When the U.S. Powerball jackpot tops $100.0 million, it doesn’t matter what the odds of winning are, Canadians are lining up. And for good reason—lottery winnings are free from income tax in Canada even if you win in another country.
But it’s not all tax free. Lottery winnings in the U.S. are subject to a 30% withholding tax by the IRS. And dealing with the IRS can be complicated and expensive. When it comes to reclaiming a portion or all of your withheld winnings, no one is more successful than Refund Management Services (RMS). In fact, we’ve never been refused an eligible refund.
U.S. Powerball Hits Nine Figures
In July, one lucky person won $391.0 million on the U.S. Powerball; the eighth biggest lottery prize in U.S. history. Just one month later, that number has climbed back into the nine-figure territory at $154.0 million or $200.0 million Canadian.1
The two-dollar Powerball tickets are sold in 44 states with draws held on Wednesday and Saturday evenings. The only states that do not participate in the draw are Alaska, Nevada, Utah, Alabama, Mississippi, and Hawaii.
With the exception of Alaska, Powerball played is in all of the states that run along the Canadian border. Powerball is also played in the U.S. states most popular with Canadian snowbirds: Florida, Arizona, Texas, California, New Mexico, Kansas, and South Carolina. This might explain why so many Canadians play the U.S. Powerball.
Fortunately, Canadians are not taxed at home for lottery winnings, even those they win outside the country. That means, you avoid the 40% federal tax that U.S. citizens have to pay if they win the Powerball—and additional state tax.
But, Canadians and other non-U.S. citizens that win the Powerball, or any other lottery, or game of chance, (slots, table games, pari-mutuel, game shows, bingo, etc.) are subject to a 30% withholding tax by the IRS.
Of the $140.0 million you won, Powerball will hand you a cheque for $98.0 million. The IRS gets to keep the rest.
Canada’s Missing Millionaires?
You might think the chances of your winning a U.S. lottery are remote, but the fact is that an estimated $2.0 billion in lottery winnings went unclaimed last years. Many of those lottery winnings were worth less than $50.00, but roughly 115 prizes were worth more than $1.0 million.2
Research shows that more prizes tend to go unclaimed for draws associated with huge payouts, like the current $154.0 million prize. That’s because people often discard their ticket when they find out they didn’t hit the jackpot.
For example, in February 2016, the winner of a $63.0 million California Lottery jackpot went unclaimed.3 But there are a lot of other smaller, secondary prizes.
U.S. Gaming Winnings Subject to 30% Withholding Tax
Whether you’re a snowbird who loves to play the lottery or you’re just visiting the U.S. for a short vacation, any lottery winnings over $600.00 are subject to a 30% withholding tax by the IRS.
This differs slightly from other games of chance including slots, Keno, bingo, poker, pari-mutuel, or game shows, where winnings over $1,200 are subject to a 30% withholding tax.
If you win $1,000 playing the lottery, your payout will be $700.00. But, if you win $1,000 playing the slots at a casino, your payout will be the full amount. Even then there are exceptions. Gaming income is not taxed on any winnings that come from blackjack, baccarat, craps, roulette, or big6 wheel.
Residents of foreign countries without a U.S. tax treaty will be subject to a 30% withholding tax. BUT, if you live in a country like Canada, which has signed a U.S. tax treaty, you may be eligible for a refund.
There are a number of countries that currently do not have a U.S. tax treaty. However, if you reside in any of the following countries, you could still be eligible for a refund: Australia, Bahrain, Barbados, Brazil, China, India, Indonesia, Israel, Kuwait, Mexico, Malaysia, Monaco, New Zealand, Norway, Saudi Arabia, Singapore, South Korea, Switzerland, Taiwan, Thailand, and the U.A.E.
To see if you meet the criteria and are eligible to get some or all of your withholding tax back, contact RMS.
RMS, the Easiest, Fastest Way to Get Your 30% Withholding Tax Back
If you won money playing the lottery, slots, bingo, poker, or on The Price is Right, and had 30% of your winnings withheld by the IRS, RMS can help you reclaim a portion or all of your taxable winnings.
RMS was founded by a Canadian Chartered Accountant in 1998. Since then, we have become the most reliable and experienced gaming and casino tax refund provider for non-U.S. residents.
Only RMS has the One Simple StepTM process. Our Customer Service Agents take care of the rest: processing and submitting it to the IRS. It can take a minimum of one year for the IRS to review the claim and for RMS to receive the refund. Best of all, we’ve never been refused an eligible refund.
1. “Powerball,” Powerball.com, last accessed August 29, 2016; http://www.powerball.com/pb_home.asp.
2. Isidore, C., Garcia, A., “The 114 missing lottery millionaires,” CNN, January 12, 2016; http://money.cnn.com/2016/01/06/pf/unclaimed-lottery-winnings/.
3. Philips, D., “$63 Million California Lottery Ticket Still Unclaimed on Day of Deadline,” ABC, February 4, 2016; http://abc7.com/news/$63m-california-lottery-ticket-still-unclaimed-on-day-of-deadline/1186335/.