We all dream of having that winning ticket, but as with all earnings, the IRS will want their share. Easy come, easy go! Here’s a closer look at what to expect from the IRS should you be so lucky as to land a big lottery payout.
Anthony Babbitt, MS from Babbitt Consulting.
Consult a tax attorney
Your tax problems depend entirely upon how you claim the lottery winnings. Out of excitement, most people run down to the lottery office and claim the winnings as an individual. Depending on the size of the winnings, this can be your very first multi-million dollar mistake. Congratulations, you just donated a huge chunk of your winnings to the government, regardless of whether you take the lump sum payout or the annual payments.
You should have first consulted a tax attorney and an estate planning attorney. Don’t worry, they will wait to be paid until you collect the winnings. You should immediately start a charity that will be claiming the prize money. This simple act will avoid personal taxes and preserve the bulk of the winnings for the charity. Yes, you can pay yourself a salary as the charity’s new executive director. You can also invest much of the winnings as an endowment for the charity so it will exist in perpetuity.
“A fool and his money are soon parted” is as true today as it ever was. Be smart, and you can keep much more of the winnings for yourself.
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