hiring an accountant for our small charitable organization

Reporting Miscellaneous Sources Of Taxable Income

Most categories of taxable income are reported on a specific line on Form 1040 intended for that particular type of income. There is, however, one line on Form 1040 designated for miscellaneous income. Tax filers must report income that does not fit neatly into a specific category as miscellaneous income. The catchall category of miscellaneous income encompasses a wide array of taxable activities.

Jury duty

Although the pay is relatively low, serving on a jury is considered a civic duty. Many summoned citizens are not selected to serve and are compensated for only one day. Individuals who are actually selected to serve as jurors may spend several days in court. Despite the low pay, jury duty is taxable and is reported as miscellaneous income.

Gambling winnings

Lottery awards and gambling winnings are taxable. Even though many lottery awards are only a few dollars, larger lottery awards occur occasionally. If your winnings at a casino exceed designated thresholds for the various games there, the casino is required to provide you with IRS Form 1099-G to report your earnings. Other types of prizes are also reported as miscellaneous income, such as money or merchandise won in a contest.

Gambling losses may be deducted, but they cannot be directly subtracted from winnings to arrive at a net amount of miscellaneous income. Gambling losses may be deducted as an itemized deduction on IRS Schedule A. However, gambling losses deducted cannot exceed the amount of gambling winnings.

Canceled debt

Unless an exception applies, debt forgiven by a creditor is taxable as miscellaneous income. Creditors usually issue IRS Form 1099-C to report canceled debt. A potential exception to the taxation of forgiven debt is the forgiveness of debt on a personal residence. Another potential exception is the forgiveness of debt during a time when you were financially insolvent. A separate tax form is used to exclude canceled debt from income.

Taxable distributions from an HSA

One of the primary requirements of a health savings account (HSA) is that the funds must be spent for medical care. A withdrawal from an HSA that is used for unrelated purposes is taxable as miscellaneous income. In addition, a taxable distribution from an HSA is usually subject to a penalty. The penalty itself is entered on a different line on Form 1040.

Income that is not taxable is generally not reported anywhere on Form 1040. An example of nontaxable income is life insurance proceeds due to death of the insured. Contact an accountant, such as those found at Zara Rhone CPA Inc., for more information on reporting miscellaneous sources of income.