Tax Guide |
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If you are a U.S. citizen, you must report all income from any source and any country - your total worldwide income - unless it is explicitly exempt under U.S. law. This includes income received in the form of money, property, or services.
This section and those that follow explain how to report some commonly encountered forms of miscellaneous income.
Other types of income, listed below, are discussed in detail elsewhere in this guide:
Alaska permanent fund dividend income. If you receive this type of income, you should receive a statement from the State of Alaska showing the total amount. Report it on Line 21 of Form 1040, on Line 13 of the 1040A, or Line 3 of the 1040EZ.
Alimony. See our discussion of how to report alimony that is paid or received.
Canceled debts. If you had a debt that was canceled by the person to whom you owe money, the debt may be treated as taxable income. It will not be taxable if the cancellation was intended as a gift, or as a bequest. It will also not be taxable if the debt was canceled in a bankruptcy case or when you are insolvent.
Through the end of 2014, you may be able to exclude income from the discharge of debt on your principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, can qualify for this relief. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion doesn't apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home's value or the taxpayer's financial condition.
Certain student loans that are canceled because the student worked for a certain period of time in a certain profession (such as teaching) are not treated as income. To qualify, the loan generally must have been made by an educational institution, a tax-exempt organization, or a government agency or instrumentality.
See also the discussion of canceled business debts.
Credit card insurance payments. If you receive payments under an insurance plan that makes your credit card payments if you cannot pay because of unemployment, illness, or injury, you must report as "other income" on Line 21 of Form 1040 the amount of benefits you receive during the year that exceeds the amount of premiums you paid during the year.
Election official fees. If you are paid for performing services as an election officer or worker, you should receive a W-2 Form reporting this income. Include it in the total reported on Line 7 of Form 1040 or Form 1040A, or on Line 1 of Form 1040EZ.
Executors and trustees. If you are not in the business of being a professional fiduciary, fees you receive in these capacities are treated as "other income" to be reported on Line 21 of Form 1040. If being a fiduciary is part of your trade or business, or your duties are so extensive as to constitute a trade or business for a substantial period of time, you will have to report the fees you receive on Schedule C or C-EZ.
Gambling winnings. If you have winnings from a lottery, raffle, or some other gambling activity, it must be reported on Line 21 of Form 1040. If any taxes were withheld from your winnings, you should receive a Form W-2G that shows the total paid to you in Box 1, and the amount of income taxes withheld in Box 2. Be sure to include the amount in Box 2 in the amount of taxes paid on Line 62 of your 1040. Your gambling losses are deductible as an itemized deduction on Schedule A but only to the extent of your winnings reported on Line 21.
Hobby income. Income you receive from an activity that is not considered a for-profit business is reported as "other income" on Line 21 of Form 1040. Expenses you incurred in generating this income are deductible as miscellaneous itemized deductions on Schedule A subject to the 2%-of-adjusted-gross-income limit.
Illegal income. Bribes, kickbacks, push money, stolen or embezzled funds, and other illegal income must be reported on Line 21 of Form 1040, or on Schedule C or C-EZ. While obviously this is rarely done, failure to report opens the door to imposition of tax fines and penalties, as well as criminal penalties, on illegal activities.
Jury duty pay. All jury duty pay you receive must be reported as "other income" on Line 21 of Form 1040. If the pay is turned over to your employer, you should treat the amount you repay to your employer as an adjustment to income on Line 36. Write "Jury Pay" and the amount that was repaid on the dotted line next to Line 36.
Prizes and awards. If you win a prize in a contest, drawing, or raffle, you must report it on Line 21 of Form 1040. If the prize takes the form of a car, merchandise, a gift certificate, or free services, the fair market value of the item is the value that you must report. If you refuse the prize, you don't have to report it as income.
There is a very narrow exception for prizes in recognition of past accomplishments (such as a Nobel, Pulitzer, literary prize, citizen-of-the-year award, etc.). You don't have to include the award as income if you were selected without any action on your part to enter the contest, you don't have to perform future services, and you transfer the award directly to a tax-exempt charitable organization or government unit.
More detailed rules apply to the following types of miscellaneous income:
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