It’s tax season, are you excited/ if you’re not excited, don’t worry — very few people are going to be excited at the idea of paying the government money, but it’s part of life. If you have to pay taxes, you will first need to determine what is actually taxable income. You might find it hard to believe, but your federal government only asks for a certain percentage of your money, and not 100% of your money either. It’s based on your taxable income. However, a lot of people forget that it’s not just your paycheck that turns into taxable income. There are other sources of income that you might have that turn into actual taxable income at tax time — wow, say that three times fast!
If you’re really serious about figuring out your taxes, we have a list of 3 things that count as income on your taxes. See if you knew these sources before this list, or if you just learned something new today!
1. Debt Forgiveness
The problem with the rise of debt settlement programs is that they never tell you that the money that you get “settled” from your debts is considered as income by the IRS. You will be getting a 1099 in the mail that lists the amount. A separate copy is usually sent to the IRS directly, which means that you will definitely get caught if you don’t report that amount on your tax return. The last thing that you want is to be audited over something that small. Is it bad to settle your debts? Definitely not — you just need to know what you’re getting into. Unfortunately, a lot of people end up trying to not only get the debt settled, but also hiding the fact that they had a settled debt in the first place. Actually, if you look at it from the right perspective, it’s a matter of cash flow. It’s a lot easier to let other deductions potentially cover the amount of tax owed than to try to come up with the high monthly payments that would arise from not settling your debts. Just something to think about this tax season!
2. Gambling Winnings
Yep, that’s right — if Lady Luck happens to smile upon you, then you will still need to make sure that you report your winnings to the IRS. Generally speaking, anything more than $600 needs to be reported to the IRS. So all those radio contests offering $1000 cash? Yep, you guessed it — you’re going to have to pay taxes on the money. Again, this is something that’s added into your entire income amount, so it’s not like you don’t have access to your exemptions and deductions. If you play at an actual casino offline, don’t be surprised if you get asked for your Society Security card — this is so that they know who you are, and that they can report your winnings to the IRS on their end. They have to do this in order to remain within compliance for the IRS.
3. Alimony Payments
While it’s true that child support payments are not considered taxable income, the reality of the matter is that alimony payments are considered that way. This is something that a lot of people feel is unfair, but the truth is that the IRS will consider any maintenance payments that you get as taxable income. Therefore, it’s better to make sure that you will be able to get these properly recorded on your taxes. If you are having your taxes done by a professional, you will need to make sure that you actually have that included. This can really throw off your taxes greatly, because alimony payments can get quite high. It doesn’t hurt that a lot of celebrities have received alimony payments of high amounts, which means that the IRS is definitely not going to let those alimony payments go tax-free anytime soon. Thankfully, they are not included separately, which means that you will be able to keep most of your deductions without a problem, which in turn means that you might not pay as much tax as you think.