There are more ways to make money than just working or investing. If you come into some “funny money” – money won by bets, pools, gambling, illegal gains, or somehow, buried treasure – you can bet Uncle Sam still wants his share. Hey, it could happen.
Football Pool Winnings
My 9th place fantasy finish does not qualify me for funny money. However, if you actually won money in a fantasy football pool or league, this money is taxable income. In most cases, this would be considered gambling income and would be reported as Other Income on line 21. You could also deduct your gambling losses on Schedule A.
That is interesting, but many people are aware of this one. However, did you know that on your Massachusetts tax return, you can deduct the price of your wager? Depending on your pool or league, this can be more than a couple of bucks. You can do the same for those $30 scratch tickets. However, if that deduction happens to be greater than $20, you cannot take both the deduction and e-file your return.
My wife and I like to joke about stopping at Mohegan Sun to see an old crooner play whenever we are on I-95 in Connecticut. We might even have a go at the roulette or blackjack tables. In the event that we win, that income would be taxable at the Federal and State levels, and not just Massachusetts. If you have gambling winnings in Connecticut, Rhode Island, or virtually every other state that has casinos or a lottery, then you may be liable for income tax in that state. Depending on the amount of your winnings, you might have the privilege of filing an additional state tax return.
Any income from illegal activity is taxable income. It is recorded either on the Form 1040 as Other Income on line 21 or Schedule C income. Funny money from drugs, embezzlement, bribes, larceny, etc. are all earned income. This taxable income should be reported on your tax return, otherwise you might be charged with tax evasion in addition to whatever crime generated the income. Does the IRS rat you out to the coppers? The IRS will not comment on this. However, it is suspected that there are enough loopholes in the tax return confidentiality rules that the IRS likely does tip off other law enforcement agencies. Remember, that’s how they got Capone.
My son might be in trouble one day. He loves digging in the yard for buried treasure. I even planted a box of coins for him once. He has also found old whiskey bottles (circa 1920), farm tools, railroad track parts, and other tetanus carrying stuff in my 150 year old back yard. If he ever hits the mother lode, he would have to pay income tax on the treasure. He won’t have any taxable income when he sells it, but he will have to pay the tax when he finds it. I am hoping for a 1913 Liberty Head V Nickel to show up one of these days . . . then he can pay for his own college.
Questions About Taxable Income?
Maybe you have funny money of your own. Well, at the very least, maybe you have income you are not quite sure how to record on your tax returns. If you have thoughts, questions or concerns regarding how your taxes are filed, WorthTax uses a triple check accuracy system. We also though great lengths to protect your information on secured servers. Please feel free to contact us, leave your comments below or post to on our Facebook, Google+ or LinkedIn pages.