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Tax Tips for Prize Winners

As most of my regular readers know, my views on Guest Posts are quite simple, but on occasion I do allow for a guest writer, and this is another instance, and this one Tax Tips for Prize Winners, is a useful post. As I am not likely to win anything in the near future, best let someone else describe what to do.

Tax Tips for Prize Winners

By Jennifer Gorman, TurboTax

Earlier this year, it was announced a Mississauga woman had won Canada’s largest lottery jackpot ever – $64 Million. We’ve all dreamed about winning the lottery, retiring early, living a life of luxury and taking vacations at any time. With that said, let’s take a look at what winning the lottery means in terms of taxation for any lucky winners.

Casinos and Lotteries

Canadians are in luck when it comes to lottery and most casino winnings as they are considered windfalls and are tax-free! Even winnings from most sports pools, sweepstakes, or lotteries sponsored by a charitable organization are generally tax-free.

However, while the Canada Revenue Agency (CRA) doesn’t require you to pay tax on the winnings themselves, you are subject to tax on any money your windfall generates. Interest earned from bank accounts, GICs, and savings bonds is considered taxable income and must be reported on your tax return.

Does method of payment for the winning ticket make it taxable? No, method of payment for your ticket, even if it’s given to you as a gift, doesn’t change that the winnings are considered non-taxable windfalls.

Thinking of going pro as a card shark? The CRA has recently begun examining how “winnings” by professional gamblers are treated. Because of the expectation of profit, the theory is that monies won by professional gamblers should be classified as business income and subject to tax like any other type of business income. This means professional gamblers could also deduct related “business” expenses such as travel expenses, tournament fees, and equipment used in gambling. This theory is interesting as it opens to door to claiming a business loss if you didn’t win enough to cover your gambling expenses.

Workplace contests

Prizes won through your workplace are generally counted as part of your income. Your employer will deduct income tax, Canada Pension Plan and in some cases, even Employment Insurance premiums on this type of award. Your T4 will have the amount of the taxable benefit listed in box 40.

The one potential exception to this if you win a prize in a draw by a social committee in your workplace. If the social committee, which is entirely funded by employee fundraising, paid for the prize, then any gifts or awards the social committee gives out are non-taxable. This isn’t the case if the committee is funded by the employer, as any gifts or awards the social committee gives out are taxable benefits.

Niagara Falls or Vegas?

While both can be lots of fun, if you hit the jackpot from an American source, your winnings will be taxed. The US Internal Revenue Service (IRS) considers all winnings, even from lotteries, to be taxable. If you hit the jackpot at a US casino, expect a good chunk of those winnings to be withheld by the casino to ensure your tax obligations are met before you even leave the country. Even if you win big from your own home on a US online poker site, for example, your big score will be considered to be American income and taxed accordingly. You may also be required to submit a US tax return the following April to ensure the proper amount of tax was remitted to the IRS.

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About Jennifer Gorman:

Jennifer is a tax expert with more than 20 years experience helping Canadians. She enjoys holding seminars in her hometown in Newfoundland to teach seniors and students how to use TurboTax to prepare their own returns.

Site Note: Now just because this article talks about winning at the lottery, this does not mean I want you to go out and buy lottery tickets! That is not the message to take away from this, this is an informational piece about taxation.


TurboTax Winners and a Quick Review

A while ago I announced a quick contest for a version of on-line Turbotax 2014 Tax Year (Canadian On-line edition), and yes I have told the winners about it, all they have to do is return my e-mail some time this week, or I will pick other winners.

I have gone out and purchased my own copy of Turbotax (I figured I’d get my own, that way I wouldn’t feel obliged to be nice in my views on the software), and I bought the version that runs on the PC (for my own paranoid reasons).

Tax Time

Tax Time

So far I am let down, that some of the shortcomings I have seen in the past, still haven’t been dealt with, namely the inability to copy and paste medical expenses (typing in 25 Occupational Therapist visits for my son, does get a bit repetitive), but mostly the software seems to be working fine for me, with a few issues that I have run into (so far).

  • The lack of “DO YOU REALLY WANT TO DELETE THAT?” boxes on a few of the commands has caused me some grief. I had “cleared” my son from my dependants list, and it just let me, without any neat dialog boxes warning me that this might be a bad thing. I had just typed in those 26 Medical expenses and hadn’t saved, so I had to figure out how to recreate my son.I think it would be safe to say any place a “CLEAR” button exist there should be a corresponding, “ARE YOU SURE?!?!?” dialog box associated with it.
  • An autosave capability would have been nice with that first problem too, or maybe a revert back to a previous saved version.

I still have not received any tax documentation from my employer so I may have more to say soon (I also have a collasal amount of checking of receipts for tuition, rent and the like as well). Tax season has begun (it would seem).

Tax Software That Gets You Every Penny You Deserve

So far so good for Turbotax, it works just fine (as I said, so far).


Tax Time! TurboTax Giveaway

Yes, it’s that time of the year, where the Tax man is beefing up their Helpline, RRSP vendors are out for your last buck, and financial bloggers like me give you useful tax tips, in Canada, it is Tax Time!

This is the season when folks like Mark over at the Blunt Bean Counter earn their money, and I start getting odd e-mails about whether you can claim your dog as a dependent (the simple answer is NO! you cannot).

Tax Time

Tax Time

How better to celebrate this festive season than a Turbotax (on-line) giveaway. What is Turbotax on-line? Here is a helpful blurb about the software:

With TurboTax Online or ImpôtRapide en ligne, you prep your taxes and pay at the end, when you’re happy with the result and ready to NETFILE. 

As this is Canada, I like to stick with the concept that contest winners need to answer a skill testing question, or have to do something (I don’t give stuff away for free, just ask my kids).

This year we have a simple question that, you must answer in the comments of this article, by February  6th to be considered for this free software (I am giving 3 codes away).

Question: The stupidest thing I ever left off my tax return was _____________
(fill in the blank)

The winner will be chosen (at random) from the entries that qualify (i.e. you can’t just put in, “GIVE ME THE  SOFTWARE” and be considered).

Tax Software That Gets You Every Penny You Deserve
NB: You must supply a valid e-mail address or your entry will not qualify.


I’d Rather Be Flossing My Cat’s Toes…

… than doing my taxes. Yes, that was NOT one of the winning entries in the nth annual, world famous, Canadian Financial Place TurboTax Giveaway.

This year we saw a great deal of imagination in the responses to the question:

I’d rather be _____ than doing my taxes

OK, when I say imagination, I actually meaning, deeply disturbing verbage, but as promised winners were chosen (at random), as I couldn’t choose only 5 of these deeply worrisome comments. They will be informed and will hopefully reply in the correct time frame.

What would you rather be doing

Here are some of the more interesting responses:

Frugal guy with a balance does get the award for the most graphic example:

I’d rather trot to Hell on a fast horse with a porcupine saddle than doing my taxes.

Summer Plewes is another with quite the dislike of doing her taxes too:

I would rather be sticking hot needles through my eye while listening to Bieber sing than doing my taxes.

Wendi1 wins for the longest response:

I’d rather be scrapping hard packed ice off my car…
Repairing the window that was broken by a fallen tree limb…
Swabbing out the basement…
Cleaning disgusting rotted food out of my freezer…
And doing physio to help heal my twisted ankle.

Birdiebee sums up a lot of the other comments, I’d rather be doing anything than my taxes:

I’d rather be cleaning the toilet than doing my taxes.

Thanks to all the entrants, we’ll do this again soon!


TurboTax Giveaway: What would you rather be doing?

The nice folks at TurboTax have given me (again) 5 (five) codes to use their TurboTax on-line system, and now all I have to do is give them out.

Now how should we do this? Previously I really enjoyed the Two Line Financial Horror story challenge, which was quite terrifying to read (and judge), however this time we will go for something a little simpler.

This year’s challenge, answer the following question in the comments to this post:

I’d rather be _____ than doing my taxes

I realize for some who really love the tax system (I’m looking at you Blunt Bean Counter) they can’t fill this in, but for the rest of us common folks, it shouldn’t be that hard, can it?

Submit your answer in the comments and I will be announcing the winner(s), on Thursday January 23rd. You must include an e-mail address where you can be reached to be a winner. I will send you an e-mail “pinging” you if you are a winner, you have 24 hours to respond, if you don’t I will move on to the next entry.


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