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A New Jersey lawmaker has introduced legislation that would increase tax withholding on State Lottery winnings for players who fail to provide a Social Security number or tax identification number.
Senator Michael L. Testa Jr., representing Atlantic, Cape May, and Cumberland counties, sponsored the bill, which modifies the state’s gross income tax withholding requirements on lottery prizes.
The proposal would lower the threshold for enhanced withholding from $10,000 to $600 and require an 8% tax withholding rate on any New Jersey lottery winner without proof of a federal Social Security or tax identification number.
Current lottery withholding rules
Under current law, the New Jersey Division of State Lottery withholds taxes on prizes exceeding $10,000. For prizes between $10,000 and $500,000, the division typically withholds 5% for gross income tax purposes.
However, if a winner cannot provide proof of a Social Security number or tax ID, the division withholds 8% instead of 5%. This higher rate applies to the same prize bracket.
What the bill changes
Testa’s legislation would expand that 8% withholding rate to apply to any lottery prize exceeding $600 claimed by someone without a valid Social Security number or tax identification number.
In effect, the bill lowers the threshold where enhanced withholding kicks in from $10,000 to $600, which is a significant expansion that would affect a broader group of lottery winners.
According to the bill’s statement, the change addresses concerns about lottery winners who lack traditional identification documents:
“This bill modifies the gross income tax withholding requirements for the payment of certain State Lottery winnings to persons who do not possess a federal social security or tax identification number.”
The bill takes effect immediately upon enactment and applies to all prize claims submitted after the legislation passes.
The reasoning behind the change
The legislation appears designed to ensure the state can collect taxes from lottery winners who lack traditional identification documents. By requiring higher withholding at lower prize amounts, the state creates a mechanism to secure tax revenue when winners cannot be fully verified through standard federal identification.
The 8% rate represents a more aggressive approach compared to the current 5% standard withholding on prizes in the $10,000-$500,000 range.
What it means for New Jersey lottery players
New Jersey lottery players without a Social Security number or tax identification number should be aware that smaller prize amounts, anything over $600, would now trigger the higher 8% withholding rate instead of the standard 5%.
Players can still claim their prizes, but they should expect a reduced payout if they cannot provide proper identification documentation.
