Call Now :(855) 549-7829
Se Habla Espanol

Are You Earning Unusual Income This Year?

This year might be like any other, as you bring in the usual wages from your employer(s), without any additional income to speak of. However, there is a chance that before the year is out, you’ll enjoy an unexpected windfall. If this is the case, it’s critical to understand how this can affect your tax return next year – and, ultimately, how much you may have to pay in.

Extra Work

Unusual IncomeThere are a number of ways you might see some extra money, beginning with taking on side work. If you’re earning income in a freelance capacity, such as cleaning houses or repairing cars, your wages are taxable (even though the tax isn’t being withheld, as with your wages from a typical employer). Depending on the frequency of your side work, you may actually need to estimate and pay taxes on your earnings throughout the year (you can visit IRS.gov to learn more about this).

Gambling

Whether you consider gambling a hobby or a profession, there are some taxable consequences that accompany your winnings. Regardless of your game of choice, from poker to the lottery, any earnings must be reported and you will be required to pay the appropriate amount in taxes. In many cases, payers will require you to fill out a W2 in order to collect your winnings (this form will be used to report the event to the IRS). Don’t forget to include your total winnings on your tax return, or you’ll face a tax debt later on.

Finding Valuables

You might think it’s unlikely that you’ll find an envelope full of money sitting in a parking lot, or perhaps uncover buried jewels in your back yard, but the reality is these sorts of situations occur every year. If you are lucky enough to stumble upon a small fortune, don’t forget about Uncle Sam. The total value of your find will need to be estimated, in order for you to pay the correct amount in tax when it comes time to report.

Judgments and Settlements

In the unfortunate event that you become embroiled in a lawsuit, the silver lining may be a cash award or settlement in your favor. However, this too must be reported to the IRS. In certain cases, you may not be required to pay tax from judgments (compensation for medical expenses is one example). There are other monetary awards which will require tax payment to the IRS. It’s smart consult with a licensed tax professional anytime you receive money from a legal dispute.

Pitfalls and Protection

No matter what type of unusual income you receive this year, don’t assume that you can bypass the IRS by simply not reporting the event. Remember, they conduct audits at random every year; the last thing you want to do is supply them with a reason to examine your earnings. This will likely result in a tax liability, one bloated by penalties and interest.

You can always protect yourself by enlisting the services of a licensed tax professional. He or she can review what type of money you’ve earned and what your corresponding tax obligations are. Additionally, you can rely on a licensed tax professional to execute a professional resolution for any existing IRS issue.