7 Little-Known Income Sources the IRS Expects a Piece Of

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The IRS takes a piece of more than just your employment income. Take a look at seven other things you could owe taxes on this year. [[{“value”:”

The IRS is officially accepting 2023 tax returns, and in the next couple of months, we’ll all have to explain to the government what we did with our money last year. You probably expect to pay taxes on the income from your job or retirement account withdrawals if you’ve already left the workforce. But these aren’t the only income sources the IRS wants a chunk of. If you have any of the following seven expenses, you’ll also have to report them to the government this year.

1. Side hustle income

Side hustles usually don’t withhold income taxes from your earnings like your regular employer does. But it’s still earned income, and you need to tell the IRS about it. The good news is you can write off any business-related expenses to offset some of your profits. And if you paid estimated taxes throughout the year, this will also reduce how much you owe when you file your taxes. You may even get a refund if you paid more throughout the year than you owed.

2. Savings account interest

The best high-yield savings accounts have had interest rates hovering at or above 4.50% this year. That could put $450 or more in your pocket in a year with a $10,000 initial balance. Often, we don’t notice these earnings because our bank deposits the funds automatically each month. But it’s still taxable income, and you have to report it to the IRS.

If you don’t know how much you’ve earned on your savings account funds in 2023, try looking back at your bank statements or contacting your financial institution for help.

3. Gambling winnings

Those who made a profit while gambling in 2023 will owe taxes on their winnings. If you lost money gambling, you can use these losses to offset your gains. However, the losses you claim cannot exceed your winnings.

4. Unemployment benefits

If you received unemployment benefits at any point in 2023, you will receive a special tax form known as a 1099-G showing the total amount of compensation you got throughout the year. Keep this form, as you’ll need it when you enter your income information on your 2023 return.

5. Forgiven credit card debt

It’s sometimes possible to get rid of credit card debt by negotiating a settlement with your creditor. This is often only an option when you’ve already defaulted on the debt and the creditor doesn’t think it’s likely to recoup what you owe. You can contact the company and negotiate a payment agreement in which you pay less than what you owe, and in exchange for that payment, the credit card company agrees to forgive your remaining debt.

It can work, but it’s not great for your credit. And the debt the credit card company forgives is technically income to the IRS. So you’ll have to pay taxes on it as if it were money you received, even though you didn’t actually get a dime.

6. Alimony payments

Alimony payments are taxable if the divorce was finalized before 2019. For divorces finalized in or after 2019, this income is not taxable. It’s also not taxable if the divorce was finalized before 2019 but the divorce or separation agreement was modified in 2019 or later.

7. Social Security benefits

Some seniors could owe federal and possibly state taxes on their Social Security benefits. It depends on their income and the size of their checks. Some could owe taxes on up to 85% of their benefits, but that doesn’t mean they’d lose that much of their checks. You just pay ordinary income tax on the taxable portion of your benefits.

If you have any questions about whether something is taxable or how you can reduce your tax liability, reach out to a tax professional who can give you advice on your situation. Sooner is better than later, as accountants tend to get very busy as tax season progresses.

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