Thanks for mentioning this! Do you know if the mandatory withholding applies to both lump sum and annuity options? And is there any way to increase the withholding amount to avoid owing more later?

The mandatory 24% federal withholding applies to both lump sum and annuity payments, but it works differently for each. For lump sum, they withhold 24% of the entire amount immediately. For annuities, they withhold 24% from each individual payment as you receive it. You can definitely request additional withholding beyond the mandatory 24% if you know you'll be in a higher tax bracket. There's usually a form the lottery commission provides where you can specify additional withholding amounts. This is actually smart planning - much better to have the withholding handled upfront than to scramble for cash when filing your return.

That might work for $200k but a million is life-changing money where tax planning makes a huge difference. Even saving 5% means $50,000 extra dollars! That's significant enough to justify getting professional help.

What about if the gift card was actually given to me as payment for a small job? I sometimes get Amazon gift cards from clients for quick consulting work. Can I then use those to buy business stuff and still deduct the full amount?

That's a different situation entirely. If you received gift cards as payment for services, those gift cards are considered taxable income when you receive them. You need to report the value of those gift cards as income on your Schedule C. Then when you use those gift cards to purchase business equipment, you can deduct the full cost of the business items as a business expense. So you'd have both income (the gift card value) and later a business expense (when you use it to buy something for your business).

I went through a field audit two years ago and this exact situation came up. The auditor was fine with me deducting the full amount of business purchases made with gift cards I received as promotions. But they did flag some purchases where I'd used gift cards that were given to me as thank-you gifts from clients, saying I should have reported those gift cards as income first.

21 What about the holding period? Does that transfer too or does it reset when the recipient gets the shares? This always confuses me for capital gains treatment.

4 The holding period does transfer - it's called "tacking." This means the recipient gets to include the time the donor held the stock when determining if they qualify for long-term capital gain treatment. So if your parent owned a stock for 10 months before gifting it to you, and you sell it 3 months later, you'd have a holding period of 13 months total, qualifying for long-term capital gains rates (assuming all other requirements are met).

10 Your brokerage won't know the original basis for gifted shares. The donor needs to provide you with that information separately. I usually include a spreadsheet showing my kids the original purchase date, price per share, and FMV at transfer date whenever I gift securities. You may need to file Form 8949 with your tax return to report the adjusted basis information since it will differ from what your 1099-B shows. The IRS matches 1099 forms with returns, so you want to make sure you explain any discrepancies.

23 Thanks! I'm going to call my aunt and get the original purchase information from her. I didn't realize the brokerage wouldn't have this data. Makes sense now why my tax software kept flagging this transaction - the basis was missing completely.

But OP said they're becoming a resident for tax purposes in 2025, meaning they're still a nonresident alien right now. I don't think nonresident aliens qualified for stimulus payments unless they were married to US citizens or residents.

I actually checked with the financial aid office already and they said they haven't processed anything for me recently. All my scholarship funds for last semester came through months ago, and the fall semester payments aren't scheduled to process until next month. The deposit definitely came from the Treasury Department based on the routing info.

I used it last year and honestly found it disappointing for quarterly payments. It's decent for annual filing, but the quarterly tool was basic and didn't save me much time. Plus it didn't sync well with my bank accounts. I switched to QuickBooks Self-Employed which is much better for tracking throughout the year and calculating quarterly payments accurately.

Thanks for the honest review! That's really helpful. Maybe I'll look into QuickBooks Self-Employed instead. I'm not doing anything super complicated tax-wise but just want something reliable that won't make me do all the math myself every quarter.

That's really helpful to know! So if this is my first year being self-employed, would I use my tax liability from last year when I was a W-2 employee as the safe harbor amount?

Exactly! Even though your situation has changed, you can use your total tax liability from last year's return (the total tax, not just what you owed at filing time) as your safe harbor amount. Divide that by 4 and pay that amount each quarter, and you'll be penalty-proof even if your self-employment income is significantly higher. Just remember that while this protects you from penalties, you'll still need to pay any additional tax you owe when you file your return. But at least you won't have those nasty underpayment penalties added on top!