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5 tax surprises you should want to know

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U.S. citizens have less than a month to finish filing their taxes.

Although tax season will be coming to an end, April 18, 2017 – here’s a list of tax surprises some people may face and here’s how to overcome the consequences, according to bankrate.com.

5 tax surprises you should want to know

Unemployment benefits are taxed

Under tax law, unemployment is considered wage income, this means the IRS will take what they are owed.

To avoid this from happening, when applying for unemployment benefits, consider having federal income taxes withheld, according to bankrate.com. If you can’t afford it, think about paying estimated taxes.

The IRS wants a piece of alimony

Getting a divorce is never easy!

Alimony payments and similar compensation from a former spouse are taxable. However, child support is considered is not taxable.

To avoid a hefty bill in April, it’s important to make your IRS payments on alimony when they are due, according to bankrate.com.

Forgiven debt is taxable income

When a consumer gets a creditor to write off debts, the tax law generally considers the amount earned income, which means it’s taxable.

However, not every debt settlement is taxable. According to bankrate.com, under the 2007 Mortgage Debt Relief Act, some homeowners who were granted forgiveness of a mortgage debt in 2016 won’t have to pay taxes on that amount. Read more here.

Prize winnings

Prize winnings are considered income that tax law says is taxable. Also, note this is not limited to cash prizes. One has to pay taxes on the fair market value of any property you win, bankrate.com reports. Read more here.

Some Social Security benefits are taxable

Even after you retire, you still might have to pay taxes.

If Social Security is the only monthly income you receive, it’s not taxable. However, if you are collecting other forms income, plus Social Security, 85 percent of those government payments could be subject to tax, bankrate.com reports.

To deal with the IRS taxing your income, you can make estimated tax payments based on what you owe, or you can file a federal tax withholding form, Voluntary Withholding Request, with Social Security Administration.

For more information, visit bankrate.com.

This report contains information from bankrate.com.

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