A rose by any other name...What is considered "income" by the IRS? Is it just the money from your paycheck? Or is there more to it? The IRS defines income as any money that you receive in a given year. So what does this include?
What can they take? In addition to the income from your paycheck additional income that can be taxed: interest on accounts, tips, and commissions. Other things that you may not have thought about include: any side money you made in excess of 0.00. This includes items sold as an e-bay auction or at the flea market.
Keep track of paperwork...With e-bay auctions you have receipts of all your transactions. Now selling at a flea market or garage sale is a bit trickier. Mainly since receipts aren't very common. Again you only have to report earnings that are over 0.00, so on the average you won't have to include these as income.
You didn't win it all...In addition you have to report gambling winnings which include the traditional casino winnings, as well as lottery winnings. You also have to include any prize winnings such as those from contests or game shows that are valued at over 0.00.
Being lucky just isn't so lucky is it? The IRS gets a piece of your good luck, and if you don't share the wealth the IRS will find out and they will come after you.
Not only does the IRS tax your winnings, but since you have to report them as income earned, your filing status may move up a bracket causing you to actually owe on your tax return. For example: let's say you won 0,000 in the lottery. After you have to pay taxes on the winnings, and then pay on your taxes from your adjusted income return...your actual winnings would only be about ,000.
Nothing is free...One of the pitfalls of won money is that people think of it as free money and burn through it...fast. Then when the tax bill comes in they have no way to pay it. But because you have to report your windfall and that's the income the IRS sees they're not going to cut you any slack.
It's a number's game...Reporting your income is just like claiming your deductions and tax credits. Keep your receipts. That's right you have to report the good and the bad...or else an IRS-Hitman might just show up at your door.
Now you have the smoking gun...Use it!
