I just have a quick question regarding taxation, hopefully someone here can help. I've entered into a lotto pool at work, with about 11 other people (I work in NY). The guy who's gonna buy the tickets lives in Jersey, which according to this site doesn't have a state lotto tax. So, he'll get the full amount (minus Uncle Sam's share). Now my question is, since we're going to be splitting this 12 ways, how will our taxes be affected?
Where you WORK won't affect what you'd pay on the lottery winnings. I just hope that the agreement is for CASH so that none of you wants a lump sum, but gets stuck with 26 annual payments.
well, most of us who work in ny also live in ny, I think just the one guy buying lives in jersey
so, we LIVE in ny...how are we taxed? are we taxed as new yorkers since we purchased as a group? or do we go through the one jerseyite, or is that illegal?
Each of you would pay state taxes (if any) based on where you LIVE. In certain parts of NY state, you would also pay CITY tax. I presume the NJ Lottery _will_not_ deduct state taxes from out-of-state winners.
According to the scenario that you gave, if he gets the whole jackpot, then he will be taxed and he will have to give the proper amount to each of you as a gift which would then be subject to a gift tax. However, if you have formed (or will form after winning) a partnership among all people who have put money into the buying of the tickets, then the money will be split according to the percentages you have spelled out in the partnership. You will each be given your share of money and you will be taxed according to the laws of your state of residence at the time of the drawing. I hope that you have some kind of written contract with your group or things could get messy and you may have to go to court with no guarantee of winning. This was the case with a winning ticket that had been given as a tip to a group of waitresses in Alabama, and basically the only people that won were the lawyers.
Before you go to claim your winning you have to contact a lawyer and incorperate your group. It is sort of like forming a new company. Then and only then you go cash your ticket. Place the ticket in a safety deposit box until ready to cash.
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