Let’s say you’re walking down the street and out the corner of your eye you spot a $100 bill on the ground. Finders keepers, right? Not so fast. Whether you find money or property, the IRS expects you to report your windfall, so they can tax you accordingly. But their greed doesn’t stop there, check out what other surprising things are taxable.
Social Security benefits
The average Social Security check is $1,694. Depending on your lifestyle, that may not be enough to cover all the bills. Although the obvious solution is to earn extra income, it can actually end up costing you money. Social Security benefits usually aren’t taxable if it’s your only source of income. However, those rules go out the window when additional income is involved. Single filers can be taxed on up to 50% of their benefits if their combined income is between $25,000 and $34,000. Married couples filing a joint return can face the same fate once they earn between $32,000 and $44,000. Up to 85% of your benefits may be taxable if you earn more than those amounts.
Receive Social Security and additional income? Use the formula below to determine if you’ll need to pay taxes on your benefits.
Your adjusted gross income + Nontaxable interest + ½ of your Social Security benefits = Your combined income
Canceled debt
Sometimes when you’re over your head in debt, a lender will agree to settle for less. If that happens, the IRS expects you to pay taxes on the canceled amount. Even if the cash never touches your hands, the IRS still views it as income. Typically, you’ll receive a Form 1099-C from your lender if the canceled amount exceeds $600.
Unemployment income
Unemployment benefits help countless people keep the lights on while they’re in-between jobs. But, by no means is it free money. It’s taxable income for which you will receive a Form 1099-G to report on your tax return. The simplest way to avoid an unwanted surprise is to request to have taxes withheld from your pay. To do this, complete and submit Form W-4V to the paying agency.
Scholarships
With tuition prices continuing to rise, it’s no surprise that many students rely on scholarships to help foot the bill. However, winning a scholarship may get more than you bargained for. Generally, if your scholarship is used to pay for tuition, enrollment fees and course-related expenses, you’re in the clear. But, if your free ride covers room and board or living expenses, you’ll probably have to pay up.
Gambling winnings and prizes
Won money from a scratch off game? You’re not the only one doing a happy dance. When you win, Uncle Sam does too. It doesn’t matter how you score your windfall, the IRS expects you to pay taxes on cash and non-cash prizes. You’ll receive a Form W2-G if you win:
- $600 or more and it’s at least 300 times your wager
- $1,200 or more from a bingo game or slot machine
- $1,500 or more from a keno game
- $5,000 or more from a poker tournament
- Any other winnings subject to federal taxes
Illegal activities
Income from illegal activities is taxable. So, if you earned a living by selling drugs, you must report the income on Schedule 1 (Form 1040), or on Schedule C (Form 1040) if it’s from your self-employment activity.
Jury duty pay
As a U.S. citizen, you are obligated to serve jury duty. If you are summoned, you will most likely be paid a daily rate for your time. Any pay you receive must be reported on your tax return. If you had to give the money to your employer because they paid your salary while you served, you can deduct the amount as an adjustment to your income.
Bartering
Bartering is when you and another person exchange one good or service for another. Although no money is involved, the IRS still expects you to report the fair market value of the items you received.
Stolen property
Sometimes when people can’t afford to buy what they want, they’ll use a five-finger discount instead. Clothes, jewelry, designer handbags, razors, laundry detergent – nothing is off limits. If you steal property, you must report the fair market value of the item in the year you stole it, unless you return it to the rightful owner the same year.
No matter how you earned your income, ezTaxReturn makes it fast and easy to do your taxes.
