More articles from Federal Income Taxes
You have just received what is known as a “windfall.”
That means you have more responsibilities than you ever realized or ever wanted.
To start with, the federal government says you owe them money. Your state government says you owe them money. Your local county says you owe them money. Even your local city or town says you owe them money.
Oh. My. Lions and tigers and bears. What do you do? Screaming and crying and panicking doesn’t work. Hiding behind the curtains doesn’t work. You have this piece of paper that represents millions of dollars and the last thing you can think of is peace of mind. The best thing to do is find someone who can help you grab the bull by the horns and help you become sane once again.
An Enrolled Agent (EA) or knowledgeable CPA (that specializes in taxes), one who knows how to deal with a windfall tax situation like you’ve suddenly become representative of will be your best move. Granted, you may have just won $10 million in your local school lottery, but you know just as sure as pink isn’t blue that you don’t get to keep $10 million. An EA can guide you into a path where you get to keep as much as possible without offending the “gods.”
After taxes, a $10 million award can actually be as little as two to three million in real dollars you can spend. Whether you hit the jackpot in Vegas or at your local convenience store, at least a third of your winnings are claimed as “windfall taxes” by the IRS. Another third is easily claimed by local state, county and city governments.
If you expect to stay out of jail and off the tax rolls, the best thing you can do is simply shut up and accept it. That’s where having a tax professional hired makes a huge difference. Although you may spend part of your winnings on their fees, you’ll still come out dollars to the good, thanks to their efforts.
Yes, you can earn lots of money playing the lottery. The upside is that you have more money in your pocket to buy the things you need and the things you want. The drawback is the fact that taxes for the Feds, local county and local city will impact your “earnings.” Don’t wind up in jail or owing more than you can afford thanks to those taxes. There are companies and EAs that know what the rules are and they can help.