Claiming income may seem easy and straightforward when all a person has to list is income from employment. However, people may have other types of income they must disclose to the Internal Revenue Service on line 21 of their federal income tax returns. Depending on the unique set of circumstances, these forms of income may be taxable. However, even certain income that could escape taxes must often be reported to the IRS. If a person, fails to do so, he could face penalties.
One type of other income is taxable distributions from a Coverdell Education Savings Account. Taxable distributions from a qualified tuition program, health savings account, and Archer MSA also fall in this category. However, these distributions are not always taxable. They are usually only taxable if the beneficiary's expenses were less than the distribution amount and they were not included in a roll over. Other income from a health savings account may fall into the other-income category as well.
Prizes and awards can also count as other income. This includes merchandise prizes won on game shows and cash prizes. As far as gambling is concerned, winnings are considered as other income and are taxable. Lottery and raffle winnings both fit in this category.
Jury duty payments are also classified as other income. Alaska Permanent Fund dividend amounts, alternative trade adjustment payments, reimbursements for certain expenses, and income from certain things a person does without seeking a profit. Income from the rental of person property counts as well, as long as the taxpayer does not rent the property as a business. Some types of dividends may also fall under this heading.
Sometimes people are tempted to list self-employment income as other income, but it should be included on a Schedule C. A person is self-employed if he owns his own business and does work or provides service in exchange for money. He may also be classified as self-employed if he works for a company but is classified as an independent contractor. In both cases, the person is responsible for keeping track of his own income and reporting it. However, companies usually provide 1099s for independent contractors to whom they’ve paid at least $600 US Dollars (USD) in a tax year.
A taxpayer may become confused when trying to figure out where to include each type of income on his tax return. Fortunately, the Internal Revenue Service offers free publications that explain where and how to list each type of income. They can be found online on the IRS website.
