Lottery-winner used as example

Taxes and the lottery have both been notable in the financial news recently. A recent story highlighted both. A male was indicted Wednesday for trying to hide lottery winnings from the Internal Revenue Service, proving, once again, that tax evasion is a risky proposal at best, and a bad idea for sure. Resource for this article: Lottery winner tax evasion thwarted by IRS

Unreported income for taxes

One male in McClellandtown, Pa, won $481,000 in the lottery. The 69 year old male, Sherman W. Friend, was indicted for this on April 4.

The indictment said that Friend had his buddies cash the winning tickets for him to be able to keep away from the tax obligation. He should have paid about $132,000 on the winnings in taxes between 2009 and 2010. He will be arraigned on April 4 after facing two counts of tax evasion.

The majority of the money

The number of times Friend really won is unknown, but is it known that he played the PA State lottery quite a bit. A survey done by Bloomberg Rankings showed that the most often played form of gambling in the country is the lottery. Apparently it paid off because Friend got most of his 2009 and 2010 income from the lottery, according to an unnamed lottery official who spoke to the AP.

[Playing the lottery gets costly. Installment payday loans are a sure thing.]

Trying to keep the money hidden

In 2009, Friend won about $102,000 in the lottery. In 2010, he won about $379,000. Friend ended up avoiding taxes for a long time by simply having his friend’s cash in little winning tickets separately.

It was not specified whether the people cashing in tickets for Friend received a percentage of the winnings for their help.

Mostly 50 cent daily games

The official went on to say that the bulk of the winnings came from playing a multitude of 50 cent daily Big 4 game tickets. Winning numbers are drawn twice a day for the game. Players can invest any amount between 50 cents and $5 a shot. The odds of winning are about 10,000 to 1, but the game pays off 5,000 to 1. The payoff on a 50 cent bet could be as high as $2,500.

Trying to get a better chance

The chance of winning the Big 4 game could be dramatically increased by “boxing” combinations of four digits. By betting on 24 numeric combinations, the odds can drop to as low as 417-to-one. Those winnings pay off at a lower rate, yielding only 200 times the investment.

A sucker’s bet

Friend assumed he would never get caught; his scam was impossible to find. The one thing he forgot was that the IRS will not forgive when catching somebody evading taxes on purpose. He should have just paid up.

Sources

Pittsburgh Live

Beaver County Times

The Republic