It’s genuinely confounding how the IRS can always find a way to charge taxes on every one of your possessions. When filing returns is concerned, it’s a known fact that the Internal Revenue Service assesses your employment and investment proceeds to determine your total tax payment.
However, it might come as a surprise that even your unemployment benefits are a taxable item. Can you guess what happens when you win a Nobel Prize in science? The IRS says “big whoop!” and then asks for your due taxes on the prize money. Following are some more taxable items that will shock you. If you want to avoid audits and tax fines, you should declare these things as your income right away.
- Income From Sperm/Egg Donation
Often, young folks decide to donate their healthy and fertile gametes to infertile and struggling couples. Most companies in the donation industry will pay around $5,000 to $30,000 as compensation for such services. But, here’s the bummer. The US Tax Court has declared these payments as taxable items. Usually, the donors and the IRS will receive a form 1099 from the fertility clinics, documenting this exchange and its returns.
- Social Security
The majority of the population toils away their whole life, trying to qualify for social security benefits. Yet, the IRS’s ruthless streak of charging tax continues once this income goes beyond a certain threshold. For instance, the IRS taxes 85% of all individual taxpayer and joint proceeds higher than $25,000 and $32,000, respectively.
- Alimony Payments
Nothing compares to the sense of relief you feel when getting out of a pocket-draining marriage with a soul-draining partner. But, that happiness is short-lived, as you’ll be paying taxes on your alimony payments. Though there’s some good news; you don’t have to pay tax on your child support payments and property payments.
- Academic Scholarships And Aid
Most parents wish for nothing more than securing a financial aid or merit scholarship for their child’s college education. And sometimes they succeed. Still, you’ll have to pay tax on any portion of your online masters analytics scholarship that’s not contributing towards tuition.
- Unemployment Benefits
No, the IRS won’t cut you any slack even when you’re jobless, and your unemployment benefits will be taxed. When collecting unemployment compensation, you have two options. You get your funds withheld and receive the total amount. Alternatively, you can make estimated payments to settle the obligation.
- Cryptocurrency
The IRS regards all cryptocurrencies, including Bitcoin, as property. So, cryptocurrency users must record the current value of the coin along with its original cost. This information is crucial for accurate calculations of the gain/loss on your taxes. Also, it’s good to document the critical dates as the property tax rate may vary if your cryptocurrency is older than a year.
The question of what can you do with a masters in accounting might be necessary here. Well, for starters, it can smoothen your transition from cash to cryptocurrency by providing you with an understanding of loss/gain complications.
- Bartering
When looking at history from a bird’s eye view, exchanging money for services and goods seems a reasonably new concept. Unfortunately, bartering also comes under the IRS’s domain. So, you’re required to declare the market value of all exchanged items for tax purposes.
Suppose you trade your vintage Ford to get your laptop screen fixed. The income in this exchange will be the difference between your vintage Ford’s cost and the laptop repair’s value.
- Crowdfunding
In recent years, online crowdfunding has gained popularity as the easiest way to raise money. You can raise funds to support your favorite cause or fuel your entrepreneurial endeavors. The intended use and returns from the funds define whether they’re tax-exempt or not. Typically, business-related funds will be taxed, whereas funds raised for significant life events will be exempt from taxes, for example, medical emergencies.
- Fantasy football
Playing fantasy sports is a fun and profitable past-time for many. Sadly, the IRS won’t treat your fantasy sports earnings any different from casino winnings. Expect to receive a form 1099 from the website in which you play in an online league. Why? Because these earnings are taxable items.
- Expensive Employer Gifts
But wait! Gifts aren’t taxable, right? Usually, they aren’t. But, suppose you’ve decided to accept another job offer with a more attractive package than what your boss offers you now. In this case, your employer might gift you a Swarovski watch for your spectacular efforts and persuade you to stay. And if you accept the shiny new bling, you’ll owe the IRS some taxes.
Sometimes, your employers’ gifts might be excepted from your income if the sentiment behind was one of pure generosity. However, gifts used for employee rewards and business promotions don’t come under this umbrella.
- Found Property
Imagine you go deep-sea diving and discover a treasure chest filled with precious jewels and stones. If you’re true to your human nature, you’ll likely decide to keep it. But, according to the law, your new property is subject to the found property tax. Even if you find a meager 50$ dollar bill on the road, the same tariff will apply to the sum.
- Lawsuit Settlement Compensation
It’s common for business disputes to occur. Perhaps a vendor charged you illegal fees, conducted fraud, or wronged you in another way. And the law makes you eligible to receive compensation for your losses. That’s all fine and dandy. However, when you accept the settlement proceeds, you’re supposed to report that information to the IRS. More often than not, the IRS will track you down for taxes on such payments, so better to pay upfront.
In A Nutshell
It’s a good rule of thumb to accurately report all your earnings in a given year for tax purposes. Sure, even if you forget to declare a few negligible items in your income, it won’t necessarily warrant an audit. However, if you’re clueless about the size, amount, and types of the taxes you owe, you may be in trouble. This article went over some “interesting” items that are, for some reason, taxable. These involve alimony, fantasy football, cryptocurrency, barter, and scholarships.
