I hate taxes.
I’ve probably mentioned that at least a hundred times?
Unfortunately, they are a necessary evil. You must make sure that you get them right or face expensive correction or even an audit. My last article focused on what your rights are as a taxpayer, so you have the facts.
It’s critical that you don’t leave out possible income sources. I’m not talking about those W2s or 1099s. I’m talking about the stuff you may not receive every day, but could cause you a lot of tax heartache.
There are four sources of income you must include on your return:
1. Your gambling income. So you won that big slot machine payoff, or hit the trifecta at the track? Congratulations! Just don't forget that counts as income. If you itemize your taxes you can write off all those losses (that you never mention) to offset your winnings.
2. Your cancelled debts. If you had a bunch of credit cards or loans and owed everyone, or so you felt, you can negotiate with your creditors. This includes a reduced amount to pay back.
So for instance if you had a $10,000 credit card and you negotiated a reduced bill of $7,000, you will owe tax on the forgiven $3,000.
3. Your Hobby Income. Let’s say you do furniture repair or paint a few oil paintings and receive a few bucks here and there. All of this is taxable income. Don’t forget you can write off your expenses like supplies and materials. You just cannot write off more than the income you received.
4. That ridiculous small pay from Jury Duty. All of us have had to report for jury duty at some point. If you do get stuck with it, you do receive some income that will need to be reported as Miscellaneous income.
Don’t forget these income sources, the IRS gets a copy of the W-9 or a 1099, so they are expecting it. Leaving it off will come back to haunt you.