Unemployment Taxes and Other Surprises
Sign up for our FREE Monthly Email Newsletter
In addition to keeping in the financial know, you may be interested in checking your credit score and report.
¹The credit scores provided under the offers described here use the Equifax Credit Score, which is a proprietary credit model developed by Equifax. The Equifax Credit Score and 3-Bureau scores are each based on the Equifax Credit Score model, but calculated using the information in your Equifax, Experian and TransUnion credit files. The Equifax Credit Score is intended for your own educational use. It is also commercially available to third parties along with numerous other credit scores and models in the marketplace. Please keep in mind third parties are likely to use a different score when evaluating your creditworthiness. Also, third parties will take into consideration items other than your credit score or information found in your credit file, such as your income.
²The Automatic Fraud Alert feature is made available to consumers by Equifax Information Services LLC and fulfilled on its behalf by Equifax Consumer Services LLC.
³Equifax Credit Report Control™ is only available while you have a current subscription to Equifax Complete Premier. Locking your credit file with Equifax Credit Report Control will prevent access to your Equifax credit file by certain third parties, such as credit grantors or other companies and agencies. Credit Report Control will not prevent access to your credit file at any other credit reporting agency, and will not prevent access to your Equifax credit file by companies like Equifax Personal Solutions which provide you with access to your credit report or credit score or monitor your credit file; Federal, state and local government agencies; companies reviewing your application for employment; companies that have a current account or relationship with you, and collection agencies acting on behalf of those whom you owe; for fraud detection and prevention purposes; and companies that wish to make pre-approved offers of credit or insurance to you. To opt out of such pre-approved offers, visit www.optoutprescreen.com/.
4We will require you to provide your payment information when you sign up and we will immediately charge your card $4.95. After that, we will charge the card $19.95 for each month you continue your subscription. You may cancel at any time; however, we do not provide partial month refunds.
Equifax® is a registered trademark and Equifax Complete™ Premier is a trademark of Equifax, Inc. © 2014, Equifax Inc., Atlanta, Georgia. All rights reserved.
Each year, the IRS sends out charming letters telling you that you didn’t report some income on your tax return. Sometimes those CP-2000 letters come as good news, like one did for a client of mine with Alzheimer’s disease whose family found $100,000 worth of bank accounts when the IRS notice showed unreported interest income.
But often the letter doesn’t come as such a nice surprise, such as when you didn’t know a certain kind of income was taxable. IRS gets 1099-type reports from people about your activities—and it wants you to report the income. What are common sources of surprise when filing taxes?
Unemployment income. This income is always taxable on the IRS level. Most states also tax unemployment. Usually, this income is left off the tax return for two reasons. First because you didn’t know it was taxable. Second, by the time you prepare your return, you may have forgotten you were unemployed during the previous year. So when you sign up for unemployment, remember to have them take out withholding.
Disability income. This is more complicated than it looks—and quite confusing. Please review your situation with a tax professional. There are two kinds of disability: state disability and funds from insurance companies—each with two types of taxability.
Barter income. Anytime you trade your services or products for someone else’s, you have engaged in barter. As the trade is designed to be a fair exchange, you have to wonder why this should be reportable. The net effect should be zero, right? Not quite. For example, if you have a mobile dog grooming business and trade your services (worth $100) for gardening services for your home (worth $100), your business has a sale, but you don’t have a business deduction. So you have a net profit of $100—and so does the gardener, right? Folks who do a lot of barter tend to join barter clubs, which issue a 1099-B.
Cancellation of debt income. When this 1099-C arrives, it’s usually utterly shocking. You think you’ve dumped your credit card debt or upside-down mortgage, but then along comes this form, and you suddenly find yourself owing taxes on the debt you dumped. There are a number of ways around this kind of taxable income, depending on the source. Read these tips to learn more.
With about 4 million words in the current tax code, it’s easy to make mistakes. But don’t worry. The IRS doesn’t generally issue penalties on the first go-round.
Eva Rosenberg, EA is the publisher of TaxMama.com , where your tax questions are answered. Eva is the author of several books and ebooks, including the new edition of Small Business Taxes Made Easy. Eva teaches a tax pro course at IRSExams.com and tax courses you might enjoy at http://www.cpelink.com/teamtaxmama.
Equifax maintains this interactive forum for education and information purposes in order to allow individuals to share their relevant knowledge and opinions with other members and visitors. We encourage you to participate in discussions about personal finance issues and other topics of interest to this community, but please read our commenting guidelines first. Equifax reserves the right to monitor postings to the forum and comments will be published at our discretion. Do you have questions or comments about your Equifax credit report or customer-service issues regarding an Equifax product? If so, please contact Equifax directly. All opinions and information expressed or shared in blog comments are solely those of the person submitting the comments, and don't necessarily represent the views of Equifax or its management.