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View Diary: According to USA Today's logic, you should ask your boss for a pay cut (122 comments)

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  •  Winning the lotto will put you in a higher bracket (18+ / 0-)

    but I suppose one may as well give back that winning ticket. Wouldn't want to pay those high taxes!

    •  Actually, there's a lot (1+ / 0-)
      Recommended by:
      phonegery

      of stories of winners going bust in rather horrible fashion after winning the lottery.  More than a few ended up with less than they started with...

      So, in that one case, her weird logic might apply, but really having less to do with taxes than having to do with the problems people have managing money when they've never had to on a larger scale.  But there is a very bad tax angle which is that if you do not take the lump sum, the tax people still want you to pay on the entire amount you won immediately.  There were a whole string of stories of people selling their prize annuities for pennies on the dollar to meet that obligation.

      Back to our regular programming now...

      •  You sure this: (0+ / 0-)
        But there is a very bad tax angle which is that if you do not take the lump sum, the tax people still want you to pay on the entire amount you won immediately.  There were a whole string of stories of people selling their prize annuities for pennies on the dollar to meet that obligation.

        isn't another urban legend?  

        •  Yes - it is the same for inheritances (0+ / 0-)

          in tax brackets well over what most people have to worry about, too.

          Prizes are actually pretty aggressively taxed. Don't you remember when Oprah gave away all those cars to her audience and then they found out that they had to pay a large sum of cash if they wanted to keep the cars to the tax folks?

          http://money.cnn.com/...

          IIRC - The state lottery commissions responded to some really bad situations where people won hundreds of millions of dollars and unknowingly took the annuity rather than the flat payout by making it easier to choose which option after they won.

          •  Prizes aren't taxed any higher (0+ / 0-)

            than earned income.  The Oprah car give-away wasn't unique.  

            You do seem to mis-informed on lottery winnings:

            According to the Minnesota State Lottery, “For every Lottery prize over $5,000, 32.25 percent is deducted for federal and state withholding. Federal law requires the Lottery to withhold 25 percent of each payment for federal income tax and state law requires that 7.25 percent be withheld for Minnesota personal income tax.”

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