Just about anything you do financially has a tax consequence. Most of us are familiar with the fact that when we earn income, we pay taxes. But perhaps there are events that you don’t know are also taxable. Let’s explore what 11 other ways there are to collect (or pay, depending who you are) taxes.
Gambling
If you decide to spend your Friday night in a casino and you are one of a lucky few to walk away with some winnings, that money is taxable.
In this category fall not only casino winnings, but also fantasy football and lottery. So when you win, you didn’t exactly win what you think you did. Uncle Sam gets a portion and you can keep money after that.
Cryptocurrency
When there are still some arguments whether this new asset class is a currency or a security, you are required to pay taxes on any earnings (realized or not realized). Pay attention to it and ensure you report it correctly.
Illegal Business Deals
While there are branches of the government that would prefer that illegal business activity doesn’t exist, there is one branch that wants you to report earnings regardless of how you make them.
Yes, you guessed correctly, the tax department wants to participate in all earnings, legal or illegal.
Clearly, we support legal activities only, but failing to report earnings of any kind will create additional liabilities for you.
Proceeds From Fertility Clinics
College kids and young adults have been for decades making some additional income selling to these clinics. While one could argue for or against, that’s not why we are here.
We simply want you to know that this income is taxable and as such you need to report it on your tax filings.
Bartering
While we’re not quite sure how exactly you would report income from a barter, it appears that this too is a taxable event and must be reported.
So if you have traded your goat for a tractor, make sure your CPA is aware and make the proper reporting of the trade.
Found Property
You went on a fun trip to south Florida where you went on a sunken treasure hunt. You got lucky and recovered a treasure on the bottom of the sea. Guess what, the IRS wants a portion of your find and as such you must report and pay taxes on it.
Employer Gifts
You have a great employer who showers you with fantastic gifts every time you bring a new client in. The newest set of your golf clubs are seen as a taxable event for you, so make sure you save up some cash to pay Uncle Sam for your gift. Of, just tell your boss “no thank you”.
Scholarships
If you are a student and have received a scholarship to attend, make sure you know exactly what the scholarship is for. If that money was given to you for anything but the tuition, fees, or books, you are on the hook to pay taxes on your “free” money.
Nobel Prize Winning
Congratulations! You have found a way to create World Peace and you’re the newest individual to win such an esteemed prize.
The IRS expects that you will share your wealth with them as well, so be prepared to pay a hefty tax on your accomplishment.
Proceeds From Investments
Most people already know this, but it’s important we reiterate. If you earn money from your investments, you are due to pay taxes. How much depends on what kind of earnings you got and how long you held your investment.
Tapping Into Your IRA Before The Appropriate Age
Taking money out of your retirement can have dire consequences on your financial picture. Not only is there a penalty for early withdrawal, but you will also have tax liabilities on your hand. Of course, there are some other rules that can play in your benefit, but instead of guessing, make sure you work with a competent accountant. Well there you have it. Eleven ways you may or may not have known about that will generate taxable event in your life. To ensure you are properly prepared for these (and many other events that we did not name) make sure you have a CPA and talk to them BEFORE you do anything. It can literally mean thousands of dollars in savings or more.
Want to improve your financial picture and potentially reduce your taxes legally? Get my book “From Financially Stressed To Money Blessed” FREE.
