Can You Skip Paying Taxes on These 10 Money Sources?

Taxes have always been complicated. With the advent of so many side jobs, freelancing opportunities, and other extra income available, taxes have gotten even more confusing. I know I've wondered many times what is taxable and what is not. In the interest of saving you the headache I ended up with, here's a quick list of income you need to pay taxes on.

1. Tips

   

   As most servers in the US know, you have to claim your tips on your taxes, including cash tips. If you keep track of your tips in a daily log and report them properly to your employer, you should have no trouble correctly claiming them on your return.

   You do not need to track any service charges your employer adds to a customer's bill, as this will already be reported on your wages and is not a tip.

2. Freelance Income

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   There are two types of freelancers: those who earn a traditional paycheck (Form W-2), and those who are paid in full (Form 1099). If you are the first type, none of this applies to you as you will file just as you would with any other job. If you, like me, are the second kind of freelancer, here is what you need to know:

   • Your taxable income starts at $400.
   • If you have expenses directly related to your freelance work, you must file a Schedule C or Schedule C-EZ.
   • If your expenses cancel out the $400 minimum, you may not owe taxes.

3. International Income

   

   Did you go abroad in the last year? Were you there for work? Or maybe for school, and got a job on the side? First of all, I envy you. Secondly, you have to file taxes on this income if you are a US citizen or resident. Here are things to know if you have income from another country:

   • There are several different forms you may need to file with your taxes, so be sure you've got the right ones.
   • Check to see if your income is excluded; some people may find they are exempt if, for example, they live full-time in the country they work in.
   • You may be able to deduct taxes you paid to the foreign country you were in.
   • Thoroughly confused? Tax-filing extensions are available if you qualify.

4. Bartering

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   Wait, people still barter? And it's taxable? How does that work? Essentially, you're filing taxes for the “fair market value” of the items traded. You probably don't need to claim the M&M's you swapped for your friend's Snickers bar, but if you gave your neighbor your leaf blower in exchange for them doing yard work for you, you probably need to claim that.

5. Gambling Earnings

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   Won big at the casino recently? Hit the jackpot on a scratch-off ticket? Perhaps you guessed the right numbers and won the lottery. The IRS considers all of this gambling, and the income you received from these ventures is fully taxable. This doesn't just apply to the cash you can get, however: you must also claim the value of any prizes such as vehicles, trips, and other non-cash items. The good news here is that you can also claim your losses.

6. Jury Duty Payment

   

   For cases requiring jurors to take extended time off work, the court usually pays jurors a certain amount as compensation. This income is also taxable. The courts might send you a 1099-G or 1099-MISC, which you will need to file, although many court systems don't send anything at all.

7. Hobby Income

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   Do you enjoy making things for your family and friends? Do they occasionally pay you for those items? Congratulations, you have hobby income! Hobby income differs from small business income in that a hobby is considered something you do for fun, not for profit. If you regularly make money selling your quilts at the local farmer's market, it's no longer a hobby and you need to file for a small business. However, if Aunt Shirley asked you to make a baby blanket for her friend's newborn grandchild and offered to pay you to do it, that is most likely hobby income. You won't need to pay taxes for that.

8. Illegal Activity

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   If you're making money from anything illegal…well, we don't want to know, but the IRS does. Make sure you claim the money you got from robbing the corner store; Uncle Sam wants his cut of that, too.

9. Alimony

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   Just as your ex can deduct the cost of alimony they pay you, you must report the alimony as income on your taxes. This is different from child support, which is always non-taxable. Your ex will need your Social Security number to claim the deduction, and you will be fined if you refuse to give it to him so he can file his taxes correctly. Since he can claim a deduction of his payments, the IRS can track if you fail to claim the income, so make sure you file properly.

10. Canceled Debts

    

    Did your credit card company cancel your debt? The canceled amount is taxable. There are some exceptions to this rule, such as forgiven student loans, amounts that would have been deductible if paid, and certain debts canceled or forgiven in inheritances, gifts or bequests.

Tax time can be a confusing time as you struggle to figure out what you need to claim. I hope this list helps answer your tax-related questions. Do you know of any taxable income not on this list? Let us know in the comments below, and don't forget to share!