Gambling winnings and state tax question?
Okay, so gambling winnings must be declared as taxable income for federal and state taxes.
What happens if you happen to win a big prize on the exact same day you move from one state to another? Which of the 2 states do you pay state income tax to? Are you stuck paying to both states?
State A you lived in the first 5 months out of the year. State B you lived in the remaining 7 months.
Again, the taxable income (value of the winnings) was incurred on the exact day you moved from State A to State B.
Edit - more accurate time would be to say that we lived in State A for first 4 1/2 months of the year, and State B for the remaining 7 1/2 months of the year.
Saying that is unlikely to happen does me no good because this actually DID happen to me.
The money was won in State B. But State A is sending a tax bill to me 2 years later saying that we owe them a substantial amount of money for that prize. (The IRS and State B have already been paid.)
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You still live at the first place…just pay your taxes in the original state where you paid taxes the last time. Start fresh in the state you moved too, once you start working then you pay taxes there..
You pay taxes to the state where you bought the lottery ticket. Residency doesn’t matter.
The gambling winnings are taxable in your state of residence. Residency is determined based on various factors including the state where you’re licensed to drive and registered to vote. As stated in a preivous answer, you were probably not established enough in state "B" to be considered a resident.
In any case, I would inform state "A" that you were a resident of state "B" at the time you won. Send state "A" a copy of the return that was filed in state "B" and inform them that the income was reported and taxes were paid to state "B". That may be enough to get state "A" off your case. If this doesn’t work, you will have to pay the taxes to state "A" and amend the state "B" return.
In a related note, gambling losses can be deducted on your federal return (to the extent of gambling winnings). If you did not take the losses, you can amend your federal return and get some money back.
It sounds as though you reported the gambling winnings and filed a tax return in State B. At the time that you won the money you were a resident of State A. You should amend your return to State B and file a state return in State A. You may have a problem getting State B to believe your story but the option is to pay them both.
And what state is the money won in? If you are moving from State A and stop at the State A Casino before crossing the border to State B, you are still a State A resident and it will be income in State A. If State C and its casino were between A & B it would still be State A because you have not yet established residence in State B. If you win the big jackpot in the state lottery and, as in my state, California, CA lottery winnings (but not other states’) are not subject to state income tax, you may wish to reconsider your desire to move.
I would think it would be the state that you were at the end of the day.
Which state did you win the money in?
Flip a coin.
It’s highly unlikely to happen. But just pick on and go with it.