If you worked in any of these countries, you could be due a Tax Refund

What to Do (And What Not to Do) If You Win the Lotto

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A while back there was a shocking lotto statistic doing the rounds in the news...

It was believed that 70% of American lotto winners go broke within a few years of collecting their winnings. This statistic has since been debunked by the National Endowment of Financial Education (NEFE) but it’s not too far from the truth!

The real stats are more along the lines of ‘almost a third of lottery winners go broke within a few years of their win’. What’s even sadder is many lottery winners suffer through higher rates of divorce, suicide and depression.

The fact is, when it’s not handled correctly, many people who win big on the lotto end up wishing they’d torn the ticket up instead of cashing in.

But what solutions are there to make sure that your money lasts a lifetime? Whether you play the lotto on a weekly or monthly basis or you’re an occasional quick picker, the day may finally come when your lucky numbers pop up and if that day comes, here’s what to do (and what not to do).

 

 

Do’s


 1. Protect your ticket!

A winning lotto ticket is precious so protect it! Start by making paper and digital copies of the ticket.

If you’re planning on taking your time when it comes to contacting the lottery authorities (which you should!), get yourself a home safe or put it in a safe deposit box in your bank.

Let the media attention die down surrounding the unclaimed prize. Take this time to relax and let the idea of your soon-to-be new life sink in. Just remember, there’s usually a time limit on claiming the prize so don’t leave it too long.

 

 2. Remain anonymous

You might want to stick it to your snooty neighbour, your cheating ex or the guy who bullied you mercilessly throughout high school… but it’s better to remain anonymous if you win big.

Why?

Well, there are a number of reasons. The first being to protect yourself from theft and scam artists. Secondly, you can expect a lot of family and friends coming out of the woodwork looking for a handout. Sure, you should be generous with the people closest to you (within reason) but you don’t want your third cousin twice removed asking you to fund her hen do to Lanzarote.

 

3. Change your address and your phone number

If you’re all about that fame and fortune and you don’t want to go anonymous, you can expect a whole lot of calls from people you know, charities, investment advisors and all sorts of individuals looking to get in on the action. This might seem excessive but you should consider changing your number and address and remaining unlisted.

 

 

 4. Get yourself a team of reliable, trustworthy experts

Really this should be the very first thing you do – well after you have a party and a quick shopping trip. You should really have a lawyer, a tax attorney, a financial planner, an accountant and an investments expert. Meet with lots of different people from each profession. Compare their credentials and qualifications, see who you get a good vibe from and who you would like to work with.

These people will help you manage your money well and keep you out of trouble. They can make sure that you don’t go broke.

 

5. That brings us to… Investing!

One sure way of making your money go further investing. Property can often be a good investment as opposed to stocks and shares, however, if you know what you’re doing (or can hire someone who does) they can be very profitable too. Put together a diverse, solid investment portfolio. That way if one thing goes belly up, you’ll have other investments to fall back on and you won’t have to take as much of a financial hit.

 

 6. Protect yourself from scams and theft

There are some pretty devious people out there, so make sure you’re careful. Don’t trust any old person who offers you an irresistible investment opportunity. Lotto winners have been duped before and it can easily happen again. You can even go so far as to put your money in several different financial institutions in case one is compromised.

 

 

 

7. Think about tax

Here in Ireland, we don’t have to pay tax on lotto winnings but if we want to gift a family member some money, they’ll have to pay tax on it. In fact, many countries don’t have any gambling taxes for players, check out the full list here, but if you decide to set up a business or invest in something like property, for instance, you’ll have to be familiar with your tax obligations.

The same goes for income you generate from investments or businesses abroad. Many of us dream of leaving our homeland for sun-kissed beaches and busy cities aboard. You’ll have to make sure you’re compliant with the tax laws of any countries you earn in. This is where a knowledgeable accountant can save the day.

You’ll also have to think about tax when you’re deciding if you’d like to receive a lump sum or several payments over a number of years as this can also affect taxation.

In the US, the taxman gets a big old chunk of the winnings. In states like Florida and Texas, there is no state lottery tax but the federal government could end up taking millions if you choose a lump sum payment. 

 

 

8. Choose between taking the lump sum or taking payments

There are pros and cons to both of these choices. If you take it in instalments, you might pay less tax because you’ll be in a lower tax bracket but you could also lose money from decreasing inflation rates. Do your homework, get a professional opinion and make a wise choice.

 

Don’ts


1. Don't gamble it away

A wild weekend in Vegas might seem like a good idea at the time but it’s best not to gamble at all and if you do decide to, you should really limit your money significantly. Yep, this is a bit ironic considering you acquired the money through gambling in the first place but let’s be real, gambling a few euro on a lotto ticket is a lot different to gambling thousands at a casino. Gambling has been the downfall of many a lotto winner so it’s best to avoid it altogether.

 

2. Don’t buy things just for the sake of it

Of course, you’re going to go a little cray-cray with your money, you’ve won the lotto for crying out loud! It’s a dream come true and you should most definitely treat yourself to many of the things you’ve always wished you could have but couldn’t afford in a million years.

That’s totally understandable and we’re only human after all.

Just remember, once you’ve sorted yourself out with a beautiful home, a shiny new car, a makeover, a walk-in wardrobe, a worldwide globetrotting adventure and whatever the hell else is on your list, make sure to start thinking strategically.

They say you gotta have money to make money and you’re off to a pretty great head start! Think about how you can turn your winnings into even more money and do it before you’ve squandered it on designer clothes, expensive jewellery and exotic pets.

 

3. Don’t think the money is unlimited

Why not splash out on every little thing you’ve ever wanted? Why not bathe in bathtubs full of diamonds and drink bottles of $10,000 champagne every evening? Well, we’ll tell you why; no matter how it may seem, your lotto winnings are not unlimited.

Your money can and in a lot of circumstances, will run out so be very, VERY careful with it. Don’t kid yourself that it’s never ending cash flow.

 

4. Don’t forget to put a good chunk away for a rainy day

But I’m rich! I’m a millionaire or a billionaire, why the hell would I need a rainy day fund? Well, let me tell you, that statistic we mentioned earlier about lotto winners declaring bankruptcy more than the average American? That could be you!

You should set up various rainy day funds for different things like your retirement, college funds and inheritance for your family.  That way if any investment goes down the tubes or you’re in over your head with taxes, you have some money to help get you out of a sticky situation.

 

 


 5. Don’t neglect the boring things

Paperwork, taxes, bills, debt. These things are boring as hell but they need to be taken care of. Prioritise clearing any debts and taking care of things like taxes. If you’ve invested in properties, there’s probably a whole bunch of property taxes and income tax that you need to pay for instance.

But why do all of this? How can you have millions, if not billions of dollars and end up flat broke? Well, when it comes down to it, if you’re not disciplined and you don’t make good choices, there’s a good chance you could lose it all but if you’re smart you could be living the good life for the rest of your days!

 

 

Taxback.com can help you!

So if you’ve won big on the lotto, or you just want need help with your taxes, contact Taxback.com today.

We help people file tax returns and claim back overpaid tax in 13 countries worldwide so if you’ve worked in Canada, Australia, New Zealand, the UK, Ireland, Germany, the US, Luxembourg, Austria, Belgium, Holland, Denmark or Japan we’ll check to see if you’re owed money back, for free!

About The Author

Stephanie Meagher - Content Creation Specialist @ Taxback.com

After graduating with a BA in Creative and Cultural Industries, I worked as a freelance content creator and blogger, that is before joining the Taxback.com team! When I'm not busy writing, I can be found enjoying the company of my four pugs or blogging about horror movies and podcasts.

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