Strange Sources of Income to Report at Tax Time
Strange Sources of Income to Report at Tax Time
The Income in Income Tax
Taxpayers are allowed to take some bizarre tax deductions. Criminals, for instance, can deduct the cost of their legal defense, and private swimming pools can be deducted if they are used for medical reasons. Just as these deductions are sometimes overlooked, so are bizarre sources of income. It is important to remember and report literally all your income sources to stay in compliance with the law.
Treasure Trove
Under the treasure trove clause, you must report lucrative findings to the IRS and pay tax on them. If you took your metal detector to the beach and found a rare coin, its value is taxable. Purchase a safe at auction and find cash inside? It’s taxable. If you find a wallet and keep the contents, the cash is taxable income. If you return it and are given a reward by the thankful owner, that cash or the value of other items item they gave you is also taxable. Clearly, if you’ve received anything of value from literally anywhere, you should be reporting it.
Debt Forgiveness
This one trips up taxpayers every year and generates quite a few fees and penalties for the IRS. If you owe money to your bank, credit card company or other lender and they forgive the debt, you must pay tax on the amount of debt that was forgiven. If you find yourself in financial trouble and negotiate a deal with your lender to erase $5,000 of your debt, the IRS considers that $5,000 to be income. This confuses many taxpayers since no money actually changes hands, and many fail to report this as income, creating problems when the lender files a report detailing the debt forgiveness with the IRS.
Other Oddities
Hiring a CPA in Las Vegas is the safest way to ensure that you haven’t overlooked these or other potential sources of income. Even money earned through illegal activities is taxable, and you will be charged with tax evasion it you don’t report these earnings and are later convicted of the crime. The world of the IRS is a strange place, but your CPA can help you navigate it safely.
