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Posted: 6/13/2022 10:12:27 AM EDT
A friend of mine won $50k in one of those promotional sweepstakes. No purchase necessary etc.

They got a check for the whole amount, which was a surprise. They were expecting some taxes to be withheld.

They know that they will have to pax taxes on it, the sweepstakes company said it will be reported to the IRS.

Does anyone know if taxes are due in quarterly installments this year, like are done with IRA distributions? Are can they just pay when the 2022 taxes are filed in 2023.

My google search didn’t come up with a conclusive answer.

Any links to relevant IRS guidelines are appreciated.

Thanks
Link Posted: 6/13/2022 10:37:41 AM EDT
[Last Edit: die-tryin] [#1]
I'd wait til 2023 providing they have discipline to hold back the correct amount of taxes from 2022, might be easier to pay the tax on the 50k now. If he over estimates, he'll get a refund.

If he pays the taxes now, he would still have to report it on his tax return and then the taxes he paid would go on tax return  as a credit.

If he owes child support or back taxes, they will want it all
Link Posted: 6/13/2022 10:39:04 AM EDT
[#2]
I’d put some money aside and wait until next January and see if he gets a 1099(?) tax form.
Link Posted: 6/13/2022 10:40:06 AM EDT
[Last Edit: TN-MadDog] [#3]
Here are a couple links.

I am not a tax professional but I believe that if they received a refund last year that they would not be penalized for not paying quarterlies this year.

IRS

Non IRS link

Who may need to pay estimated taxes

Individuals, including sole proprietors, partners and S corporation shareholders, may need to make estimated tax payments if:

   they expect to owe at least $1,000 when they file their tax return.
   they owed tax in the prior year.

Taxpayers who may need to make estimated tax payments include someone who:

   receives income that isn’t from an employer, such as interest, dividends, alimony, capital gains, prizes and awards.
Link Posted: 6/13/2022 11:00:08 AM EDT
[Last Edit: MarkBinSC] [#4]
Discussion ForumsJump to Quoted PostQuote History
Originally Posted By TN-MadDog:
Here are a couple links.

I am not a tax professional but I believe that if they received a refund last year that they would not be penalized for not paying quarterlies this year.

IRS

Non IRS link

Who may need to pay estimated taxes

Individuals, including sole proprietors, partners and S corporation shareholders, may need to make estimated tax payments if:

   they expect to owe at least $1,000 when they file their tax return.
   they owed tax in the prior year.

Taxpayers who may need to make estimated tax payments include someone who:

   receives income that isn’t from an employer, such as interest, dividends, alimony, capital gains, prizes and awards.
View Quote



They told me that they had to pay taxes on their last 2 federal returns. I’ll check out the links.
Link Posted: 6/13/2022 11:38:22 AM EDT
[#5]
Their withholding better equal last year's taxes.
State taxes too. States are often less forgiving of underwithholding penalties than the feds.

Might be a good idea to get that 2nd quarter estimate in by Wednesday.
Link Posted: 6/13/2022 2:33:08 PM EDT
[#6]
Thanks all, I have given them the info for the form 1040-ES.

They will have to figure it out from here with all the particulars.
Link Posted: 6/29/2022 4:21:04 PM EDT
[#7]
In MI if my final tax obligation compared to my withholdings is off by a certain percentage then I get hit with a penalty. That's why when one gets a pay increase through a raise or new job you better do some estimates.

Kick in an extra $10k for the year to at least get closer if you don't want to figure it out

Link Posted: 6/29/2022 6:28:18 PM EDT
[#8]
Discussion ForumsJump to Quoted PostQuote History
Originally Posted By MarkBinSC:
Thanks all, I have given them the info for the form 1040-ES.

They will have to figure it out from here with all the particulars.
View Quote



they should use some of the 50k to sit down with a CPA and let a pro calculate it if they want to avoid estimated tax penalty (which isnt really that bad, its effectively an interest charge)

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