This Wednesday, millions of people will be glued to their TVs and browsers, waiting for the $1.4 billion Powerball jackpot to come through. For a handful of lucky winners (namely, you), this is the day that all financial woes instantly become memories.
Once you win, when the shock wears off, don’t think you won’t have problems, because you definitely will. Here’s a taste of what’s coming down the pike:
Better Pay The Taxman
Right off the bat, you can expect a visit from your friendly IRS agent. The federal government taxes your gambling winnings just like it taxes everything else, and the government withholds income taxes, whether you take a lump sum or the annuity. The state also takes a piece, of course. In some states, if you take the lump sum, you can expect to wind up with “just” $600 million or so.
And you’ll want to pay out, because the IRS doesn’t take kindly to highly visible tax fraud. Just ask Rhoda Toth, who won $13 million in 1990, lied on her tax return about it, and ended up with a two-year jail term and a $1 million tax bill.