Guindalf

I'm curious. I Heard yesterday that someone in the UK won 108 million pounds (about $170m), the fourth largest jackpot ever, in the UK.

If he happened to be a USC, visiting his family, what would the US tax situation be? We all know that lottery winnings are not taxable back home, but would he be stung for millions of dollars on his US tax return?

Could he just leave it in a UK bank account and use a debit card in the US with no comebacks?

Opinions or definitive answers welcome.

Discuss...

Yorkieabroad

Presumably the winnings would be declared on his annual return and taxed as proceeds from gambling in the US?

As for leaving it in a UK Bank account...don't see a problem with that as long as all the FATCA/FBAR reporting is also done.

But I'm not a tax expert...no doubt someone will be along shortly to tell you how to hide your newfound wealth ;-)

Guindalf

I wish it were me!!

My first thought was to head straight to the Caymans (first class, of course!) and open an offshore account for most, if not all of it and go from there.

notonuksoil

This made OH chuckle when we first had to do a US tax return.

https://turbotax.intuit.com/tax-tool.../INF14370.html

He is into horse racing and when we first moved over here he would travel back to the UK for the Cheltenham festival, unfortunately he usually didn't have any winnings to of set his losses!

ChocolateBabz

theoretically....can I borrow a tenner?

I assume you are taxed on it as it is 'worldwide income', but...hubby always told me that when you buy a ticket in the UK it includes tax on the ticket and that's why you don't pay tax on winnings. So if you already paid tax would it be exempt under double taxation rules? Of course he could be speaking $#!+€, he often does!

Pulaski

My standby plan, which unfortunately I have never needed to put into operation, is to head straight to a large firm of lawyers, have them present the ticket, and deposit the winnings into their client account pending further notification from me.

ChocolateBabz

I like that plan, or give it to a UK family member to keep for you....oh hang in I just remembered who my family are, let's go with plan #1, I've got more chance of getting the money back from a bloodsucking lawyer

Guindalf

Not an issue in the UK. You have the right to receive your winnings anonymously anyway.

Pulaski

I wouldn't trust my bank's employees not to leak the info. Straight from the lawyer's client account to various banks and brokers of my choosing is the way to go, with none getting more than 10% (5% if a "big one") of the total sum, so no nosey staff get to know I won the jackpot.

mikelincs

Would they be even able to be paid. Uk Lottery is only for UK residentsand the win has to be paid into a UK bank

Hotscot

Change the question to Dual Citizen then...

Michael

It's not taxed but just that the UK government pays out so little in relation to what they receive and therefore it isn't taxed. US states also do the same thing but since the US federal government doesn't get it's piece of the pie, they tax lottery winnings.

Guindalf

I intended it to be a dual citizen, hence the 'visiting family bak home' statement.

I guess it would be easy to claim it in the name of a close family relative (that you trust!! ) and draw from that. Then the IRS wouldn't even know about it. I realize that's not kosher, but rich peole become and stay rich by 'working around' the taxman!

Steve_

I remember there was a truck driver from PA I think it was who won the lottery in Ontario and he got dinged for tax in the US, I remember it because a lot of Canadians were upset an American had won, it was really quite pathetic the way they were going on.

I think the question is more interesting (well I would, wouldn't I) looked at from the other way around, i.e. you win in the US, the casino or whatever does 30% non-resident withholding on your winnings. So you file a W-8BEN with them and claim the tax treaty for your country, which is really important, especially if you're from, say, the UK because the tax treaty reduces the rate to 0%.

If you're Canadian the non-discrimination clause basically means it's done the same way as for Americans, i.e. we can claim losses against our winnings, but the only way you get out of the tax is because the amount you win is US-source income and taxed at the marginal rate in the US. Which effectively means unless you win a lot, you pay no tax.

Hotscot

On that note, I often ponder on my dear old mum's unused ISA allowance...