PSA: Megamillions won by some lucky people in MD, Kansas, Illiinois

[Atomic Playboy]

How is it my lack of knowledge, I'm going by what the website says

Pro-tip: websites aren't always correct. If Mega Millions tells you their cash option is $389 million and someone else tells you it's $290 million, who should you believe? Probably the people who actually RUN the lottery, no?

 

[AMDZen]

you are using someone else's knowledge for simple math, do it yourself if you want to show you DON'T lack the knowledge. If you still come to that number then show us your math so we can show you where you went wrong and you can GAIN knowledge.

I know from past articles I've read that the lump sum isn't what you guys are using to calculate from. I think the government taxes the money first (Taxing the actual lottery, taking it to $291 million) and then taxes it again.

So as someone else said, its taxed twice. Which is total bullshit yes, but thats the government for you.

 

[DisgruntledVirus]

you are using someone else's knowledge for simple math, do it yourself if you want to show you DON'T lack the knowledge. If you still come to that number then show us your math so we can show you where you went wrong and you can GAIN knowledge.

This is the internet. None of that sense or logic crap belongs here.

 

[rcpratt]

I know from past articles I've read that the lump sum isn't what you guys are using to calculate from. I think the government taxes the money first (Taxing the actual lottery, taking it to $291 million) and then taxes it again.

So as someone else said, its taxed twice. Which is total bullshit yes, but thats the government for you.

You have no idea what the fuck you're talking about.

The "cash" option is the actual amount in the pot to be won. The amount that they advertise is an annuity, which is calculated from the cash option and current interest rates. Either way the money is taxed a single time at the same rate (although, I suppose the standard disclaimer that future tax rates could change applies, if you take the annuity).

The current cash option is $349M which corresponds to a $540M annuity.

 

[AMDZen]

Pro-tip: websites aren't always correct. If Mega Millions tells you their cash option is $389 million and someone else tells you it's $290 million, who should you believe? Probably the people who actually RUN the lottery, no?

Fuck no. Why would I believe them? Thats my whole point, you guys believe what you want. Thats why you need a tax lawyer with you when you collect, its not an option.

http://www.blakechristian.com/blog/...for-lottery-winners-lump-sum-vs-installments/

"Despite everyone telling you to take the lump-sum. Your heirs will receive the balance if you die before collecting all the payments and at least 65% of your lump-sum amount will be gone within the first year due to discounting and taxes.

A lump-sum winning will typically get reduced by 45% or more for the time value of money (acceleration by 20+ years) and then the net amount is further reduced by approximately 35% or more for taxes — leaving a net amount of 35% or less of the gross winnings."

EDIT: Bolded the important piece

 

[mnewsham]

I know from past articles I've read that the lump sum isn't what you guys are using to calculate from. I think the government taxes the money first (Taxing the actual lottery, taking it to $291 million) and then taxes it again.

So as someone else said, its taxed twice. Which is total bullshit yes, but thats the government for you.

it is taxed twice once from the feds and once from state. As I explained you take 390 (rounding up from 389 for convenience) subtract 25% for the federal government, you get 292,500,000 then you subtract your state tax which ranges from nothing to 10.8% assuming you live in new jersey at 10.8% you then subtract $42,120,000 from 292,500,000 and you get $250,380,000

 

[AMDZen]

You have no idea what the fuck you're talking about.

The "cash" option is the actual amount in the pot to be won. The amount that they advertise is an annuity, which is calculated from the cash option and current interest rates. Either way the money is taxed a single time at the same rate (although, I suppose the standard disclaimer that future tax rates could change applies, if you take the annuity).

I don't pretend to, I'm not a CPA. I know for a fact that if you take the lump sum on the $540 mill jackpot, that it won't be $389 before taxes. I have read enough about the lotto to know that as one of my best friends growing up won a state lotto.

They inflate numbers to draw people in, just like any business.

 

[rcpratt]

Trolololol.

 

[AMDZen]

it is taxed twice once from the feds and once from state. As I explained you take 390 (rounding up from 389 for convenience) subtract 25% for the federal government, you get 292,500,000 then you subtract your state tax which ranges from nothing to 10.8% assuming you live in new jersey at 10.8% you then subtract $42,120,000 from 292,500,000 and you get $250,380,000

You don't understand what I was saying. I was implying that the federal government taxes the lottery company first (mega millions) on the said amount of $389 million which takes it to $292 million. Then the federal government taxes it again when you take possession of the money for another 25% of the 292

 

[akahoovy]

I don't pretend to, I'm not a CPA. I know for a fact that if you take the lump sum on the $540 mill jackpot, that it won't be $389 before taxes. I have read enough about the lotto to know that as one of my best friends growing up won a state lotto.

They inflate numbers to draw people in, just like any business.

I didn't read the previous posts and I'm sure many of you know this, but to provide some clarity I think usually the jackpot number listed is the money you would get for the annuatized payments. The jackpot you win gets placed in a high-interest account and you get yearly payments for the term listed on the ticket. Cash option gets you the amount that would have been placed in the account, and then taxes get taken out.

 

[mnewsham]

You don't understand what I was saying. I was implying that the federal government taxes the lottery company first (mega millions) on the said amount of $389 million which takes it to $292 million. Then the federal government taxes it again when you take possession of the money for another 25% of the 292

are you stupid?

 

[Jeeebus]

Annuity also assumes the lottery/funds to support it will still be in existence 10 - 20 years from now. We can't even guarantee social security will be around that long - not sure I'd want to risk payment of $100+ million to myself when I can't even guarantee $2000/mo.

Not that I'd have any appreciable difference in lifestyle if I had $13 million annually or $200 million today.

 

[LookBehindYou]

You don't understand what I was saying. I was implying that the federal government taxes the lottery company first (mega millions) on the said amount of $389 million which takes it to $292 million. Then the federal government taxes it again when you take possession of the money for another 25% of the 292

wtf.

 

[AMDZen]

How else do you guys explain what that website is saying?

You think its just making shit up? Its the number one google hit, regardless of if you google "lottery calculator" or "mega millions calculator" and the numbers all add up. You pu $540 in there, and then click the "mega millions" radial

http://davidwier.com/powerball.aspx

Lets just use the "its the internet" pull out of your ass "wikipedia" argument then, obviously that website is double taxing the amount for no reason. If its on the Internet, I don't believe it.

I'm not saying that website is right, but it certainly wouldn't surprise me if it was and the others posted here are wrong. I was just trying to explain why it might be giving us that number.

Personally, I don't even care. I don't play the lottery game. Nor will I ever have enough money to care about how capital gains are taxed

 

[Jeeebus]

You don't understand what I was saying. I was implying that the federal government taxes the lottery company first (mega millions) on the said amount of $389 million which takes it to $292 million. Then the federal government taxes it again when you take possession of the money for another 25% of the 292

Yes, of course. Sneaky government. Then they tax it again when you try to deposit it. Another 25%. Then when you try to withdraw any of it, they tax it again at 25%. Access your online banking - 25%. Think about your money - 25%. Etc. Etc.

$300 million is no more than $3.50 after a week. Scumbags.

 

[AMDZen]

Yes, of course. Sneaky government. Then they tax it again when you try to deposit it. Another 25%. Then when you try to withdraw any of it, they tax it again at 25%. Access your online banking - 25%. Think about your money - 25%. Etc. Etc.

$300 million is no more than $3.50 after a week. Scumbags.

If I sell you a house for a profit, doesn't the government tax on the gains (the seller) as well as the buyer on the sale of the house?

Isn't the government doing this with pretty much everything? Ford gets taxed on the money I paid to buy a car from them, which I got taxed on.

What is so surprising that this might be what is happening? I was simply implying that as a reasonable deduction, I don't really know if thats why that website gave that as the readout.

 

[highland145]

Yes, of course. Sneaky government. Then they tax it again when you try to deposit it. Another 25%. Then when you try to withdraw any of it, they tax it again at 25%. Access your online banking - 25%. Think about your money - 25%. Etc. Etc.

$300 million is no more than $3.50 after a week. Scumbags.

http://poestavern.com/ but you'll need more than $3.50.

 

[Atomic Playboy]

How else do you guys explain what that website is saying?

You think its just making shit up? Its the number one google hit, regardless of if you google "lottery calculator" or "mega millions calculator" and the numbers all add up. You pu $540 in there, and then click the "mega millions" radial

http://davidwier.com/powerball.aspx

I have a website too. It's from an organization called the IRS. You know, the people who actually collect the taxes on lottery winnings?

Regular Gambling Withholding

You may be required to withhold 25% of gambling winnings for federal income tax. This is referred to as regular gambling withholding. Withhold at the 25% rate if the winnings minus the wager are more than $5,000 and are from:

Sweepstakes,
Wagering pools,
Lotteries, or
Other wagering transactions if the winnings are at least 300 times the amount wagered.

So federal taxes on lottery winnings are 25%, not 35% as taken out in the website you reference. Granted, that's just withholdings, and not a final tax-rate at the end of the year, but if the federal government only requires a 25% withholding, why do the math for 35%?

 

[mnewsham]

I have a website too. It's from an organization called the IRS. You know, the people who actually collect the taxes on lottery winnings?

So federal taxes on lottery winnings are 25%, not 35% as taken out in the website you reference. Granted, that's just withholdings, and not a final tax-rate at the end of the year, but if the federal government only requires a 25% withholding, why do the math for 35%?

exactly, not to mention putting it into a tax shelter will help alleviate what the IRS can take from you, honestly very few people would need more then 20 million a year. Maybe the first year you go all out. but after that it should be less 😛

 

[highland145]

So federal taxes on lottery winnings are 25%, not 35% as taken out in the website you reference. Granted, that's just withholdings, and not a final tax-rate at the end of the year, but if the federal government only requires a 25% withholding, why do the math for 35%?

The fed takes 25% but you'll owe a total of 35% at year end, right?

 

[mnewsham]

The fed takes 25% but you'll owe a total of 35% at year end, right?

depends on a lot of things, such as if you set up a trust for the money or if you put some in IRAs or something or maybe you donated to a charity that is tax deductible. it will all be a case by case basis i think.

 

[slayer202]

How else do you guys explain what that website is saying?

You think its just making shit up? Its the number one google hit, regardless of if you google "lottery calculator" or "mega millions calculator" and the numbers all add up. You pu $540 in there, and then click the "mega millions" radial

http://davidwier.com/powerball.aspx

Lets just use the "its the internet" pull out of your ass "wikipedia" argument then, obviously that website is double taxing the amount for no reason. If its on the Internet, I don't believe it.

I'm not saying that website is right, but it certainly wouldn't surprise me if it was and the others posted here are wrong. I was just trying to explain why it might be giving us that number.

Personally, I don't even care. I don't play the lottery game. Nor will I ever have enough money to care about how capital gains are taxed

There's something you aren't understanding. The lump sum amount(before taxes) is not lower than the jackpot amount because of taxes. The link you posted shows correctly ONE taxation

 

[Atomic Playboy]

The fed takes 25% but you'll owe a total of 35% at year end, right?

Not necessarily. There are a lot of tax shelters and loopholes people can take advantage of to lessen their tax burden, not to mention deductions (such as charitable giving) that are easy to take advantage of to decrease one's tax liability. Not that there's anything wrong with paying 35% either; you'll still have well over $200,000,000 to your name, and if you can't live on that, there's not a tax shelter in the world that can save you.

 

[Atomic Playboy]

There's something you aren't understanding. The lump sum amount(before taxes) is not lower than the jackpot amount because of taxes. The link you posted shows correctly ONE taxation

No, the biggest problem with that graphic is that it uses a formula to approximate what the lump sum payment will be, and that formula is off by about $100 million. In this case, the formula is approximating the lump sum payment to be $290 million when it's going to be closer to $390 million based on money the lottery has already received. It's also using the wrong value for federal tax withholdings, although when you factor in state withholdings, it becomes slightly less inaccurate. But if your starting value is off by 25% to begin with, it makes everything else just flat-out wrong and it can't be trusted.

 

[Beev]

If I sell you a house for a profit, doesn't the government tax on the gains (the seller) as well as the buyer on the sale of the house?

Isn't the government doing this with pretty much everything? Ford gets taxed on the money I paid to buy a car from them, which I got taxed on.

What is so surprising that this might be what is happening? I was simply implying that as a reasonable deduction, I don't really know if thats why that website gave that as the readout.

I may be completely wrong (I'm no tax guru), but in your example doesn't Ford charge it's customers tax to cover the cost THEY will owe? I didn't think they would charge tax and then charge me tax. That doesn't make any sense.