7 Random Things You Will Get Taxed For

tax return
Photo by Linaimages from Shutterstock

If you’re working, you know that the money you make is taxable. You also probably know that some investment income is taxed, too. The bad news is that there are more taxable items on the IRS’s list.

If you’ve picked up some extra money through skill, luck, or even criminal activities, there’s a pretty good chance you owe taxes on that cash as well. To avoid being taken by surprise when it’s time to file your tax return, we’ve rounded up some surprising things that are actually taxable.

If you’ve collected any of these, make sure you declare them on your next tax return.

gambling
Photo by Nejron Photo from Shutterstock

1. Gambling Winnings

Not everything that happens in Vegas stays in Vegas. That’s because gambling winnings are taxed. Gambling income includes winnings from casinos, lotteries, horse races, and sports betting (including fantasy sports). Those mentioned here are the most popular types of gambling winnings, so keep in mind that the list doesn’t end here.

The payer is required to send you a Form W2-G if you win $1,500 or more from keno, $1,200 or more from slot machines or bingo, more than $5,000 from a poker tournament, or $600 or more from other wagers if the payout is 300 times or more the amount of your bet.

Here’s one thing to keep in mind: Even if the payer doesn’t send you a W2-G, the IRS still requires you to report your gambling winnings on your tax return. While this type of income is taxed, there’s still some good news. You can deduct gambling losses, but only if you itemize. Also, you can only do this to offset the income from your gambling winnings. Basically, you can’t deduct more than you own.

Let’s have an example. If you won $3,000 last year and lost $4,000 in bets, you can only deduct up to $3,000 of your gambling losses.

The state where you live may also want a piece of the action. Your state will usually tax all your income, including gambling winnings. But also watch out for a tax bill when placing a winning bet in another state.

This doesn’t mean that you’ll be taxed twice, though. Your home state should offer you a tax credit for the taxes you pay to another state. Also, check to see if your state offers a deduction for gambling losses.

cancelled debt
Photo by zimmytws from Shutterstock

2. Cancelled Debt

Don’t get too thrilled if your credit card issuer tells you that you don’t have to pay off the remaining balance. That’s because debt that’s cancelled or otherwise discharged for some of the amount you owe is usually taxed.

This applies to mortgages, car loans, credit card bills, or any other debt that you owe. So, for instance, if your bank says you don’t have to pay $1,500 of the $5,000 you still owe on a car loan, you have $1,500 of cancellation of debt income that the IRS expects you to report on your next tax return.

There are some exceptions to this rule, such as for qualified farm indebtedness, debts discharged in bankruptcy, student loans, and a few other types of debt. Also, when it comes to “nonrecourse” debt—i.e., where the lender is able to repossess the borrower’s assets if they fail to pay, but they aren’t personally liable for the unpaid debt—any cancelled debt won’t get taxed (although you may realize a loss or gain from the repossession).

If you do have a debt forgiven, the lender may send you a Form 1099-C, which shows the amount of cancelled debt. The IRS will also get a copy of the form, so they will know about it.

buried treasure
Photo by OneSideProFoto from Shutterstock

3. Buried Treasure

Any treasure you find is taxed, too. In September 2020, a lucky man found a 9-carat diamond in Arkansas’ Crater of Diamonds State Park. It was the second-largest diamond ever discovered in the park, and its estimated value was $1 million or more.

So be aware that if you unearth a cache of gold coins, discover a diamond in the rough, or find sunken treasure while deep-sea diving, Uncle Sam wants a piece of your booty. According to the IRS, found property is taxed at its fair market value in the first 12 months it’s in your undisputed possession.

The IRS’s “treasure trove” was first applied in 1964, when a couple found $4,467 in a used piano they had bought for only $15. The IRS said the couple owed taxes on the money, and a US District Court agreed.

stolen property
Photo by Sergey Mironov from Shutterstock

4. Stolen Property

If you staged an at-heist last year, embezzled money, or robbed a bank, you’ll get taxed on the proceeds. In other words, income from criminal activities, such as money from dealing illegal drugs, is taxable and must be included in your income. Bribes are also taxed.

Of course, few criminals report their ill-gotten gains on their returns. But if you’re caught, you’ll be found guilty of tax evasion. While the IRS doesn’t pursue these types of felony cases for many people, the penalty for those caught is harsh.

That’s what happened to well-known gangster Al Capone, who was sentenced to 11 years in federal prison. According to the IRS, he never filed a tax return.

unemployment benefits
Photo by Castleski from Shutterstock

5. Unemployment Benefits

Millions of Americans have received unemployment benefits during the coronavirus pandemic—many for the first time. While this type of compensation is considered an important lifeline during times of struggle, it could also result in an unexpected tax bill.

Yes, that’s right—you can also get taxed if you receive unemployment benefits. They are basically a form of income, therefore they are taxable at the federal level. Moreover, in some cases, unemployment compensations are subject to state taxes, too.

According to the IRS, these benefits, for the most part, include any amount received under state or federal unemployment compensation laws. This also applies to state unemployment insurance benefits and benefits paid to you by the District of Columbia or any state from the Federal Unemployment Trust Fund.

bitcoin
Photo by Wit Olszewski from Shutterstock

6. Bitcoin

While Bitcoin can be used to purchase a variety of services and goods, the IRS considers Bitcoin and other cryptocurrencies to be an asset. If the Bitcoin you used to buy something is worth more than you paid for it, the IRS expects you to pay taxes on your profits at capital gain rates—just like bonds and stocks.

Also be aware that, as more and more people start to use virtual currency, the IRS is starting to keep a more careful eye on it. For example, since 2019, internal revenue agents have been sending letters to Americans who may not have reported transactions in cryptocurrencies.

Also, the 2021 Form 1040 included a line asking you if you sold, received, exchanged, sent, or otherwise acquired any financial interest in any digital currency during the next tax year.

Some virtual currency platforms are issuing statements that show a record of their transactions. Even if you didn’t receive a statement, you’re still responsible for paying taxes on any gains earned in crypto.

If your employer pays your wages in Bitcoin or some other digital currency, you must report it on your W-2 form, and you must also include the fair market value of the cryptocurrency in your income.

gift
Photo by CHALERMCHAI99 from Shutterstock

7. Gifts from Your Employer

You don’t usually need to pay taxes on gifts you receive, even if they are worth a lot of money. However, if your employer gives you a lovely—and expensive—gift as a reward for a job well done (or to convince you to say “no” to a job offer from a competitor), chances are you’ll have to pay taxes on the value of your newly received possession.

A half-century ago, the Supreme Court decided that the rule doesn’t apply to gifts made out of “disinterested and detached generosity.” Also, according to the court, gifts that reward an employee for their services can be excluded from their income. Gifts that help promote the company also don’t meet the standard.

You may also want to read These 6 Things Will Cut Down Your Social Security Payments.

Share:

Leave a Reply

Your email address will not be published. Required fields are marked *

Related Posts