Do unemployed lottery winners have to pay taxes on their (already taxed) lottery winnings every year?

Good question! No, you wouldn't have to pay additional taxes on lottery winnings that have already been taxed. Lottery winnings are considered ordinary income in the year you receive them, so you pay taxes once when you get the money. If you're just keeping that money in a non-interest bearing account or "under your mattress" and not earning any income from it, there are no additional taxes due on those funds. However, you would still need to pay taxes on any interest, dividends, capital gains, or other income that money generates if you invest it. Even with no income, you may still need to file a tax return depending on your situation, but you wouldn't owe taxes on money that's just sitting there and has already been taxed.

When I had a similar question about a smaller windfall, I used taxr.ai to analyze my tax situation. I uploaded my previous tax returns and lottery documentation, and the AI gave me a detailed breakdown of my tax obligations. Basically, it confirmed what the other commenter said - you pay taxes when you first get the money, but not again on the same dollars. The site https://taxr.ai actually explained how to structure my finances to minimize future tax implications while still having access to my money. Super helpful for situations like this where you're sitting on a large sum and concerned about tax obligations!

Just wanted to follow up on my skeptical comment earlier. I decided to give taxr.ai a try with my situation (inherited money rather than lottery, but similar tax questions), and I'm genuinely impressed. It analyzed my last two years of returns and gave me specific insights about my tax situation that my regular accountant missed. The AI explained exactly how my inheritance would be taxed going forward and recommended specific account structures based on my actual spending patterns. It was able to project my tax liability for different scenarios, which helped me make decisions about whether to invest the money or keep it in cash. Much more helpful than googling around for answers!

If you're trying to reach the IRS to get a definitive answer on this lottery winnings question, good luck spending hours on hold! I was in a similar situation (not lottery but a large settlement) and couldn't get through to anyone at the IRS for weeks. Finally used https://claimyr.com to get a callback from the IRS without the endless hold times. You can see how it works here: https://youtu.be/_kiP6q8DX5c - basically they navigate the phone tree and wait on hold for you, then call you when an actual IRS agent is on the line. I got a clear answer directly from the IRS about my settlement taxation instead of relying on internet advice.

I have to admit I was completely wrong about Claimyr in my comment above. After another failed attempt to reach the IRS myself (got disconnected after waiting 45 minutes), I decided to try it out of desperation. The service actually worked exactly as described. I entered my number, and about 90 minutes later I got a call connecting me directly to an IRS agent. The agent confirmed exactly what others here have said - lottery winnings are taxed once when received, and you don't pay annual taxes on the principal amount sitting in your account, only on any new income it generates. Getting a definitive answer straight from the IRS gave me peace of mind that random internet advice couldn't. Consider me converted.

Another thing to consider with that much money - even in a basic savings account, the interest could be substantial. Like if you put that $3.8 million in a high-yield savings account paying 4.5%, you'd generate about $171,000 in interest annually, which would definitely be taxable income. Plus, keeping that much money in savings rather than investing it means you're losing value to inflation every year. Might want to talk to a financial advisor about your overall strategy, not just the tax implications.

Does anyone know if there's a minimum filing requirement even if you have no income? Like if OP really did just sit on the cash and earned zero interest (bad idea but hypothetically), would they still have to file a return every year showing $0 income?

One important thing to keep in mind is that even though you won't owe taxes on the principal amount sitting in your account, you'll want to keep good records of your lottery winnings and the taxes you already paid. The IRS might ask for documentation years later, so make sure you have copies of your lottery payout statements, tax withholding forms, and the tax return where you reported the winnings. Also, if you're planning to live off this money for years, consider that $3.8 million might not last as long as you think, especially with inflation. Even without earning interest, your purchasing power decreases over time. You might want to at least put some of it in Treasury I-bonds or TIPS (Treasury Inflation-Protected Securities) to maintain your buying power while still keeping things relatively simple from a tax perspective.