…You can get one at auction in Sacramento on April 4th. Jerry Yang, the winner of the Main Event of the 2007 World Series of Poker, is in tax trouble with both the IRS and California’s Franchise Tax Board. Back when Mr. Yang won the Main Event (and $8,250,000), here’s what I wrote about his tax burden:
Mr. Yang, hailing from California, had $2,062,500 withheld to the IRS right off the top of his prize. Given the marginal tax rate he will likely face, he will probably owe another $825,000 in federal taxes (a total of $2,887,500 to the IRS). He will also California tax, so the Franchise Tax Board figures to rake in $849,750 of the win. Mr. Yang’s actual win is probably $4,512,750 or so. The Franchise Tax Board is especially grateful. This is the second year in a row that a Californian has won, and given California’s budget issues, any and all revenues will be quickly spent.
The notice of encumbrance notes multiple liens, including a $571,894.54 lien by the IRS. (Though it is listed twice, there’s likely one amount owed to the IRS; the lien is listed twice because there are two separate properties in different counties under the lien.)
One of the things I tell my gambling clients is to put aside one-third of what you make for taxes (at minimum). Given that Mr. Yang had money withheld for taxes, its somewhat surprising that he has fallen into tax trouble. Apparently, much of his winnings was not put aside for federal taxes as it should have been. I remember reading about him opening a restaurant in Merced, California (in the Central Valley). The article references him having paid his taxes and that he could retire on the interest he earned. Apparently, he didn’t keep enough money to pay the taxes he owed.
If you suddenly come into a lot of money–you win a lottery or a large gambling tournament–get professional advice on how much money you must put aside for taxes. You may not like the answer–tax rates are higher now than in 2007–but you should get a good idea of what you will owe. If I were to win a World Series of Poker bracelet, I wouldn’t want that memorabilia to be anywhere but in my possession.
