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RD
RD, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 8784
Experience:  CPA, MBA, Over 10 yrs of experience in tax planning and business consulting..
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I won $5000.00. How much taxes needs to come off the top

Resolved Question:

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Submitted: 10 years ago.
Category: Tax
Expert:  RD replied 10 years ago.
Is your question related to tax withheld by the giver and net paid to you?

Is it from lottery?
Expert:  RD replied 10 years ago.
There are two types of withholding on gambling winnings: (1) regular gambling withholding at 25% (33.33% for certain noncash payments) and (2) backup withholding at 28%. If a payment is already subject to regular gambling withholding, it is not subject to backup withholding.

Regular Gambling Withholding
You may be required to withhold 25% of gambling winnings for federal income tax. This is referred to as regular gambling withholding. Withhold at the 25% rate if the winnings are more than $5,000 and are from:

Sweepstakes,

Wagering pools,

Lotteries, and

Other wagering transactions if the winnings are at least 300 times the amount wagered.


Do not withhold at the 25% rate on winnings from bingo, keno, or slot machines or any other wagering transaction if the winnings are $5,000 or less.

Regular gambling withholding applies to the total amount of gross proceeds (the amount of winnings less the amount wagered), not merely to the amount in excess of $5,000.


Backup Withholding
You may be required to withhold 28% of gambling winnings (including winnings from bingo, keno, and slot machines) for federal income tax. This is referred to as backup withholding. You should backup withhold at the 28% rate if:

The winner does not furnish a correct taxpayer identification number (TIN) and

25% has not been withheld or the winnings are from bingo, keno, or slot machines.


Backup withholding applies to the total amount of the winnings reduced, at the option of the payer, by the amount wagered. This means the total amount, not just the payments in excess of $600, $1,200, or $1,500, is subject to backup withholding at 28%.

Let me know if you have any question.
[email protected]

Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases.



Customer: replied 10 years ago.
Reply to Renu V's Post: I won the $5000.00 by being the 100th nationwide caller. Does the 25% still stand?
Expert:  RD replied 10 years ago.
25% withholding may not be required in your case since the winning is not more than $5,000 unless you did not provide your SS# XXXXX them.

Though they do not withhold taxes, they are required to report this winning to the IRS.

Let me know if you have any question.
[email protected]

Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases.

Customer: replied 10 years ago.
Reply to Renu V's Post: No. I am totally responsible for the taxes. That's why I wanted to know how much I have to withhold for next year. I won it by being the 100th nationwide caller. It was a radio contest.
Expert:  RD replied 10 years ago.
Yes, you will be required to include this in your income and pay taxes on it.

Your taxes would depend on your total taxable income, filing status, tax credit etc...

If you can provide some detail,....I can give you an estimate of the tax liability.

Let me know if you have any question.
[email protected]

Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases.
Customer: replied 10 years ago.
Reply to Renu V's Post: I file head of household with 2 dependants. I make $25000.00 a year. I usually file ez form. I never have deductions except for earned income credit for the kids.
Expert:  RD replied 10 years ago.
Do you claim child tax credits for the dependants (dependents below age 17) ..IS yes...than you will not owe any taxes.

You tax liability on total income ($25000+$5000)after exemption and deductions will be $1400 (aapx.) but you can get $2,000 as child tax credit (for two kids)

So you will not have a tax liability.


Let me know if you have any question.
[email protected]

Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases.

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