Dodging taxes, what if?

My state has a relatively high income tax. Pretend I won a really big lottery, could I avoid state income tax on that by moving to a non income tax state?  
   What's considered a move?  Do I have to physically be in that state when I claim the prize? When I buy the ticket? Do I have to own property in That state? Do I have to sell my property in my state? 
     What about avoiding Federal income tax?  Any legal way to claim the prize if I'm a "resident" of some low tax country?  
    No I haven't even bought a ticket, just something keeping me awake at 2:00am. ( (along with a 1/2 dozen other thoughts) 

Pretty sure it takes at least 6 months if not a year to establish legal residency, for exactly these reasons.

So, you want other people to pay for the government services you enjoy?  
 

Yeah, that's not a thing. 
 

Government has a cost. We all pay for it. My experience with "non income tax states" is that they still extract the taxes through other means, such as high property or sales taxes. 
 

There are no free rides. 

Windfalls are taxed the same as bonuses or gifts in TN (non-income tax state). To the tune of about 30%.

Death and taxes, the two certainties in life.

If someone can manage to avoid taxes on large sums of money, they're not hanging out on GRASSROOTS Motorsports... There's probably a Professional Motorsports forum for those that can afford to buy teams...

The only way to avoid lottery taxes is to not play. 

RevRico said:

The only way to avoid lottery taxes is to not play. 

Or move to Canada.

In reply to Streetwiseguy :

Nope, Uncle Sam pursues us Yanks even across borders. If I win a lottery, in theory I have to give uncle sam half of the $$$. Of course, if the wife plays the lottery, she does not have to share.  I think Casinos have the same deal.

SVreX (Forum Supporter) said:

So, you want other people to pay for the government services you enjoy?  
 

Yeah, that's not a thing. 
 

Government has a cost. We all pay for it. My experience with "non income tax states" is that they still extract the taxes through other means, such as high property or sales taxes. 
 

There are no free rides. 

I whole heartedly agree with that statement.  

Duke said:

Pretty sure it takes at least 6 months if not a year to establish legal residency, for exactly these reasons.

 

Yep! You're allowed 6 months to collect and takes 6 months for residency.  Pretty sure the taxes paid likely are almost equal to the interest income you'd lose too.  

I say consult an attorney and a tax professional. 

I used to work 50%  of the time in TX and 50% in NY. I had an apartment in TX and I could show that I was there about half of the year. I talked to my accountant about it. He said I could get a license there and claim TX residency at my apartment but it opened me up to audit risk since I still owned a house in NY and was living in it part time. It would have saved the NY income tax but it was questionable and I didn't want to deal with the risk of paying back taxes and fines. 

You probably won't pay no taxes but paying less taxes is possible if the professionals know legal and accepted methods to shelter some of that windfall.

In reply to NOHOME :

Well, you have to buy the ticket here too.

So, you've already won, or are you just planning to?

Years ago, right after Florida started the lottery, I saw this on a bumper sticker: 

"Lottery: tax on the gullible"

In reply to Floating Doc (Forum Supporter) :

"Lottery:  A tax for being bad at math"

America - the country where statistically no one can win the lottery but everyone already has. 

Had a cousin decide that he didn't want to pay taxes anymore.  IRS got him good.  Now he literally doesn't own anything, it is all in his former wife's name (they still live together, divorced so that some of it was protected,) he had to sell his company cause no one would do business with him at its head, he even screwed over some other family members with an estate that he pressured them to close before everyone else was ready.

You wanna try to dodge taxes, go for it.  Maybe don't post about it on a public forum where you've previously posted enough info to (likely) have an investigator be able to track you down and flag your accounts, though?

Why can't anyone laugh about a little tax evasion? My friends and I have thought about making a website that buys video game keys with crypto to take advantage of differences in national currencies, but programming that AI would be super complicated and would honestly turn video game keys into something like investment banking.

Sadly, centuries of legal-and-not-so-legal gambling have made gubernmint really, really good about finding and taxing resources won in this way; the IRS takes a carrot-and-stick approach by making some options genuinely beneficial to literally everyone, provided the winner isn't some fool (which most are). Since all winnings of this scale and transfers of money have to be reported over $10K to government agencies, getting the money from the holder to you without taxation is effectively impossible. You'd have to know a lot of people, and that money would likely have to be pulled out over the span of years so nothing was reported or have some kind of barely-legal agreement that makes the IRS think there's still money being made off the winnings like in a trust.

Holding and using the money are the next problems. As previously said, having property in multiple states doesn't mean much to the IRS, they will want proof about which state you predominantly live in through receipts and will have no qualms about interviewing neighbors- state DMVs especially will- to figure out which state you pay to. So if you want to do wacky shuttlings by say, avoiding Income tax by buying through Oregon while enjoying stupid low state taxes in Alaska, you'll be constantly traveling and will likely wash out any savings. States also have pre-binding agreements for taxation and how they share revenue to allow companies to work across state lines- think uHauls all being Arizona plated- so it's actually very hard to take advantage of loopholes in states, because other states typically find them and get butthurt over it.

That final detail is also why living in other nations also can't work- they get tax revenue too, or in some cases (Canada) will also get a payout from the IRS as a thanks for their assistance in getting the dosh. Basically, if you want to cheat on your taxes the only way to really do it is to already be rich or a decently-sized corporation, because then you can sell IP or materials to claim "losses" tactically each year. Have to have money to save money.

GIRTHQUAKE said:

Why can't anyone laugh about a little tax evasion?

With the current stuff going on in the stock market, the govt is already working to increase taxes made in the stock market by the retail market.   Following that, the things that I want my taxes to pay for get killed, and we end up paying trillions for a war that goes nowhere, while billionaires get off without paying anything.

That's why I don't really find it funny.  We either get screwed by the businesses, or we get screwed by the govt.  None of it is amusing to me.

It's easier that moving or hiring attorneys. Just get the folks that write the tax code in your pocket. If the lotto you win is big enough, you could likely lobby several legislators and still have a good chunk left over. 
 

Just saying. 

Real talk, take the annuity option, pay it into a trust because a trust doesn't die when you do, use the trust to build shell companies to purchase existing companies with, then hire a team of accountants so you can get $117 million tax returns even if you show $11 billion in revenue that year. You'll still have to eat the 30% every year, but only on the lottery winnings income.

Also, you don't want to win the lotto.  

Large jackpot winners face double digit multiples of probability versus the general population to be the victim of:

1. Homicide (something like 20x more likely)

2. Drug overdose

3. Bankruptcy (how's that for irony?)

4. Kidnapping

And triple digit multiples of probability versus the general population rate to be:

1. Convicted of drunk driving

2. The victim of Homicide (at the hands of a family member) 120x more likely in this case, ain't love grand?

3. A defendant in a civil lawsuit

4. A defendant in felony criminal proceedings

Nearly one third of multi-million dollar jackpot winners eventually declare bankruptcy. Some end up worse. To give you just a taste of the possibilities, consider the fates of:

• Billie Bob Harrell, Jr.: $31 million. Texas, 1997. As of 1999: Committed suicide in the wake of incessant requests for money from friends and family. “Winning the lottery is the worst thing that ever happened to me.

• William âBud❠Post: $16.2 million. Pennsylvania. 1988. In 1989: Brother hires a contract murderer to kill him and his sixth wife. Landlady sued for portion of the jackpot. Convicted of assault for firing a gun at a debt collector. Declared bankruptcy. Dead in 2006.

• Evelyn Adams: $5.4 million (won TWICE 1985, 1986). As of 2001: Poor and living in a trailer gave away and gambled most of her fortune.

• Suzanne Mullins: $4.2 million. Virginia. 1993. As of 2004: No assets left.

• Shefik Tallmadge: $6.7 million. Arizona. 1988. As of 2005: Declared bankruptcy.

• Thomas Strong: $3 million. Texas. 1993. As of 2006: Died in a shoot-out with police.

• Victoria Zell: $11 million. 2001. Minnesota. As of 2006: Broke. Serving seven year sentence for vehicular manslaughter.

• Karen Cohen: $1 million. Illinois. 1984. As of 2000: Filed for bankruptcy. As of 2006: Sentenced to 22 months for lying to federal bankruptcy court.

• Jeffrey Dampier: $20 million. Illinois. 1996. As of 2006: Kidnapped and murdered by own sister-in-law.

• Ed Gildein: $8.8 million. Texas. 1993. As of 2003: Dead. Wife saddled with his debts. As of 2005: Wife sued by her own daughter who claimed that she was taking money from a trust fund and squandering cash in Las Vegas.

• Willie Hurt: $3.1 million. Michigan. 1989. As of 1991: Addicted to cocaine. Divorced. Broke. Indicted for murder.

• Michael Klingebiel: $2 million. As of 1998 sued by own mother claiming he failed to share the jackpot with her.

• Janite Lee: $18 million. 1993. Missouri. As of 2001: Filed for bankruptcy with $700 in assets.

Stolen from here

wheelsmithy (Joe-with-an-L) said:

Death and taxes, the two certainties in life.

 

I always thought it was "Death in Texas" ... whew, at least that is cleared up now for me  !!

No kidding. It's stuff like this from a winner a few years ago that is just horrible. 

Marie Holmes won one third of the $564.1 million Powerball jackpot back in February 11, 2015. She went with the lump sum option and took home about $127 million before taxes.

She also donated 10% of her winnings to Pleasant Hill Missionary Baptist Church. After taxes, the charitable contribution amounted to about $1.5 million, which is the largest ever made to a church from a lottery win.

That however, didn't stop the pastor of the church from suing Marie Holmes for more money – claiming that the lottery winner pledged to donate up to $10 million. Marie Holmes responded by saying that she would honor this agreement.

In reply to Mr_Asa :

We need to normalize those stats against all lottery players, not just the winners...may well be par for the course.