You hear business coworkers winning the lottery through their work pools all the time, but can the business itself enter and win the lottery in your state? Check out the results of our investigation below.
State Law Rules Refer to Individuals
The states each vary on regulations on their state lotteries. It is common to see restrictions made in states on the minimum age to play the lottery, ranging from 18 to 21 years old. Some states don’t have any age restriction whatsoever. As for whether a business can enter, we have to look deeper. There is no specific rule against a business entering the lottery per se, but it is implied that the participant must be an individual since the rule restricts the age to 18 years old or older to enter and states require a verification of the winner’s age before collecting their win. Rules, like in California, for example, refer to participants as a “person” only. There is no mention of a business being eligible to participate and win a state lottery.
Individual Income Tax for Gambling Winnings
Lotteries can be won by multiple individuals who may or may not know each other, like an office pool as mentioned or random individuals across the state. They just have to have the winning ticket. A business owner may want to try purchasing a lottery ticket for his or her business to report the income to the business rather then on their own individual income tax return, but this is not how it works. According to the Internal Revenue Service, lottery winnings are considered taxable gambling income and must be reported on your individual income tax return, form 1040. The IRS expects you to withhold 25% of your gambling winnings and do not forget state income tax laws, which vary from state to state.
State and Federal Treatment of Lottery Winnings
The rules do not specifically mention that businesses cannot enter the lotteries, but the Internal Revenue Service requires individuals to pay the taxes on these types of wins. Gambling winnings or losses are reported to individuals through a W-2G form. Looking at the rules regulating the state lottery where you play and how the IRS treats gambling winnings makes it clear that a business cannot win the lottery.
AXIS Legal Counsel’s Business Practice provides legal advice to numerous small businesses with a variety of legal matters, including business formations, contracts, deals, and transactions, business administration, corporate governance, operations, risk management / insurance, labor/employment matters, intellectual property, healthcare, crisis management, directors/officers, private/data security, technology, statutory/legal compliance, and business litigation. AXIS represents businesses, corporations, LLCs, LLPS, partnerships, and startups in need of a corporate lawyer, for business legal matters as well as business litigation, such as disagreements, non-solicit agreements, non-competes, trade secrets, and other disputes with businesses. We are also experienced in providing assistance to business clients concerning business contracts, corporate formation matters, contracts and transactions, business litigation, business legal advice for Corporations, LLPs, LLCs, Partnerships, Small Business, Startups, and others involving corporate law.
If you are seeking a business lawyer, or for information on retaining AXIS Legal Counsel to represent your business in connection with any legal matter, contact [email protected] or call (213) 403-0130 for a confidential consultation.
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