Powerball jackpot went up to $625 million. Here’s the tax bite if you win

Powerball jackpot went up to $625 million. Here’s the tax bite if you win

With no one hitting all six winning numbers in Powerball’s Wednesday night drawing, the top prize has climbed to $625 million, making it the seventh-biggest jackpot in U.S. lottery history.

And while players daydream about what they’d do with a windfall of that size, they should remember that they wouldn’t really end up with the advertised amount.

Whether the winner takes their prize as an annuity spread out over three decades or as an immediate reduced lump sum, lottery officials are required to withhold 24 percent for federal taxes.

However, the top federal tax rate of 37 percent means the winner would owe a lot more at tax time. And there also typically are state taxes due as well.

“The big impact on winnings is taxes,” said certified financial planner Dan Routh, a wealth advisor at Exencial Wealth Advisors in Oklahoma City. “If you win, just realize how big the tax bill can be and make sure you’re ready to handle it.”

With the odds stacked against players hitting the jackpot — your chance is about 1 in 292 million — the Powerball jackpot has been growing since late December.

For Saturday night’s drawing, the cash option — which most winners go with — is $380.6 million. The 24 percent federal withholding would reduce that amount by $91.3 million.

Assuming the winner had no reduction to their taxable income — such as large charitable contributions made from their winnings — another 13 percent, or $49.5 million, would be due to the IRS ($140.8 million in all).

That would leave the winner with $239.8 million before state taxes. That levy ranges from zero to more than 8 percent, depending on where the ticket was purchased and where the winner lives. In other words, the winner could end up paying more than 45 percent in taxes.

Given the sheer size of the jackpot, experts say it’s important that the eventual winner assemble a team of experienced professionals to help navigate the windfall: an attorney, a tax advisor and a financial advisor.

“There’s a big responsibility that goes with having such a large some of money,” Routh said. “It would be important to surround yourself with a quality team that’s working in your best interest.”

So the question is, if you win, what would you do?

What are some tax deadlines small  business owners should know for 2019

What are some tax deadlines small business owners should know for 2019

April 15, 2019 – Deadline to submit 2018 tax returns

Oct. 15, 2019 – Deadline to submit 2018 tax returns with extension.

April 15, 2019 – Deadline to file C-corporation taxes

Oct. 15, 2019 – Deadline to file C-corporation taxes with extension

March 15, 2019 – Deadline to file S-corporations and partnership taxes

Sept.16, 2019 – Deadline to file S-corporations and partnership taxes with extension

2019 Tax Season – 5 Important IRS Tips

2019 Tax Season – 5 Important IRS Tips

It’s January, with many taxpayers hopeful that new laws will result in bigger refunds. Yet with the government shutdown having hit at a particularly bad time for the Internal Revenue Service, it’s still not clear exactly when tax season will officially start.

But even if you can’t know for sure exactly when you’ll be able to file your return, it’s not too early to get ready for tax season — whenever it comes.

Here are the 5 IRS Tips for the 2019 Tax Season

1. Watch your withholding
Tax reform caused the amount of money withheld from paychecks to go down in 2018 for many taxpayers. That made their paychecks bigger, but it could result in smaller refund checks for many, and some might even end up owing tax when they file their returns.

The IRS has come up with a tool to assess whether your withholding is correct. If it’s not, you can make adjustments to your payroll withholding by filing a new Form W-4 with your employer. Or looking at estimated tax payments can prevent you from owing penalties and interest.

2. Predict what your refund will be — and when you’ll get it
The biggest motivator for many to file their returns is to get their refund. But tax reform will likely affect those refund amounts in many ways. Higher standard deductions, lower tax rates, and larger child tax credits could boost refunds, while the elimination of personal exemptions, limitations on certain itemized deductions, and the phase-out of various other tax benefits could reduce them.

One thing families should remember is that if you’re eligible for the earned income credit or the additional child tax credit, then your refund will be delayed at least until mid-February. Given the potential for delays to the beginning of tax season, it’s likely that even those who aren’t seeking those credits could have to wait at least that long to get money back from the IRS.

3. Look at these special rules for those without Social Security numbers
If you’re required to file taxes but don’t have a Social Security number and aren’t eligible to get one, then the IRS issues what it calls individual taxpayer identification numbers. These ITINs fill the same role as a Social Security number for tax purposes for certain nonresident aliens, as well as a set of resident aliens and dependents or spouses.

The critical thing about ITINs is that they expire. Therefore, the IRS urges those whose ITINs could expire before they file their returns to submit a renewal application now in order to avoid any future hassles.

4. Familiarize yourself with new tax forms
Millions of taxpayers will have to deal with a new tax form for the very first time during the 2019 tax season. Everyone will use a shortened version of Form 1040, which has been shortened to more closely resemble short-form returns like the 1040-EZ and 1040A. Yet the 1040 will also require new schedules that taxpayers will have to attach in certain circumstances. With the new forms available on the IRS website, it’s smart to get a head start by looking at them before starting your tax prep for the year.

5. Know where to get help
The IRS knows that tax reform will create a lot of confusion, but there’s help available. From online assistance to taxpayer assistance centers and the Volunteer Income Tax Assistance program, Americans can get the guidance they need to deal successfully with their tax returns in the coming months.

Be ready for tax season
Preparing your tax return might seem daunting this year, especially with all the changes that have occurred lately. But with the prospect of possible tax savings, you have a big incentive, and getting ready now will help you get off to a running start when tax season officially opens.

Need more help? Give us a call or setup an appointment, we would more than happy to serve you!

California to Consider Taxing Text Messages in 2019

California to Consider Taxing Text Messages in 2019

California regulators are currently contemplating whether residents would have to pay a fee on text messages from their cellphones.

The proposed tax  would help fund programs in the state that provides low-income  Californians with phone service and will be discussed further during the January 2019 meeting by the California Public Utilities Commission.

The rational from California regulators is this: Text messaging uses the same cell towers as phone calls, yet do not face similar fees—particularly in the era where voice calls have dropped precipitously over the last number of years.

A number of business groups are already criticizing the bill, saying that Californians could start seeing  taxes of over $44 million annually. Other wireless carriers, like  Apple, might be immune from the charges because of apps like iMessage.

The exact amount of the fee has not yet been decided.

So what do you think? Good idea or bad?
Please comment below.