Surprising Items You May Owe Taxes On

We all know that our wages and self-employment earnings are taxable but, how about any random cash or other financial benefits you may have received throughout the year? When anything of value is exchanged, the IRS might already have a way to tax it.  Here are five taxable items that might surprise you:

1. Education Financial Aid or Scholarships: Financial Aid is important in any educational setting and Scholarships are a big part of that aid for many parents and students alike. There are parts of financial aid that might be taxable - i.e., things like room, board, books, travel expenses or aid received for work like tutoring or research. 

Tip: When receiving an award, review the details to determine if any part of it is taxable. Don’t forget to review state rules as well. While most scholarships and aid are tax-free, no one needs a tax surprise.

2. Gambling winnings. Hooray! You hit the trifecta for the Kentucky Derby. But guess what? Technically, all gambling winnings are taxable, including casino games, lottery tickets and sports betting. Thankfully, the IRS allows you to deduct your gambling losses (to the extent of winnings) as an itemized deduction, so keep good records.

Tip: Know when the gambling establishment is required to report your winnings. It varies by type of betting. For instance, the filing threshold for winnings from fantasy sports betting and horse racing is $600, while slot machines and bingo are typically $1,200. But beware, the gambling facility and state requirements may lower the limit.

3. Unemployment compensation. It sounds unfair but, the IRS still taxes you on any unemployment benefits you receive. 

Tip: If you are collecting unemployment, you can either have taxes withheld and receive the net amount or make estimated payments to cover the tax liability.

4. Crowdfunding. This is in the news a lot lately and it's an important way to raise money for new ventures or to support a special (especially through certain websites.) Whether or not the funds you receive are taxable depends on a couple of things: your intent for the funds and what the one who donates receives in return. Generally, funds bound for a business are taxable and funds raised to cover a life event (e.g., special causes or medical assistance) are considered a gift and not taxable to the recipient.

Tip: It's important that you review the terms and conditions before you use any online tools to raise money. You may also want to ask for a tax review of what you are doing. If you need to account for taxes, reserve some of what you raise for this purpose.

5. Cryptocurrency. Cryptocurrencies like Bitcoin are considered property by the IRS. If you use cryptocurrency, you need to keep track of your original cost and the actual value once you use it. This information is needed so the tax on your gain or loss can be properly calculated. Remember, the tax rate on property can vary if you own the cryptocurrency more than a year, so record all dates.

Tip: For those considering replacing cash with things like Bitcoin, you need to understand the gain or loss complications. For this reason, many people using cryptocurrency do so for speculative investment purposes.

When in doubt, it’s a good idea to keep accurate records so your tax liability can be correctly calculated and you don’t get stuck paying more than what’s required. Please call if you have any questions regarding your unique situation.