3 Lesser Known Taxable Items You May Not Be Claiming
Posted by: Brookside Admin
When you start thinking about your taxable income, chances are you concentrate primarily on your salary. For most of us, what we make at our day jobs makes up most of what will be taxed by the IRS, but there are several other income streams you may not even consider that the IRS expects to be reflected on your tax return. Here's a quick rundown of a few items that are taxable and may not always make it on your return.
Used or unwanted items
Did you have a garage sale this year? Or find some heirlooms in your attic that you sold? Even if you just sold a used car that you didn't want anymore, all of the revenue generated from those sales is taxable. The important point here is the word revenue. The IRS doesn't force you to pay the entire capital gain on these sales. Instead, if you can prove what you initially paid for an item, you are only taxed on your profit. In many cases, a car will be sold for a loss unless you fixed up an old junker. Furniture and other items may be sold for a loss too, so be sure you keep those receipts and proofs of purchase around. If you can't prove your initial purchase of an item, you'll be liable for paying taxes on the entire sale price.
Barters and trades
You probably know that even if you're paid in cash for a service, that cash is considered taxable income. What many taxpayers don't realize is that even if no cash is exchanged, you could be liable for taxes on the market value of goods and services exchanged. Regardless of who you barter or trade with, if goods and services are exchanged for each other, the IRS taxes all parties involved in the trade.
Prize money and gambling winnings
If you hit it big at the casino, remember that the IRS will claim a share of those winnings. The same goes for winning the lottery, which is why many winners choose to take an annual payout instead of a lump sum that can trigger a gigantic tax bill. Cash awards connected to prizes are also taxed. You may remember that many were amazed to learn that Olympic athletes faced a tax bill for the value of their medals. The US Government has since worked to end that practice, but other prominent awards, like the Nobel Prize, have their prize money taxed as well. Even if your winnings aren't in the form of cash, you're still liable for taxes on the value. For example, if you win a new car in a drawing, the value of that car is taxed.
It's important that you include these taxable items on your tax return or you could face penalties and additional fees from the IRS. Work with the experts at Brown Kinion and Company CPAs to ensure your tax returns include all of your taxable income, and all of the deductions and credits you're eligible for.