mickeyd
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
There's not much the Internal Revenue Service doesn't consider taxable income. Of course, there are the standbys: salaries, wages, tips, commissions, interest and dividends, rent on property you lease out and all the money you make from that photography business on the side.
Bartering your services won't help, either. The value of noncash items must be determined and then counted as income. Neither can you put money in a foreign bank to earn interest out of Uncle Sam's reach. If it's in your name and you can get to it, it's considered income.
And don't think for a minute you can get away with some underhanded ways to make a few extra bucks. The IRS specifically says kickbacks and embezzlement proceeds are taxable, too.
The tax folks don't care if you steal it, as long as they get their piece of the action. Remember, it was the IRS that tripped up Al Capone.
Even trying to get a better grip on your finances could cost you at tax time.
Did you negotiate with a lender or other account holder to eliminate some of your debt? While you may no longer have a recurring payment, you'll probably now have to make one to the IRS. Any debt you owe that is canceled or forgiven (other than as a gift or a bequest) generally is considered income -- taxable income.
This tax rule could even apply when you pay off your home. If your lender offers a discount for the early payment of your mortgage and you take him up on it, the amount of the discount is canceled debt and you must include it in your income.
Then there are those minimal amounts you get when trying to do the right thing. Fulfill your civic duty as a juror and get a few bucks and you owe taxes on that pay. Serve as the administrator or executor of an estate and any stipend you get is taxable.
Efforts you made to reduce one year's tax bill also could come back to bite you if you get what the IRS terms recoveries. For example, your itemized deductions last year included medical expenses, mortgage interest and real estate taxes. This year, however, your insurance had a change of heart (or at least policy) and paid you back for some of those expensive tests. In an election-year frenzy, your county government rebated some of your past property tax payments. And your lender discovered that it had misapplied some of your payments as mortgage interest when the money really went toward your home's principal. The IRS requires you to include these amounts as income in the year you receive them up to the amount you previously claimed them as a deduction or credit.
Rewards for a job well done could cost you, too. If you get a bonus, it's income. Many fringe benefits, such as a company car or use of a health club, also are included in your income as compensation unless you pay fair market value for them or the law specifically excludes them. Your employer generally must withhold income tax on these benefits from your regular pay.
You can't get around taxes by claiming the company reward was a gift. The IRS will let it slide if your boss hands out a turkey, ham or nominally priced item at holiday time. But if you're given cash, a gift certificate or an item you can easily exchange for cash, you must include the gift's value as extra salary or wages regardless of the amount involved.
Heck, even if you're out of a job you're out of tax luck. Unemployment benefits are taxable.
Here are some more instances where the taxman wants his cut:
Alimony received
Awards, prizes, contest winnings and gambling proceeds
Back pay awards
Notary public fees
Patent, royalties, license receipts and any infringement compensation
Profit on sales between family members
Punitive damages
Residence sale profit above the exclusion limits
Severance pay
Strike benefits
In the tax clear
There are few sources of income that are not taxable. Unfortunately, many represent money you wish you didn't need to get in the first place. They are:
Black lung disease benefits
Disaster relief grants
Cash rebates from a dealer or manufacturer
Casualty insurance and other reimbursements
Child support payments
Compensatory damages awarded for physical injury or physical sickness
Damages for emotional distress due to a physical injury or physical sickness
Disability payments if you paid the premiums on the policy with already taxed dollars
Foster care payments when the care is for youngsters
Most moving expense reimbursement from your employer
Supplemental Security Income (SSI)
Veterans' benefits
Welfare benefits
Workers' compensation
And while an inheritance of property is not a taxable event, you'll owe Uncle Sam on any income the bequest produces.
As with almost every tax situation, it's not always clear-cut when it comes to taxable vs. nontaxable income.
Bartering your services won't help, either. The value of noncash items must be determined and then counted as income. Neither can you put money in a foreign bank to earn interest out of Uncle Sam's reach. If it's in your name and you can get to it, it's considered income.
And don't think for a minute you can get away with some underhanded ways to make a few extra bucks. The IRS specifically says kickbacks and embezzlement proceeds are taxable, too.
The tax folks don't care if you steal it, as long as they get their piece of the action. Remember, it was the IRS that tripped up Al Capone.
Even trying to get a better grip on your finances could cost you at tax time.
Did you negotiate with a lender or other account holder to eliminate some of your debt? While you may no longer have a recurring payment, you'll probably now have to make one to the IRS. Any debt you owe that is canceled or forgiven (other than as a gift or a bequest) generally is considered income -- taxable income.
This tax rule could even apply when you pay off your home. If your lender offers a discount for the early payment of your mortgage and you take him up on it, the amount of the discount is canceled debt and you must include it in your income.
Then there are those minimal amounts you get when trying to do the right thing. Fulfill your civic duty as a juror and get a few bucks and you owe taxes on that pay. Serve as the administrator or executor of an estate and any stipend you get is taxable.
Efforts you made to reduce one year's tax bill also could come back to bite you if you get what the IRS terms recoveries. For example, your itemized deductions last year included medical expenses, mortgage interest and real estate taxes. This year, however, your insurance had a change of heart (or at least policy) and paid you back for some of those expensive tests. In an election-year frenzy, your county government rebated some of your past property tax payments. And your lender discovered that it had misapplied some of your payments as mortgage interest when the money really went toward your home's principal. The IRS requires you to include these amounts as income in the year you receive them up to the amount you previously claimed them as a deduction or credit.
Rewards for a job well done could cost you, too. If you get a bonus, it's income. Many fringe benefits, such as a company car or use of a health club, also are included in your income as compensation unless you pay fair market value for them or the law specifically excludes them. Your employer generally must withhold income tax on these benefits from your regular pay.
You can't get around taxes by claiming the company reward was a gift. The IRS will let it slide if your boss hands out a turkey, ham or nominally priced item at holiday time. But if you're given cash, a gift certificate or an item you can easily exchange for cash, you must include the gift's value as extra salary or wages regardless of the amount involved.
Heck, even if you're out of a job you're out of tax luck. Unemployment benefits are taxable.
Here are some more instances where the taxman wants his cut:
Alimony received
Awards, prizes, contest winnings and gambling proceeds
Back pay awards
Notary public fees
Patent, royalties, license receipts and any infringement compensation
Profit on sales between family members
Punitive damages
Residence sale profit above the exclusion limits
Severance pay
Strike benefits
In the tax clear
There are few sources of income that are not taxable. Unfortunately, many represent money you wish you didn't need to get in the first place. They are:
Black lung disease benefits
Disaster relief grants
Cash rebates from a dealer or manufacturer
Casualty insurance and other reimbursements
Child support payments
Compensatory damages awarded for physical injury or physical sickness
Damages for emotional distress due to a physical injury or physical sickness
Disability payments if you paid the premiums on the policy with already taxed dollars
Foster care payments when the care is for youngsters
Most moving expense reimbursement from your employer
Supplemental Security Income (SSI)
Veterans' benefits
Welfare benefits
Workers' compensation
And while an inheritance of property is not a taxable event, you'll owe Uncle Sam on any income the bequest produces.
As with almost every tax situation, it's not always clear-cut when it comes to taxable vs. nontaxable income.
