We all know that wages are taxed by the Federal government, but uncle Sam is far-reaching definition of “taxable income,” writes Money Talk.
It covers numerous types of earnings that many people do not understand that are subject to Federal income taxes.
Below are a few examples of taxable income that may come as a surprise.
1. Pensions social security
Usually people pay Federal income taxes on their benefits if they have other substantial income such as wages, interest or dividends.
If social security benefits are your only source of retirement income or you have little income in addition to your benefits, your benefits probably will not be subject to Federal income taxes.
2. Dividends Alaska Permanent Fund
When anchorage, Alaska, was named one of the best places for retirement in the country in 2019, referred to the Permanent Fund of Alaska (Alaska Permanent Fund).
But the dividends for adults and sometimes for children, are subject to Federal income taxes, said the Department of revenue of Alaska.
The state lead Agency warns that you don’t report the dividends Permanent Fund Alaska in your Federal tax return, you may be fined for negligence or face other sanctions.
For marriage contracts to 2019, alimony is generally deductible by the payer and the recipient typically need to specify them as (taxable) income.
This has changed for contracts entered into or modified after December 31, 2018. According to the Federal law on tax reform from 2017 , such payers of child support cannot deduct the payments, so now they actually pay taxes on this money, and recipients of alimony payments is not considered income.
The IRS expects that people will report income from the bribes in their tax returns.
“If you receive a bribe, include it in your income,” explicitly stated in a publication of the Federal Agency.
5. Forgiven debts
If you are fortunate to convince anyone to write off the debt in 2019, you probably felt relief. The problem is that you can’t be completely off the hook.
Generally, if a debt is forgiven if it is not intended as a gift, the IRS expects that you will consider the cancelled amount as income when filing Federal taxes.
6. Illegal activities
It is expected that even criminals will tell us about their income, including income from illegal activities, for example, from the sale of illicit drugs.
7. Gambling winnings
The euphoria that you experience winning in gambling games, can quickly fade when you realize that the IRS expects you to pay taxes on your windfall income.
And it’s not just what happens in a casino. Winnings in lotteries and casinos should also be reported to the IRS as income.
However, you can use losses from gambling, which happened in the same year as your winnings to offset your tax burden.
You can’t avoid paying taxes, taking goods or services instead of cash for their work. Generally, you must include in your income the fair market value of those goods or services.