (2) File your taxes without claiming the lottery winnings and get audited -- and yes, you WILL get audited because the State of Michigan will know that you received lottery winnings (they have a record of it) and the end result will be that you'll pay a hefty fine for not claiming the winnings at the very least, OR you'll face criminal charges for filing a fraudulent tax return.

Answer 3

Any single gambling winner over 600 should be reported to you on a W-2 G. A copy of this is sent to the IRS. You are required to claim the winnings as income. You can get around paying taxes on the winnings if you can substantiate losses for the amount of the winnings. Gambling winnings can be offset by loss, however, more losses than winnings cannot be deducted. I am not sure how Michigan works, but in my state (MD) lottery winnings over 5000, have 25% federal and 7% state tax taken out when the prize is claimed.

Answer 4

all lottery winnings and losses go on a worksheet for 1099-g write out the wins and losses and if you kept reciepts then take them down to the local IRS office now have them do the taxes with the info you have ,, dont have all the wins and losses..now did you make less than 52,000, yes now go tothe irs site online and do a link and file the taxes without the papers online just write out a statement an place it with the tax form printouts in your records if it comes up again , but if you dont recieve a 1099-G from the government or the state from reported income and winnings then dont worry just run the free taxes online if it comes later hold onto the records in the tax folder for this years and then if they ever pick you to audit pay a fine or the back taxes when it happens ?? and a lawyer can get that reduced to almost nothing ,, see no panic just do your best ,, its not your fault if they dont send you

Answer 5

Lotttery winnings are taxable from the first dollar on your federal return, although I'd guess that not very many people file on a $5 scratch-off win. But yes, it's taxable at the federal level. Many states don't tax winnings on their own lotteries though. You say you've already talked to a tax advisor. Sounds like he or she gave you good advice. Listen to it.

Answer 6

policy is nothing but a program for setting taxes