Admittedly, we are a long way from when most of you are going to worry about filing your taxes, but I recently ran across some income sources that can sneak up and bite you on April 15th…
Employer Bonuses and Service Awards
First of all, you need to know that extra compensation from your employer, like bonuses and service awards, are more than likely taxable. You probably do not have to worry about the bonuses because your employer will withhold the taxes for you, but you do need to be careful with service awards.
If you do receive a service award (ie jewelry) and it is worth more that $1000 then you need to check with your tax accountant. I realize that the idea of a service award in a nation staring at the prospect of double-digit unemployment is a wee bit laughable, but for anyone retiring this year, this could apply.
Another taxable event that is more likely in these economic conditions is that in lieu of (or in addition to) a severance when you are laid-off, you are allowed to keep a piece of equipment that was essential to your performance on the job (ie Laptop). Check with your former employer to see if they are covering the taxes on this transaction…otherwise you could have a nice little surprise this year at tax time.
The Beast That Swallows its Young
For those of you who’s employer paid for your continued education this year…you guessed it…that’s taxable income as well.
Unemployment Benefits
In the event that you were laid-off in 2009 and drew unemployment benefits, there are some special laws that are in your favor this year. Typically, your unemployment benefits are considered income and are therefore taxable, but due to the job market, the government is easing the rules for this year only. Read the fine print when you are preparing to file your tax returns, or get thee to a tax accountant.
Death and Taxes…even if it’s Jury Duty Pay!
Jury duty pay is also taxable compensation. If you get called to serve and are compensated then you have to report that money on your tax returns as well. On behalf of Uncle Sam I’d just like to say…You’re Welcome.
Bartering can Trigger a Taxable Event
A rising trend in this economy is bartering. More and more folks who have services to offer, but no income are turning to providing professional services in exchange for things like medical services and legal aid. According to the laborynth that is the United States Tax Code, the services you receive as a result of the barter might trigger a taxable event. Again, You're Welcome.
Gambling Doesn’t Pay. But, If It Does Then You Owe…Big Time!
Finally, if you strike it rich in the lottery or at a casino those winnings are taxable…and I mean big time! States and the Feds tax those two categories of income to fullest extent and you are forced to report the income before any winnings are distributed. So, before you take the money and run…bet on Uncle Sam raking a cool 50% of your winning off of the top.
The Bottom Line
When it comes to getting paid, the government is not all that concerned with how bad your situation was this year. So be careful and report honestly…and if you are frustrated, check out the next Fair Tax Rally in your town. It is not the sexiest campaign concept ever crafted, but it could be the transformational tax reform that brings this economy back to its former state. Just a thought.
