As we enter the new year, taxes are on many people’s minds. Some may be excited because they know they will be getting a larger refund this year, others may be worried because they haven’t adequately prepared and didn’t start a file for 2014 taxes when the 2013 taxes were finished. If you are like most people, then you probably have a general idea of where your taxes are going, but there are a few sources of income that you might forget about when getting your return in order.
Social Security can be Taxable Income
For most people, the benefit that they receive from Social Security will not be taxable. However, there are instances can cause your benefit to taxed. If your only income was from Social Security, you likely don’t have to worry, but if you have other income (even if it is tax-exempt) you could owe taxes on your benefit. The baseline income that would make your benefit taxable is $25,000 for an individual and $32,000 for a married couple. An accountant in Billings, Montana can help you determine if your benefit is taxable.
Gambling Winnings are Taxable Income
If you spent a couple dollars on a scratch ticket, and you won $5, you technically need to report the difference on your taxes. Most people will report other sizeable winnings, though, because in order to collect the price they generally have to fill out a tax form. If you won a large prize, you can expect to receive a W-2G form to report your winnings. Keep in mind that you can deduct gambling losses (they cannot, however, exceed the amount that you won).
Punitive Damages are Taxable Income
If you were involved in a lawsuit last year, and you were awarded a settlement that goes over and above compensation for damages, then you will likely owe taxes on the amount you received. This includes punitive damages, monetary compensation for injury to your reputation, compensation for emotional damages, and other similar incomes.
Forgiven Debt can be Taxable Income
Have you ever owed a large amount of money? Suppose you owed on a credit card, and in the terms of settling the debt some of it was forgiven. The portion that was forgiven may be counted as taxable income by the IRS. Keep in mind that houses are excluded from this; you need to work with an accountant at A+ Accounting and Consulting in Billings, Montana if you have had debt forgiven.
Scholarships may be Taxable Income
The cost of college is going up rapidly. Since many people cannot afford to attend, they apply for scholarships to help cover expenses. If those scholarships are used to pay tuition, books, and supplies, then they likely won’t be taxed. But if they are used to pay for room and board, they could be.
Unless you have a single W-2 with no other earnings and you will only be claiming the standard deduction, you would likely be better off working with an accountant in Billings, Montana like Practical Taxes. With all of the unusual taxable incomes out there, as well as a number of deductions that you might not be aware of, you will save yourself a lot of headaches by letting a professional take care of your tax return.
From bank reconciliation, to online payroll, to tax preparation, Practical Taxes can do it all. We are a full service accounting firm in Billings, Montana.