With Tax day quickly approaching everyone is rushing to gather their documents and get those returns done, but is there some income you’re forgetting? Here are a six things that you should be reporting but might have missed:
Bartering is the exchange of goods or services for other goods or services without using money. The fair market value of the goods or services exchanged must be reported as income. Your friend is an electrician and agrees to wire your new house if you mow his lawn every week for a year, be sure to include the fair market value of wiring your new house as income on your return.
2) Illegal activity
Any income you receive as a result of illegal activity must be reported to the IRS. If you have stolen property, you must report its fair market value in the year it’s stolen unless you return it to the owner in the same year. Drug trafficking, embezzlement, bribes and kickbacks are all sources of income that must be reported. The IRS is mainly concerned with collecting tax and not the source of the income but law enforcement agencies could get a hold of that information. Unfortunately, your expenses from the illegal activity usually cannot be deducted. American Gangster Al Capone was convicted and sentenced to 10 years in prison for tax evasion from failing to report his ill-gotten gains.
3) Cancelled debts
Forgiven or cancelled debts are considered taxable income. A $15,000 credit card bill that is negotiated down to $5000 would leave the taxpayer with $10,000 of income to report to the IRS. If the debt is cancelled as a gift, bequest, devises, or inheritance, it is not income. Certain student loan forgiveness provisions will not be consider cancelled debt income.
4) Gambling income
Money won gambling or wagering is considered taxable income, this includes your winnings from racetracks, gameshows, lotteries and bingo. If you win a non-cash prize instead of money, then the fair market value of that item must be reported as income. Next time you’re on the price is right be prepared to pay taxes when you win the showcase. Gambling losses can be deducted but only up to the amount of your gambling winnings.
Prizes and awards from winning a drawing, contest, quiz or lottery must be included in your income. Oprah’s audience who famously all received a car, also all had to pay an average of $7000 in tax on those cars. If you have your sights set on a Nobel Prize, be sure to set aside some cash to account for the tax. Michael Phelps wasn’t thinking about taxes when he won 28 Olympic medals, but hopefully he included those winnings on his return.
Bonuses or achievement awards are considered income. If your bank is offering you cash back for referring friends, you have to report that as income. That bonus you get from work, whether performance based or holiday, are taxable, but if your employer opts to give out hams this Christmas that’s a gift and its tax free!