At the risk of sounding stupid, can someone explain the details in paragraph #4 on the raffle ticket order form. It says, "Federal law requires the deposit of 28% of the value of the prize to be applied towards the winners tax liability. Does this mean that after you pay the sales tax for your state, the license fees and other required fees, that an addition $33,600.00 is added based on 28% of the estimated value of $120,000.00?
Dear Revived Gearhead,
As it was explained to me, you have to show up with the $33600.00 ($120000.00 x 0.28) to pickup the car. The VCA sends that dough to the IRS in your name, to cover the minimum lottery taxes. (it has to do with ensuring that the IRS doesn't come back after the VCA if you renegged on paying the tax at year's end)
Supposedly, when you do your taxes at the end of the year, you list the lottery prize of $120000.00 and the tax paid $33600.00 and based upon your other income, etc. you might get more or less of a refund. Say for instance, you were in a very low income bracket, yet won the car, you'd likely get some of that money back....on the other hand, if you were living off interest income of say $1 000 000 000.00 a year (making you the highest tax rate), you'd likely have to pay additional tax.
Now I'm not an accountant, but when I asked an accountant, that is what they told me.
Regards,
Aaron