What To Do When Your Lottery Pool Wins Big

Running or participating in a lottery pool can be complicated, especially if your group wins. Learn how to keep things legal and clear here.

When Powerball, Megamillions, or other lottery prizes start to reach exorbitant amounts, interest peaks. For some time now, groups of individuals, friends, families, and co-workers have pooled their resources together to increase their odds of winning. A Lottery Pool Contract can help the participants have a clear understanding of what happens if the group wins.

Can I buy my own lottery tickets if I am part of a lottery pool?

Usually, lottery pools group together money to purchase tickets, and those tickets are listed in a Lottery Pool Contract. When the pool does not list out the tickets that were purchased with the money, separately purchased tickets can become a legal issue, depending on the language of the agreement. If you are the lottery pool manager or representative, it can be an even more complicated matter.

To make sure separately purchased tickets are not confused with the tickets that are part of a Lottery Pool Contract, you may want to ask fellow pool members, or the named manager or representative for their recommendation.

What are the tax consequences of winning the lottery?

Winning the lotto is generally treated the same as gambling winnings, and are taxed. The IRS taxes lottery winnings as income, and most states that have a lottery also impose a tax on lottery winnings. Both California and Delaware, however, do not have a state tax on their lottery winnings. Fortunately, this is only something a person worries about if they win.

Does a lottery pool group representative have to pay taxes when distributing the winnings?

Depending on how the winnings are claimed, there may be additional tax considerations for whoever is tasked with collecting and distributing the winnings. The representative may be required to pay taxes on the lump sum winnings. Additional tax issues may arise out of the disbursements to group members. When a lottery pool wins, the representative may want to seek legal and tax advice on how to avoid bearing all the consequences.

Can I join a lotto pool from a different state?

So long as you do not live in a state that prohibits lottery or gambling, it is likely legal to participate in a lottery pool from a different state. There may, however, be certain drawbacks, such as tax consequences, or paying additional taxes in your own state. But, if your group wins the jackpot, you’ll probably be able to afford those.

If you have more questions about starting or joining a lottery pool, reach out to Oakland Prime Mobile Notary for affordable guidance.

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What Happens When You Don’t Do Your Taxes?

There are a number of negative consequences for not doing your taxes when you’re supposed to. Let’s go over what can happen and how to dig out.

Tax day can be stressful for many people but even more so for a person who hasn’t filed their taxes in a few years. The longer you go without filing your taxes, the more stressful your situation will become, so you may as well try to fix it. Especially when you start thinking about the penalty charges that may be accumulating.

What happens if you don’t do your taxes?

Not filing your tax return or paying your taxes on time or at all can lead to serious consequences, including:

  • Penalties for late filing: The IRS will issue a Failure to File Penalty of 5% of the unpaid taxes you owe for each month or partial month that your tax return is late, unless you are also issued a Failure to Pay Penalty in the same month. In that case, the Failure to File Penalty may be reduced by the amount of the Failure to Pay Penalty for that month. The penalty will not, however, exceed 25% of the taxes you owe. 
  • Penalties for late payment: The IRS will issue a Failure to Pay Penalty of 0.5% of the amount of tax owed after the due date and for each month or partial month the tax remains unpaid. The penalty will not, however exceed 25% of the taxes you owe.
  • Interest charges: Not paying your taxes on time can lead to penalties and interest charges on the amount owed. Interest may accrue on the unpaid tax owed up until the date of payment in full. The interest rate is based on the federal short-term rate plus 3% and is adjusted quarterly.
  • Legal consequences: Continuing to ignore your tax responsibilities can lead to wage garnishments, tax liens and levies, and even imprisonment.

The good news is that the IRS actually does try to help those who come forward on their own and, in many cases, is willing to work something out.

What happens if you are late paying your taxes?

You may be subject to penalties and interest charges if you are late paying taxes that you owe. The penalty amount will depend on how late you are and how much you owe. The IRS can take legal action against you in order to collect late tax payments. These actions may include wage garnishment or seizure of assets. 

There is a separate penalty for failure to file your tax return on time. If you think you will owe taxes and not have enough money to pay them, you might consider filing your return on time and working out a payment plan with the IRS. Working with a tax pro can give you peace of mind that your return will be done professionally and with your specific situation in mind. In many cases, returns can be done quickly as well, and filed electroncially to make sure they are filed on time.

What can be done to catch up when you haven’t done your taxes?

One way to catch up with your taxes is to file late tax returns. Here are the general steps:

  • Gather your tax documents and file your tax returns. For each of the years you have not filed your taxes, you are going to need your W-2’s and/or 1099’s. If you are unable to locate these documents, you can request them from the IRS using a Form 4506-T. You will need to file a return for each year you missed. Most companies that provide e-filing services have forms for the past two years. If you need to go back further than that, you will have to request the forms from the IRS and submit your returns by mail.
  • Pay taxes that you owe. Once you have submitted your tax returns to the IRS and your state, you will want to pay any taxes that you owe along with penalties that have accumulated. You can check out the list of penalties on the IRS website. If you cannot pay your entire balance, you will be charged interest until you can. If you are expecting a refund or ended up not owing any taxes, there is no penalty.
  • Work out a payment plan with the IRS. If you are unable to make a payment in full for what is owed, you could be eligible for a payment plan. If you are currently low-income, they may have additional options for you. You can apply for a payment plan on their website or by calling the IRS at (800) 829-1040.

Going through the steps of carefully gathering information and then preparing and filing the correct documents and working out the correct fees can be overwhelming and very time consuming. You don’t have to do this on your own. You can work with a tax pro who will help you file on time.

Do you need a tax professional and how do you find one?

In most cases, simply filing your tax returns and paying your taxes will get you out of tax trouble. However, it might be a good idea to meet with a tax attorney or tax filing professional to make sure you are handling things correctly and to learn about any other options that might be available to you. Rocket Lawyer now offers affordable and convenient help for tax prep, filing, and attorney advice. Get matched with a tax pro, scan and upload your documents, and rest easy knowing you have professional help on your side.  

While it may be stressful, it will serve you better in the long run to address your IRS issues now. File your tax returns and pay your back taxes to get in good standing with the IRS and your state tax agency.

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Annuities: Income For Life

Having a company pension plan that provides guaranteed income for life could certainly relieve many financial worries, especially in retirement.

However, many Americans don’t have access to company pension plans, and those who do often have a plan that doesn’t provide a guaranteed income stream.

As part of an overall income generating strategy, annuities can be an ideal solution for taking your retirement savings and turning it into a dependable income stream for your retirement.

So let’s take a closer look at annuities, which can also provide you with income for life.

In exchange for a single lump sum deposit, a financial institution makes guaranteed regular income payments to you that contain both interest and a return of principle.

Annuity payments can continue for a chosen period of time or for the lifetime of one or two people.

While some income generating investments like mutual funds can be depleted over time, life annuities provide retirement income that’s guaranteed for life no matter how long you live.

The amount of income provided by an annuity is determined at the time of purchase and will depend on a number of factors such as;

  • the amount of money you deposit,
  • current interest rates,
  • whether or not you want your payment amount indexed to help keep up with inflation,
  • the sex and age of each spouse,
  • and the number of years you want to guarantee income payments in case of premature death.

If you die prematurely, there are options available to you to ensure that your annuity investment isn’t lost.

For example, various guarantee options can ensure a specific amount of income is paid from your annuity investment to you, or your named beneficiaries.

Some types of annuities have tax advantages as well.

Since annuity payments consist of principle and interest, only the interest portion is taxable.

Prescribed annuities evenly spread the taxable interest over the life of the annuity, thereby offering some tax deferral.

Regular annuities must report taxable income as it is earned, which is higher in the early years and lower when the principle is reduced.

If you are looking for ways to earn guaranteed income for as long as you live, then speak with an advisor about how life annuities can play a role in your overall financial plan.

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5 Things to Consider When Receiving an Inheritance

Those who fall in the age range of 60-80 currently hold approximately half the wealth in the US. As a result, their children are expected to receive the largest inheritance across all generations. While there are expectations that this inheritance won’t go as far as it would have years ago due to high inflation recently, the amount passed down can still help many young adults out financially when used wisely.

To some, receiving an inheritance may come as a surprise. Others may be aware of the possibility of an inheritance or even expect it. This can lead to anxiety over the transfer of wealth and how to best manage their inheritance. According to a study conducted by New York Life, under half of adults who expect to receive any inheritance, whether in the form of cash or non-cash assets, feel comfortable with managing it.

If you anticipate receiving any type of inheritance in the future, knowing your options is critical. Here are some tips on how to approach receiving an inheritance.

Manage your expectations

If you are expecting an inheritance, keeping yourself in check with the amount you may receive is best. If your parents, or whomever you may inherit from, do not have a Will or beneficiaries on their accounts, their estate would go to probate, which can be lengthy and costly. Or there may be accounts where someone else is named a beneficiary but was never updated, such as an ex-spouse. Further, end-of-life costs may add up, leaving less to distribute.

If you’re comfortable, talking to your family members may help clear the air of any confusion. A great place to start would be to discuss your parents’ accounts, such as their will or retirement plans.

Talk to an expert

If you are unsure where to begin or want extra help, contacting a financial advisor can help. There may be some paperwork to do, or you may have questions about tax implications, and seeking the advice of an expert is the best way to ensure you’re doing all the correct steps. A financial advisor can also help you create short- and long-term goals of what to do with your finances and help you manage any non-cash assets.

Pay off some of your debts

Assessing your debts to see if it is possible or pay some off may be a hot item on your to-do list if you receive an inheritance. Depending on where you are in your life, some possible debts would be credit card debts, student loans, mortgages or car loans. Assess the different interest rates on your debts and make choices that work the best for you with your financial goals in mind.

Save and invest

Depending on the sum of your inheritance, it might make sense for you to put some of the money away. While putting it in a savings account might be a first instinct, you’ll want to assess which account is best and will provide you with the best rate.

If you don’t need your inheritance money for any short-term goals, looking at other ways to invest your money is a good idea that could help you earn more on your assets compared to that of a savings account. Putting your money into a certificate is a good way to safely put your money away and earn a set interest rate for a period of time. Or, investing your money in a stock market is an option if you have a longer timeframe and are comfortable dealing with stock market volatility.

Get your own estate in order

It is never too early to get your own estate in order, and after you receive an inheritance is a good time to either start the process or update your current documents. Start by checking to make sure you have a record of all your accounts and assets in a safe place. Then, see if you need to add or update the beneficiaries linked to the accounts. Lastly, start a will or update your current one.

While starting this process now may feel daunting, it will make all the difference to your family later on. If you have recently lost a loved one and are in the process of receiving an inheritance, know that you can take time to grieve before jumping into your finances. There’s no need to rush.

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Fall Financial Cleaning: 5 Easy Wins to Start Today

With Fall upon us, many of us take the opportunity to declutter and spruce up our homes. But that’s not the only fall cleaning you should do this season. These financial cleaning tips will give you some easy personal finance wins so you can enjoy the warmer weather with a budget that shines as bright as the sun.

Eliminate unused subscriptions

It’s happened to all of us—we test out a new subscription, use it for a few months, stop and then continue to pay for it every month. Or, we sign up for a free trial and forget to cancel. Automatic recurring subscription charges are easy to forget and can result in a sizable leak in your budget.

Sure, one $10 monthly charge may not break the bank, but that means you’re paying $120 annually for something you aren’t using. Worse still, if you have several unused subscriptions, you’re likely flushing dozens of dollars down the drain every month.

Thankfully, this is a simple fix. Go through all your recent credit and debit card statements, being sure to account for every charge. Be on the lookout for any subscription charges you aren’t actively using. It’s best to review statements up to a year back, in case there’s an annual subscription cost hiding.

Lower your regular bills

Recurring bills such as insurance and utilities often make up a significant portion of our spending. While these are typically necessary expenses, it’s surprisingly easy to lower your monthly payments with little effort.

  • Call your providers—Many companies are willing to give discounts to customers if they express dissatisfaction with the cost of their payments or threaten to switch to a competitor. While asking for a discount may result in a “no,” the worst-case scenario is ending up with the same payment you currently have.
  • Explore other options—Research competitors for each type of bill you’re paying and determine if switching services makes financial sense. Keep in mind that many companies offer temporary introductory rates that will eventually go up, so the savings might not last forever. Even if you don’t want to switch, knowing that competitors offer cheaper options can help you negotiate with your current provider.
  • Evaluate what you’re paying for—Insurance and utility costs can vary significantly based on your selected options. For example, having collision and comprehensive car insurance coverage is more expensive than liability-only coverage. It’s worthwhile to examine your insurance coverage and ensure you aren’t paying for more coverage than you need. Some utilities, such as your internet service, may have cheaper packages that still meet your needs.

Switch to a high-yield savings account

Having a healthy amount of money in your savings is incredibly important, whether preparing for the unexpected turns life throws your way, saving up for a car or a down payment on a house, or simply for a rainy day. Putting those funds into a high-yield savings account allows you to earn more on your money and have it grow faster than a typical savings account.

Consolidate debt

Debt is an uncomfortable topic many of us would rather avoid, but making high interest payments is equally uncomfortable on our wallets. Debt consolidation can take some of that sting away by combining multiple unsecured loans into a single debt. If you take several high interest debts and consolidate them into a new debt with a lower interest rate, you’ll pay less over the course of the loan.

For example, let’s say you owe money on several credit cards, each with an APY of over 15%. You transfer the balances onto a new credit card with a 0% interest rate promotion for 12 months. During that promotional period, any payments you make towards that debt will be interest-free! While this method is great for digging yourself out of difficult debt, you should fully understand the terms of any debt consolidation option you choose.

Review or create your budget

Throughout our lives, our spending habits are naturally going to change. Some of this is due to uncontrollable factors such as inflation. Others are due to major lifestyle changes, such as moving to a different area or having children. Still, others are due to simple preference changes over time—perhaps you used to hit the town with friends every weekend but now prefer to stay in to watch a movie with a nice glass of wine.

Whatever the case is for you, it’s worth looking closely at your current budget to determine what changes you can make. If you find yourself consistently overspending or feeling restricted by particular budget categories, increasing your budget for that category can lessen feelings of guilt. Conversely, other spending categories may have little interest to you now and it may make sense to reduce that budget category or remove it entirely.

This is also a great opportunity to review your short-, medium- and long-term financial goals. Are there any large purchases you plan on making within the next year or two? What about in the next decade? Are you on track with retirement savings? Your budget should reflect all of these goals.

Following these financial fall cleaning tips will give you plenty of easy personal finance wins, allowing you to reach your goals faster and live your life confidently knowing your finances are under control. Remember to keep this list handy for the future, so you can revisit them for even more savings in the future.

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