Do I Need to Report This Income? Part 1

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Last updated on June 23, 2016 Views: 547 Comments: 6

In general, if you have to ask whether you need to report certain income to the IRS, the most likely answer is, “Yes.” Here are some examples, courtesy of MSN Money.

Q. I hosted a party to sell products to my friends (and use my social circle for multilevel marketing from some corporation), and my guests brought me gifts. Do I have to report this?

A. Yes.

If you host a party at which sales are made, any gift you receive for giving the party is a payment for helping a direct seller make sales. You must report it as income at its fair market value.

See Publication 463.

Q. My sugar-daddy (er… loving husband) died and I had to pay to collect the reward (er… life insurance). Do I have to report this?

A. Yes.

Life insurance proceeds paid to you because of the death of the insured person are not taxable unless the policy was turned over to you for a price. This is true even if the proceeds were paid under an accident or health insurance policy or an endowment contract.

Q. This year, I’ve been taking bribes to keep the caviar smuggling ring off the FBI radar. Do I have to report this?

A. Yes.

If you receive a bribe, include it in your income.

Q. I ran for office this year and used campaign contributions to pay for my second cousin’s bodyguards. Do I have to report this?

A. Yes.

These contributions are not income to a candidate unless they are diverted to his or her personal use. To be exempt from tax, the contributions must be spent for campaign purposes or kept in a fund for use in future campaigns… Excess campaign funds transferred to an office account must be included in the officeholder’s income on Form 1040, line 21, in the year transferred.

Q. Instead of buying a Hummer for $50,000, I paid $60,000 and received a $10,000 rebate. Do I have to report this?

A. Yes, well, sort of. When you sell the car, figure your loss by using the sales price of $50,000, not $60,000.

A cash rebate you receive from a dealer or manufacturer of an item you buy is not income, but you must reduce your basis by the amount of the rebate.

Q. I successfully sued a hip hop artist for sampling my music. Do I have to report this?

A. Yes. The article goes into detail to determine what kind of income is reportable.

To determine if settlement amounts you receive by compromise or judgment must be included in your income, you must consider the item that the settlement replaces.

Q. I successfully sued my boss for emotional distress. Do I have to report this?

A. Yes.

If the emotional distress is due to a personal injury that is not due to a physical injury or sickness (for example, employment discrimination or injury to reputation), you must include the damages in your income, except for any damages you receive for medical care due to that emotional distress.

Q. I lost my job and my credit card’s insurance stepped in and made my payments for me. Do I have to report this?

A. Yes.

Generally, if you receive benefits under a credit card disability or unemployment insurance plan, the benefits are taxable to you. These plans make the minimum monthly payment on your credit card account if you cannot make the payment due to injury, illness, disability or unemployment. Report on Form 1040, line 21, the amount of benefits you received during the year that is more than the amount of the premiums you paid during the year.

Q. I received assistance from a non-profit program to help pay for the down payment of my house. Do I have to report this?

A. Yes.

If you purchase a home and receive assistance from a nonprofit corporation to make the down payment, that assistance is not included in your income. If the corporation qualifies as a tax-exempt charitable organization, the assistance is treated as a gift and is included in your basis of the house. If the corporation does not qualify, the assistance is treated as a rebate or reduction of the purchase price and is not included in your basis.

Q. I got a job with the help of a headhunter who charged me for his services. Do I have to report this?

A. Yes.

If you get a job through an employment agency and the fee is paid by your employer, the fee is not includible in your income if you are not liable for it. However, if you pay it and your employer reimburses you for it, it is includible in your income.

Q. I found an abandoned car and kept it while the person who lost the vehicle presumably wept. Do I have to report this?

A. Yes.

If you find and keep property that does not belong to you that has been lost or abandoned (treasure-trove), it is taxable to you at its fair market value in the first year it is your undisputed possession.

Q. My travel agency gave me a free tour of Paris. Do I have to report this?

A. Yes.

If you received a free tour from a travel agency for organizing a group of tourists, you must include its value in your income. Report the fair market value of the tour on Form 1040, line 21, if you are not in the trade or business of organizing tours.

Q. I hit the jackpot in Atlantic City. I’m sure nobody saw and there were no cameras. Do I have to report this?

A. Yes.

You must include your gambling winnings on Form 1040, line 21. If you itemize your deductions on Schedule A (Form 1040), you can deduct gambling losses you had during the year, but only up to the amount of your winnings.

As you can see, in most cases, yes, you have to report this. Welcome to tax season! Continue to Part 2 or leave a comment.

Article comments

Anonymous says:

I recieve unemployment and i just started getting disability pay from the military do i have to tell them that i am recieving disability

Anonymous says:

Do monetary and non-monetary gifts from friends or family have to be claimed???

Anonymous says:

I really hate declaring prizes as income, which is why I would never go on “The Price is Right.” If you win the ugly spa or the jukebox or the motor home, you still have to enter it on line 21. Blah.

Anonymous says:

I think the threshold is $10,000 for casino gambling. I’m not sure about any other kinds… not that I have any experience with the casino winnings.

I think if you were to keep track of your winnings and losings at a casino you could balance that $50 with $50 of losses (provided that you lose $50).

Anonymous says:

About the gambling thing. Isn’t there some threshold of $500 or something and you need to report winnings above that amount? If I remember, most casinos will ask for your SSN above that amount and will report it to IRS.

Just being a devil’s advocate…if you win like 50 bucks on a slot machine, no one is going to report it to IRS. In that case who cares if you report it in your tax forms or not. It will boil down to individual honesty.

Anonymous says:

I usually don’t like silly posts, but this one was just silly enough to be entertaining. Bravo.