Wasn’t the winning Mega Millions lottery less lucky?
A winning ticket to win the $1.34 billion Mega Millions jackpot was sold in Illinois in July, but whoever wins will get only a small portion of the winnings, while the rest will go to the federal government — at least that’s Facebook claimed in a post.
The August 3rd post appears to have been adopted from twitter, one of the users posted a screenshot of a Forbes article titled “$1.28 billion lottery winner earns $433.7 million after taxes.” (By the time the winning numbers were drawn, the jackpot had grown from $1.28 billion to $1.34 billion.)
“Congratulations to the IRS for winning the $846.3 million Mega Millions jackpot,” the Twitter user said.
Users appear to have made this assumption based on a miscalculation based on the title rather than the content of the article itself, which details how lottery winnings are paid and taxes owed.
The post was flagged as part of Facebook’s efforts to combat fake news and misinformation in its news feed. Instagram is owned by Facebook’s parent company, Meta. (Learn more about our partnership with Facebook.)
Mega Millions lottery winners can choose to be paid in one of two ways: a one-time lump sum or an annual payout.
The one-time payout is the amount of cash on hand in the prize pool that is less than the advertised jackpot, an estimate based on projected lottery sales and the current 30-year U.S. Treasury bond rate.
The annual bonus consists of 30 payments over 29 years and is the full jackpot amount.
Federal taxes and any applicable state taxes are withheld for both payment methods.
The $1.34 billion jackpot is the second-largest jackpot in Mega Millions history and the largest lottery jackpot ever in Illinois.
The Forbes article argued that lottery winners would opt for a one-time payment, which rose from $747.2 million to $780.5 million after the article was published.
People often opt for a one-time payment rather than an annual payment because it means getting the money right away rather than waiting 30 years to get the full amount, although some people do prefer an annuity to have steady income over the years.
Before the winner saw the money, about 24 percent, or about $187.3 million, was withheld in federal taxes, reducing the payout to $593.2 million.
Winners will eventually owe more tax when they file their income tax returns in April, as lottery winnings are considered regular taxable income, and the current tax rate for single filers earning more than $539,900 and joint filers earning more than $647,850 is 37% .
With 24% already withheld, the winner will need to pay the IRS the remaining 13% in taxes, or about $101.4 million.
That means the mega-millionaire will end up paying about $288.7 million in taxes to the IRS — nowhere near the $846.3 million mentioned in the social media post.
Since the ticket was purchased in Illinois, the winner will also pay 4.95% of the state’s income tax, meaning an additional $38.6 million will be deducted from the prize.
The final payment for the one-time payment option ended up being approximately $453.2 million.
Even if the full jackpot amount is taxed, based on the 37% income tax rate, the IRS would receive approximately $495.8 million.
As of August 5, no winning lottery ticket has been proposed. Winners have one year to claim the jackpot from drawing numbers.
A Facebook post shared a Twitter screenshot claiming that the $1.34 billion Mega Millions jackpot winner will have to pay $846.3 million in taxes to the IRS.
The Forbes article used in the screenshots doesn’t state this, but instead explains in detail how the winnings would be taxed if they were distributed as a one-time, one-time payment that was less than the advertising jackpot.
The actual amount the winner is expected to pay in a one-time federal tax payment is about $288.7 million. If the full jackpot amount were to be taxed, it still wouldn’t come close to the figure quoted by the post.
We think this statement is false.