Take taxes out or not?

Hi everyone,

First time poster here... I am from Mass and usually gamble around here. Only won 1 handpay of about 1500 (So EXCITING!!) on a fishing slot machine that they no longer have at Mohegan Sun in CT. At the time I chose to take all taxes out at the time.

My question is should I have done this? What are the pro's and cons of taking the taxes out? I remember when I was getting my taxes done I needed to give the receipt of this to my Tax people.

Thanks all

Quote: elkram

Hi everyone,

First time poster here... I am from Mass and usually gamble around here. Only won 1 handpay of about 1500 (So EXCITING!!) on a fishing slot machine that they no longer have at Mohegan Sun in CT. At the time I chose to take all taxes out at the time.

My question is should I have done this? What are the pro's and cons of taking the taxes out? I remember when I was getting my taxes done I needed to give the receipt of this to my Tax people.

Thanks all

In some cases, you can itemize your tax return to deduct gambling losses (only to the point that you have gambling winnings, not more than your winnings) and that would enable you to get a refund or not pay the income tax on that to begin with. In the event that you intend to itemize your gambling losses, but you have already paid the taxes on the winnings, you are essentially giving the Government an interest-free loan as those will be refunded anyway.

It also makes the paperwork take slightly longer when you are getting the handpay, but that's not really a big deal.

If you are not planning to itemize your gambling losses, then I would suggest that all of this depends on your personal situation. For the most part, I would say it doesn't matter unless you are expecting a refund anyway, again, interest-free loan to the Government if you're getting a refund.

In other words, whatever the tax amount (in dollars) that money theoretically has better value (spending power) now than it will several months from now, given inflation. In other words, paying it now comes at a greater cost in spending value than paying it in the future typically would. The exception, of course, would be a deflationary period, but that's certainly not expected between now and next year.

To clarify:

https://www.usinflationcalculator.com/

In terms of inflation, an item that would cost $300 in 2018 would cost $306.02 in 2019 (this obviously depends on the specific item, but based on standardized inflation). An item that would cost $300 now would have cost $294.10 a year ago. That's why I say, in terms of spending power, $300 is worth more now than it will be next year. Therefore, if anyone is going to be making an interest-free loan to anyone, you want the Government to be making an interest-free loan to you. Take the money now, pay later.

It comes down to this- Do you want to owe the Government or the Government owe you?
I pay my debts, but not ahead of time.

Quote: billryan

It comes down to this- Do you want to owe the Government or the Government owe you?
I pay my debts, but not ahead of time.

there's the matter of being required to have withheld enough in the meantime : not enough withheld will mean penalties Fed and usually State

I think the IRS can put you on a quarterly payment schedule if you withhold too little. It's not happened to me yet, but my tax software has issued a warning.

Pretty sure a minor penalty is involved if that brink is hit.

What? You owe more than $500 in taxes, they want estimated taxes? Now that the standard deduction is $12,000/$24,000, I'm gonna have to win harder to trigger it. Fortunately the slot machines are so crazy it's possible to win $15,000/$25,000 on a nickel slot.