Unavoidable Taxes

I think by this point most people have heard some talk about the potential tax implications of having caught Aaron Judge’s American League record-breaking 62nd homer of this past baseball season. Most of this comes in the form of “sure he caught the ball, but did you hear how much he has to pay in taxes?” And of course, this may be a significant amount, but think about this way - $2 million fell out of the sky, he caught it all, and now just has to send a portion of it elsewhere to be allowed to keep the rest.

This is still not that bad a deal.  Just mentally reframe it as you caught $1.4 million (or whatever the total ends up being) out of the sky instead. This is the same discussion that comes up around big lottery jackpots, where it is not like you suddenly made out worse because paying taxes is involved.

Of course, there are debates to be had over what the amount of taxes paid (if any) should be in such circumstances, But one probably shouldn’t get TOO upset over only winning a certain amount of millions.

What this does also display, though, is just how much the IRS wants to know about every bit of income you receive. It is easy to understand how your job wages are reported on a W2, with an amount withheld for taxes, and it is even becoming more and more understood how contractors receive 1099 wages that did not have taxes withheld but will need to be paid. However, if you also make a significant amount of money in other ways, that will also be taxed.

And yes, this can include selling valuable stuff that just fell into your lap. If you hold onto this newly prized object, then it may be seen as just an owned object, but once it is sold for potentially millions of dollars, it then becomes income. This works much the same way as gambling winnings (like those aforementioned lottery tickets or what you bring home from a casino). You may have only thrown out a couple dollars, but if it results in a significant return, the IRS then wants their share.

And no matter how upset you are over the situation, no matter how unfair you think it is, your anger will not change the rules. So let this serve as a warning that if you receive a significant amount of money, and tax agencies know about it, you will be paying taxes on it, so plan accordingly.

Warmly,

Josh Bousquet
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