The Internal Revenue Service (IRS) likes to remind taxpayers that virtually everything is taxable – and when it says that income is taxable, it means all income from all sources should be declared for taxation purposes. Here are a few examples that you may have believed to be exempt but you will soon find out to be anything but.
Income from Garage Sales and Family Heirlooms
Even when you conducted a garage sale of your unwanted clothes, furnishings, and furniture for the purpose of de-cluttering your home, you have to declare the income generated from it. You may not even know the tax basis but you have to declare it nonetheless, a situation that will require the expert assistance of Liberty Tax Service especially for larger amounts.
Income from Small Paid Jobs
Keep in mind that the IRS considers all income as taxable income regardless of its amount. Thus, if you were paid for performing relatively small jobs for your family and friends, such as babysitting for your nice neighbors, watering your father’s garden, and taking your friend to the airport, you are in effect required to declare it as income. You can’t even say that there was no cash involved as only a swap or a barter happened as the IRS will impose a tax based on the market value of the services swapped or the goods traded; trades and barters are also taxed.
Winnings from Gambling
Have you ever wondered why lotto jackpot winners usually choose the annual payments when offered the choice? This is because a lump-sum payment equals a large tax bill, which can cut the total winnings almost by half. Gambling winnings, regardless of their source, as also taxed.
The next time you want to scalp tickets for championship games and concerts, you should think twice lest the IRS starts breathing down your neck for failure to report the income generated from it. Even when you are only swapping tickets can result in taxes paid for it! Plus, scalping is illegal, which will add to your woes.
Prizes from Awards
After basking in the praise, you have to think about the taxes that come with your awards, regardless of whether the prizes were in cash or in-kind, even when it’s the Nobel Prize. For example, if you win a car in a raffle, your will be required to pay taxes on the car’s cash value.
Other income sources that the IRS can tax include tips and gratuities, small value benefits, and debt cancellation, as well as the discovery of treasure troves.