Income may come from a lot of sources. Most of it is taxable. Taxpayers often report income on their tax returns from things such as wages, dividends from stocks, and business-related income. However, there are some not-so-commonly known income sources that are taxable, such as income from unemployment. Here’s a list of some “yes-that’s-actually-taxable” income:
- Unemployment benefits – A hot topic as of late. Many people who suffered a job loss or furlough during this pandemic rely on this financial lifeline. Just as if they had earned a wage, unemployment money is taxable. Submitting a W-4V Form will allow a withholding to be applied to the unemployment income.
- Gains from the sale of property – The capital gains made from the sale of property like buildings and stocks are taxable. Notably, this also applies to the sale and exchanges of virtual currency like bitcoin. Check out our article on capital gains for more info.
- Gambling winnings – Lady Luck have a thing for you? Well you’ll be on the hook for the income taxes connected to those sweet, sweet winnings. Winners are issued a Form W-2G to report those winnings above a certain threshold on your income tax return.
- Bartering – Exchanges of services, such as a plumber doing plumbing work for an accountant in exchange for accounting services, is consider taxable and needs to be reported as income. Generally gets reported on Schedule C.
- Alimony (paid to you) – Alimony money paid to you in a divorce arrangement is treated as taxable income. Report any alimony money on the Form 1040 Schedule 1 on line 2a.
- Loan forgiveness – Worked a deal with a bank or collection agency on an outstanding debt to have it forgiven? Well, depending on some circumstances, that forgiven debt balance may be taxable income. Check out our article on cancelled debts for more info.
Generally, it may be easier to consider your sources of income as most likely taxable unless otherwise specifically exempted, such as child-support money or qualified gains made from the sale of your home.
Figuring taxable income can get complicated. Business owners already have enough on their plate running and expanding their business. Having the right backup can help move your business forward, and we at MiklosCPA can help you. We are a California-based firm that supports emerging businesses with their tax and accounting needs so owners can focus on their business goals and dreams. Learn more how we can help your business by giving us a call. Also follow our social media pages for future “good-to-know” articles like this and other interesting tax tidbits.