Lotto Winnings (Power Ball)?

There is withholding before the distribution is made... it is mandatory

Here is the official powerball rules...

Is federal tax taken out of the check before you receive it? What percent would you actually receive after taxes? If $25 million were won, for example, what would be received in the annual check? Bruce & Sally B., via Internet.

Yes, federal tax is deducted from your lottery winnings before you receive your payment. You can think of lottery winnings just like other income - except you don't have to work for it. Powerball winners will receive their prize payment in one lump sum or in a number of periodic payments depending on their election. In either case, the lottery jurisdiction will withhold 25 percent of the payment for Federal income tax withholding. A Form W-2G, "Certain Gambling Winnings", will be sent to Powerball winners in January of the following year, reporting the total prize payment and the Federal income tax withholding amount. The total payment in Box 1 of Form W-2G should be reported on the "Other Income" line on the Form 1040, U.S. Individual Income Tax Return. (Note: As with all financial matters, we recommend that proper professional advice be sought before any action is taken.)

Most states also have an income tax. The amount withheld by any given state will vary, but will be handled very much like taxes on wages. The amount you receive after taxes will depend upon your tax return. The federal tax and state tax that is withheld is just the starting point. If you have a lot of charitable or other deductions you could be looking at a refund. It is more likely, however, that you will have to pay additional tax. Powerball jackpot winners tend to fall into the top tax bracket which is higher than the minimum withholding percentage.

The Powerball prize is paid in equal payments. On the $25 million prize in your example, you would get a check for $1 million dollars each year less the federal tax withholding and less any other tax withholding that may be required by your state. You would receive a slightly larger payment for the first year since we buy securities to fund the annuitized prize. Since these securities must be purchased in increments of $1,000, any cash that is left over is added to the first payment to the winner.

No, they can't do that. Income taxes are actually due when the income is earned or received, NOT at filing time. If you owe more than a certain amount at filing time -- $1,000 for the IRS, state amounts vary -- there are penalties and interest for underpayment of tax.

Lottery winnings are subject to withholding. It's not optional and the amount of tax withheld is set by law. If not enough tax is withheld -- very likely actually -- they will need to make estimtated payments by the next quarterly due date (April 15th) to avoid any penalties and interest for underpayment of estimated taxes when they file.

No they could not, just like you cannot opt to have no taxes taken out of your paychecks during the year, in order to pay your taxes in a lump sum the following April. The government wants its money during the course of the tax year as you receive it, not all at once in April. That is why if you are self-employed, for example, instead of receiving a paycheck from someone else, you have to make quarterly estimated tax payments -- again you can't just wait until April to pay.

It is a scam. Anyone that wants you to send money to claim a prize will only take your money and you will never hear from them again.