When Lady Luck Pays You A Visit, The Taxman is Right Behind Her
Millions of people play the lottery. The chances of winning are very slim. However, Lady Luck shows up from time to time and changes lives, sometimes for the better and sometimes for the worse. When it comes to winning money, when Lady Luck shows up, the taxman is pretty much attached at her hip. A perfect example of this comes from a recent article I read at Forbes.com about a bartender who came into a very lucky streak.
According to the article, the bartender “found a $20 bill outside San Francisco Airport. Then, he took the $20 and bought two $10 scratch-off tickets. One of them won $1 million.” The article continues saying that, “his other ticket may still be valuable too. He has a second chance to win up to $25,000.”
Now for the taxman’s grab (one of the things most lottery winners fail to take into account right off the bat). In the case of this particular lucky winner, who lives in California, he will have to pay 39.6% of his winnings to the federal government and 13.3% to California for state taxes. There goes half a million dollars!
There’s no denying that five hundred thousand dollars is still a very substantial amount of money to have lucked into. However, it’s good to keep in mind that behind the taxman there’s usually a long line of family, co-workers, friends, and, believe it or not, even the store owners where you bought your tickets who feel you owe them a share of your winnings. And according to the Forbes piece, “It can get ugly if you have to defend suits by ticket sellers, co-workers and relatives. It happens more often than you might think. You must add the inevitable lawyers’ fees for defending against the claims.”
So, if Lady Luck decides to shine her light on you with big money winnings, you’ll consider yourself even luckier if you have an excellent tax attorney next to you.