Publication 505 - Tax Withholding And Estimated Tax (Page 14 of 49) in pdf

a) Your life (or your life expectancy) or the

Backup withholding on gambling winnings.

Gambling Winnings

joint lives of you and your beneficiary

If you have any kind of gambling winnings and

(or your life expectancies), or

do not give the payer your social security num-

ber, the payer may have to withhold income tax

Income tax is withheld from certain kinds of

b) A specified period of 10 or more years.

at the rate of 30%. This rule applies to keno

gambling winnings. For 2003, the amount with-

winnings of more than $1,500, bingo and slot

held is 27% of the proceeds paid (the amount of

3) A hardship distribution.

machine winnings of more than $1,200, and

your winnings minus the amount of your bet).

The payer of a distribution must withhold at a

certain other gambling winnings of more than

Gambling winnings of more than $5,000 from

20% rate on any part of an ERD that is not rolled

$600.

the following sources are subject to income tax

over directly to another qualified plan. You can-

withholding.

not elect not to have withholding on these distri-

•

butions. No withholding is required on any part

Any sweepstakes, wagering pool, or lot-

Unemployment

paid directly to another plan.

tery.

•

Any other wager if the proceeds are at

Compensation

Choosing Not To Have

least 300 times the amount of the bet.

Income Tax Withheld

It does not matter whether your winnings are

You can choose to have income tax withheld

paid in cash, in property, or as an annuity. Win-

from unemployment compensation. To make

You can choose not to have income tax withheld

nings not paid in cash are taken into account at

this choice, you will have to fill out Form W – 4V,

from your pension or annuity. This rule does not

their fair market value.

(or a similar form provided by the payer) and

apply to eligible rollover distributions. The payer

give it to the payer. The amount withheld will be

will tell you how to make this choice. If you use

Gambling winnings from bingo, keno, and slot

10% of each payment.

Form W – 4P, check the box on line 1 to make

machines are generally not subject to income

Unemployment compensation is taxable. So,

this choice. This choice will remain in effect until

tax withholding. However, you may need to pro-

if you do not have income tax withheld, you may

you decide you want withholding.

vide the payer with a social security number to

have to make estimated tax payments. See

The payer must withhold if either of the fol-

avoid withholding. See Backup withholding on

chapter 2.

lowing applies:

gambling winnings, later. If you receive gam-

If you do not pay enough tax either through

bling winnings not subject to withholding, you

withholding or estimated tax, you may have to

1) You do not give the payer your social se-

may need to make estimated tax payments. See

pay a penalty. See chapter 4.

curity number (in the required manner), or

chapter 2.

If you do not pay enough tax through with-

2) The IRS notifies the payer, before any

Form 1099 – G. If income tax is withheld from

holding or estimated tax payments, you may be

payment or distribution is made, that you

your unemployment compensation, you will re-

subject to a penalty. See chapter 4.

gave it an incorrect social security number.

ceive a Form 1099 – G, Certain Government

Payments. Box 1 will show the amount of unem-

If you do not have any income tax withheld

Form W – 2G. If a payer withholds income tax

ployment compensation you got for the year.

from your pension or annuity, or if you do not

from your gambling winnings, you should re-

Box 4 will show the amount of tax withheld.

have enough withheld, you may have to make

ceive a Form W – 2G, Certain Gambling Win-

estimated tax payments. See chapter 2.

nings, showing the amount you won and the

If you do not pay enough tax either through

amount withheld.

estimated tax or withholding, you may have to

Report the tax withheld on line 62 of Form

Federal Payments

pay a penalty. See chapter 4 for information

1040.

about this penalty.

You can choose to have income tax withheld

Information to give payer. If the payer asks,

from certain federal payments you receive.

you must give the payer all the following infor-

Outside the United States. You generally

These payments are:

mation.

must have tax withheld from pension or annuity

benefits delivered outside of the United states.

•

Your name, address, and social security

1) Social security benefits,

However, if you are a U.S. citizen or resident

number.

alien, you can choose not to have tax withheld if

2) Tier 1 railroad retirement benefits,

•

Whether you made identical wagers (ex-

you give the payer of the benefits a home ad-

3) Commodity credit loans you choose to in-

plained next).

dress in the United States or in a U.S. posses-

clude in your gross income, and

sion. The payer would have to withhold tax if you

•

Whether someone else is entitled to any

provide a U.S. address for a nominee, trustee, or

4) Payments under the Agricultural Act of

part of the winnings subject to withholding.

agent to whom the benefits are to be delivered,

1949 (7 U.S.C. 1421 et seq.), or title II of

If so, you must complete Form 5754,

but do not provide your own home address in the

the Disaster Assistance Act of 1988, as

Statement by Person(s) Receiving Gam-

United States or in a U.S. possession.

amended, that are treated as insurance

bling Winnings, and return it to the payer.

proceeds and that you received because:

The payer will use it to prepare a Form

Notice required of payer. The payer of your

W – 2G for each of the winners.

a) Your crops were destroyed or damaged

pension or annuity must send you a notice telling

by drought, flood, or any other natural

you about your right to choose not to have tax

Identical wagers. You may have to give the

disaster, or

withheld.

payer a statement of the amount of your win-

Generally, the payer will not send a notice to

b) You were unable to plant crops be-

nings, if any, from identical wagers. If this state-

you if it is reasonable to believe that the entire

cause of a natural disaster described in

ment is required, the payer will ask you for it.

amount you will be paid is not taxable.

(a).

You provide this statement by signing Form

W – 2G or, if required, Form 5754.

To make this choice, you will have to fill out

Revoking a choice not to have tax withheld.

Identical wagers include two bets placed in a

Form W – 4V (or a similar form provided by the

The payer of your pension or annuity will tell you

pari-mutuel pool on one horse to win a particular

payer) and give it to the payer. For 2003, you

how to revoke your choice not to have income

race. However, the bets are not identical if one

can choose to have 7%, 10%, 15%, or 27% of

tax withheld from periodic or nonperiodic pay-

bet is “to win” and one bet is “to place.” In

each payment withheld.

ments. If you use Form W – 4P to revoke the

addition, they are not identical if the bets were

choice, print “Revoked” by the checkbox on line

If you do not choose to have income tax

placed in different pari-mutuel pools. For exam-

1 of the form.

withheld, you may have to make estimated tax

ple, a bet in a pool conducted by the racetrack

payments. See chapter 2.

If you use Form W – 4P to revoke the choice

and a bet in a separate pool conducted by an

for periodic payments and you do not complete

offtrack betting establishment in which the bets

If you do not pay enough tax either through

line 2 of the form, the payer will withhold as if you

are not pooled with those placed at the track are

withholding or estimated tax, you may have to

were married and claiming three allowances.

not identical wagers.

pay a penalty. See chapter 4.

Page 14

Chapter 1 Tax Withholding for 2003

Publication 505 - Tax Withholding And Estimated Tax Page 14

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