How should my game show winnings be reported?

September 26, 2008

From:  Joe
Date:  19 Jun 2008

I am a single part-time teacher in California. Normally I make $15,000/year. I just won $500,000 on a game show. I received a check with no taxes withheld.

Does this mean I don’t owe any taxes? If not, what taxes should I expect to pay? Does FICA or self-employment tax apply?

Thank you so much for your attention.

Best regards,
Joe B. Lacosta

Answer

Date:  02 Jul 2008

Hello Joe,

Congratulations on winning $500,000!

Prizes are subject to income taxes, but not employment taxes like FICA or self-employment taxes.

A tax advisor can help you estimate your tax liabilities. That’s our business!

Consider prepaying most of your California tax to get a current deduction against your federal income tax.

You also should be getting investment advice to preserve your new nest egg.

Good luck!
Mike Gray

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