I won $5,000 on a lottery ticket. I paid $200 state tax when i cashed in my ticket. On my state tax form it shows $5,000 winnings as income. Was I taxed twice?

[minnerhead1]

On my tax return it carried the $5,000 over to my state but I have already paid $200 state tax up front.  The lottery office gave me a check for $4800 and they said it was to pay the state tax.  On my state tax form it shows $5,000 added in my income.  Was I taxed on that $5,000 again?

[Vanessa · Accepted solution]

Yes and No, The statement says $5,000 because that is what you won and what needs to be reported to the IRS.  So you will pay taxes on the full $5,000 to the Federal just like you did to the state. 

You are not being taxed twice by the state as you are receiving a credit for that $200 paid towards what you would owe the state. However, if the $200 was not enough withheld when added to the rest of your income you may need to pay any additional amounts due.  Just be sure to enter the $200 paid when entering your W-2G.