And if they pay the IRS too little, you need to send in estimated taxes because you will get penalized if at year end you have paid too small of a percentage of your taxes due.
This is correct. When I was on Jeopardy! in 1991, my second-place prize (on my last show) was a four-day Bahamas cruise and three days at Disney World. I definitely had to pay taxes on the value of the trip, and had to get the show to lower the stated value, because the airfare was priced from Los Angeles to Fort Lauderdale, but I lived much closer, in Baltimore.
And like @MrAtoz, I had to fill out a California tax return to get the withheld CA taxes refunded. But I did have to pay Maryland taxes on the winnings.
You get a one year grace on that. The first time that you screw up by paying too little taxes, they waive the fees. Also, there is only a penalty if you miss by over a certain amount. There aren’t going to ding you for missing by a percent or two.
Slightly related, the USA is one of the few countries to tax Olympic winners on the value of their medals.
They will send you a 1099 if the total from a given entity is over a certain amount. I think it’s $2k now but it was lower in the past obviously. If you don’t get the 1099, the Feds won’t know about it and you don’t have to worry about it.
You’ll also get taxed if you win a Nobel Prize.
Not if, but when that happens I’ll be ok as I’m a UK tax payer!
Which one are you planning to win? Or are you going to sweep the field?
I’ve heard they’ll give the Peace Prize to almost anyone..
They might extend that courtesy, but if you paid 100% of the previous year’s tax (or 90% of current year, whichever is lower, almost certainly the former) there’s no penalty anyway, regardless of how many times you’ve done it.
Sure, but that’s a medal that also comes with 1 million bucks.
In the UK the lottery person who visits you to verify your ticket will help you with banking. They strongly suggest that you open an account with a Private Bank and they have contacts at most of them on speed dial.
Most regular High Street banks have a Private Banking arm so you can stick with a brand you know and trust, or pick a different one. The Queens bank, Coutts, is a popular choice as they have a team dedicated to sudden high net worth individuals. Lottery winners, football players, actors etc. People who have suddenly gone from zero to millions and need a lot of support and advice.
I did some work for a different Private Bank a few years ago and they felt that all this new money was beneath them. But this was a bank that still kept muskets in the main banking hall, and most other banks have moved on from the 17th Century now.
The prize sum is the amount you’ll get paid as tax is charged on the ticket price rather than the winnings.
Yes. That’s what I meant by miss by over a certain amount but you explained in much better detail.
That’s a pretty old article. Nowadays, only athletes with annual income above $1 million pay taxes on Olympic winnings, anyone below that is exempt:
Definitely! The average person has no idea how to be safely and profitably rich. Diversification is a key, and you will be guided as to how to diversify your money via accounts, investments, etc so that your money makes more money and you pay a minimum in taxes.
Does this mean you can gift aid the prize fund?
A lot of people say, get a financial advisor. How would you pick one and not be one of the many whose advisor runs off with their money and leaves them holding a huge income tax bill? Or one that is convincing you that you should invest in the next big metal: ruthenium.
Honestly, what’s wrong with (after taking 10% out for gifts and splurging and buying a house and car) dumping everything into a few index funds (SCHG, QQQ, &c.) and a dividend ETF for income? Check with a CPA to make sure the gift taxes are handled correctly and a trust attorney for estate planning.
I’m onto you, Simon Templar.
You got half of it.
Isn’t that a concern with even a more modest windfall? You can find an advisor by reputation, there’s no guarantee they’re honest or good, but probably won’t take a run with your money.
That’s usually sound investment advice, but also the many horror stories of people blowing through their money quickly should be cautionary. And legal representation can shield you from that second cousin you haven’t spoken to in 20 years suddenly becoming friendly or someone thinking they can use lawsuits to get a piece of it.
They can’t take your money. They can access your brokerage account to make trades and they can transfer funds to your checking account or whatever but that’s it without doing something elaborate. There are other checks and safeguards as well.
You pick them the same way you pick any contractor. Word of mouth, interviewing them and reviews.