Dec 23, 2010, 4:50 pm
Allow winners to avoid paying taxes, support
The Massachusetts State Lottery continues to have a widespread problem with "ticket-cashers'' who claim prizes valued at millions of dollars, apparently allowing the actual winners to avoid taxes on their winnings, the state auditor said yesterday.
An audit released yesterday, as well as prior reports, found numerous instances in which certain people were claiming "hundreds of prizes worth millions of dollars,'' State Auditor A. Joseph DeNucci's office said.
The State Lottery Commission said it is required to pay prizes to anyone who has a winning ticket. "By law, the MSLC is obligated to pay the bearer of a winning ticket the amount owed,'' the commission said yesterday.
"If, in the future, legislation is enacted that restricts customer cashing activities, then the MSLC will act accordingly,'' the commission added in an official response contained in the audit.
The Globe reported in 2003 that ticket-cashers would buy winning tickets at a 10 percent discount. The winners agreed to the arrangement because the amount they would lose by selling their tickets at a discount would be less than if they had to pay federal and state taxes. The ticket-cashers are professional gamblers who can write off gambling losses against winnings.
The audit released yesterday, which covered the period from July 1, 2007, to June 30, 2008, said the use of ticket-cashers allowed winners to avoid paying taxes and child support.
Auditors found that in 2007, one person cashed 1,492 tickets worth about $2.6 million. Another person cashed 1,120 tickets worth about $1.6 million. Overall, the top 10 ticket-cashers in 2007 cashed in 5,938 tickets for $9.3 million, slightly less than the year before.
Auditors called for the practice to be minimized and eventually eliminated.
DeNucci said the lottery had taken corrective action to address previous issues identified by his office, but still must address issues such as ticket-cashers.
"The State Lottery has made a number of significant improvements in response to my audit recommendations,'' DeNucci said in the statement released by his office, "but there is still more to be done to further protect this very important gaming operation that brings in nearly $5 billion a year in revenue.''
Lottery officials said information on frequent cashers of winning tickets was forwarded regularly to agencies such as the US Internal Revenue Service and the state Revenue Department.
"Outside critiques such as reviews by the state auditor's office are valuable and welcome parts of our business plan,'' officials said in their statement.
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