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Tax Checklist

September 25, 2018

Keep yourself out of trouble with the U.S. Internal Revenue Service (IRS)! Except for some tax-free fringe benefits, practically everything you receive for your work or services is taxed, whether you are paid in cash, property or services. In fact, Uncle Sam gets a cut of probably more things than you may realize, from unemployment benefits to prize money to gambling winnings. Knowing some of the common and lesser-known sources of taxable income will help you accurately complete your tax return and keep you out of trouble with the IRS.

Keep in mind that your employer will generally report your taxable compensation on Form W-2. This form also will specify the amount of certain taxable fringe benefits, as well as the amount of any tip income that should be allocated to you. You're on your own when it comes to calculating and reporting other taxable income. Here's a checklist to help you stay on track:

Fringe Benefits

  • Automobile Expenses — There's no free ride when it comes to the IRS. If your company provides you with a company car or picks up the cost of monthly leasing payments, that's considered taxable income for you. Alternatively, if your employer provides you with a car to use for business, you may be taxed on the value of the personal usage.
  • Education Assistance — Don't expect Uncle Sam to foot the bill for courses you took to pursue a new career. Employer-provided education allowances are tax-free only if the education is required by your employer, is necessary for you to function in your current job, or meets other IRS requirements.
  • Company Stock — Generally, if you receive your company's stock as payment for services, you must include the value of the stock as pay in the year you receive it. However, if the stock is subject to certain risk or forfeiture, you do not need to declare its value as taxable compensation until the restrictions no longer apply. Generally, the taxable income is the difference between the amount you pay for the stock, if any, and its value at the time its restrictions are removed.
  • Child or Dependent Care Assistance — Even free day care for your children can be subject to tax. Employer-provided day care valued at over $5,000 for single employees and married employees filing jointly is taxable. Likewise, employer-provided day care valued at over $2,500 for married employees filing separately is also taxable.

Job-Related Benefits

  • Unemployment Benefits — All unemployment benefits you receive from a state agency or the federal government are treated as taxable income. You should receive Form 1099 showing the amount of the payments.
  • Severance Pay — Severance pay provided by your employer is taxable.
  • Disability Income — Generally, you must report as income amounts you receive for disability through an employer-paid accident or health insurance plan.

Interest Income

  • Interest Income on Debt — Keep in mind, too, that you also have a tax liability if you have been collecting interest on money you generously lent to friends or relatives. You must report to the IRS any interest earned on loaned money.
  • Treasury Bills, Notes and Bonds — Interest on securities issued by the federal government is fully taxable on your federal income tax return.

Other

  • Prizes and Awards — Other than certain employee achievement awards, prizes and awards are generally taxable.
  • Lottery and Sweepstakes Winnings — Whether you win cash in a lottery or a new car through a church raffle, you're required to let Uncle Sam know about it and pay the requisite tax on the value of what you received.
  • Gambling Winnings — Finally, remember that even gamblers must ante up to the IRS. All gambling winnings are taxable. However, gambling losses are only deductible against gambling gains. You'll need to manage the burden of other losses on your own.