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© February 2021 The Kiplinger Washington Editors, Inc.
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You answered 1 out of 11 questions correctly.
You’re right, the answer is False.
The stimulus money is an advance on a “recovery rebate” tax credit for the 2020 tax year, so it’s not counted as taxable income. And because the stimulus money isn’t taxable income, it won’t cause taxpayers to be pushed into a higher tax bracket or trigger taxation of their Social Security benefits.
Question 1 of 11
True or False?
Federal stimulus checks sent to individuals in 2020 are taxable.
B.
A.
False
True
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You answered 2 out of 11 questions correctly.
You’re right, the answer is True.
Not only does the federal government tax unemployment benefits, but the majority of states do so also. You can avoid a surprise tax bill by signing up to have taxes withheld from your weekly unemployment checks.
Question 2 of 11
True or False?
Unemployment benefits are taxable.
B.
A.
False
True
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You answered 3 out of 11 questions correctly.
You’re right, the answer is False.
Congress in 2017 changed the tax treatment of alimony. Now, for divorce agreements reached in 2019 or later, alimony received is no longer taxable, while alimony paid is no longer tax deductible. Earlier divorces come under the old rules—alimony is taxable for the recipient and tax deductible for the payer—unless the former spouses modify their agreement to reflect the tax law change.
Question 3 of 11
True or False?
If my spouse and I divorced in 2020, the alimony I receive is taxable.
B.
A.
False
True
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You answered 4 out of 11 questions correctly.
You’re right, the answer is False.
Virtual currencies are not legal tender, but the IRS treats them as property and taxable. So, when you sell or exchange Bitcoin, you will have a gain or loss based on what you originally paid for the currency, similar to when you buy or sell a stock.
Also if your employer or someone else pays you in Bitcoin for goods or services, you must factor in the fair market value of the currency on the day you receive it when calculating your income for tax purposes.
Question 4 of 11
True or False?
Bitcoin and other virtual currencies are exempt from taxes because they’re not considered legal tender by any government.
B.
A.
False
True
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You answered 5 out of 11 questions correctly.
You’re right, the answer is C.
A portion of your benefits becomes taxable once your “provisional income” reaches certain limits. Calculate your provisional income by adding up your adjusted gross income, tax-free interest plus half of your annual Social Security benefits. If the sum is less than $25,000 and you’re a single filer or under $32,000 and you file a joint return, your Social Security benefits won’t be taxed. If your provisional income is higher, a portion of your benefits will be taxable.
Question 5 of 11
Which statement on Social Security benefits is true?
C.
B.
A.
Up to 85% of your benefits could be subject to taxes depending on your income.
You don’t have to pay tax on Social Security benefits if you are 72 or older.
Social Security benefits are fully protected from taxation.
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You answered 6 out of 11 questions correctly.
You’re right, the answer is D.
Bribes, stolen property and other ill-gotten gains are taxable.
Note: You don’t have to report a cash rebate on a vehicle as income, but you will have to reduce the cost basis of the auto by the amount of the rebate to figure the gain or loss on the vehicle when you sell it.
Question 6 of 11
Which of these income sources is taxable?
C.
B.
D.
A.
Cash rebate you receive from an auto dealer
or manufacturer
Money your carpool passengers pay you for driving them to and from work
Bribes
Child support payments
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You answered 1 out of 11 questions correctly.
You’re right, the answer is False.
According to the IRS, found treasure or other property is taxable at its fair market value in the first year it’s in your undisputed possession.
This unfortunate taxation goes back to a ruling in the 1960s, when a couple discovered $4,467 hidden in a second-hand piano that they had purchased for $15 in 1957. The couple argued that the windfall wasn’t income, but a court ruled in favor of the IRS, which claimed found property was income.
Question 7 of 11
True or False?
If you find buried treasure in your backyard or discover a rough-cut diamond in a state park (it happens), you’re extra lucky because the IRS doesn’t tax found property.
B.
A.
False
True
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You answered 8 out of 11 questions correctly.
You’re right, the answer is E.
All of this money comes from gambling, and the IRS expects you to report gaming income on your tax return. In fact, if your winnings reach certain limits, say, $1,200 or more at bingo or more than $5,000 at a poker tournament, the payer will issue you a Form W2-G that shows your winnings and the type of gambling (info that is also shared with the IRS).
But not all is lost. Your gambling losses are tax deductible on your return if you itemize on Schedule A. You can’t, however, deduct more than the amount you won. So if your winnings for the year amount to $3,000 and your losses total $5,000, you would report $3,000 of winnings on Form 1040 but deduct only $3,000 of losses on Schedule A.
Question 8 0f 11
Winnings from which activities are taxable?
D.
B.
E.
C.
A.
Lotteries
Poker tournaments
All of the above
Bingo
Fantasy football
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You answered 9 out of 11 questions correctly.
You’re right, the answer is True.
According to the IRS, debt that is canceled or discharged for less than the amount owed is generally considered taxable income. There are numerous exceptions. For example, it’s not taxable income if the debt was discharged in bankruptcy, eliminated as part of a student loan forgiveness program or the lender agreed to cancel or reduce the mortgage debt on your primary residence in 2007 through 2020.
A creditor will send you—and the IRS—a Form 1099-C showing the amount of your canceled debt if it amounts to $600 or more.
Question 9 of 11
True or False?
If your credit card issuer forgives some of your outstanding balance, this generosity is considered taxable income to you.
B.
A.
False
True
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You answered 10 out of 11 questions correctly.
You’re right, the answer is B.
The Wrongful Convictions Tax Relief Act of 2015 eliminated taxation of compensation awarded to people who had been wrongly imprisoned.
NOTE: If you do win a Nobel prize, you can avoid paying taxes on the award if you donate the money directly to a tax-exempt charity without pocketing the check first.
Question 10 of 11
Which of these is not taxed by Uncle Sam?
D.
C.
B.
A.
The market value of goods or services bartered
Payment for donating your eggs to infertile couples
Compensation for being wrongly incarcerated
The $1 million+ award for winning a Nobel prize
Get your results
You answered 11 out of 11 questions correctly.
You’re right, the answer is True.
Consider this a lesson from the school of hard knocks. Scholarship money designated for tuition, books, fees or other required supplies
at an eligible educational institution is tax free. But scholarship
funds that can be used for other things, such as travel and housing,
are taxable.
Question 11 of 11
True or False?
Scholarship money that pays for room and board at college is taxable.
B.
A.
False
True
This is only an overview of key aspects of tax law affecting individual taxpayers. Other provisions or special rules may apply to you. Get professional assistance before taking any action.
You answered X out 11 questions correctly.
Congratulations on completing the quiz!
You now know more about what’s taxable and what’s not. You can also retake the quiz to improve your score.
Try again
The stimulus money is an advance on a “recovery rebate” tax credit for the 2020 tax year, so it’s not counted as taxable income. And because the stimulus money isn’t taxable income, it won’t cause taxpayers to be pushed into a higher tax bracket or trigger taxation of their Social Security benefits.
Sorry, the answer is False.
You answered 1 out of 11 questions correctly.
Go to next question
Not only does the federal government tax unemployment benefits, but the majority of states do so also. You can avoid a surprise tax bill by signing up to have taxes withheld from your weekly unemployment checks.
Sorry, the answer is True.
You answered 2 out of 11 questions correctly.
Go to next question
Congress in 2017 changed the tax treatment of alimony. Now, for divorce agreements reached in 2019 or later, alimony received is no longer taxable, while alimony paid is no longer tax deductible. Earlier divorces come under the old rules—alimony is taxable for the recipient and tax deductible for the payer—unless the former spouses modify their agreement to reflect the tax law change.
Sorry, the answer is False.
You answered 3 out of 11 questions correctly.
Go to next question
Virtual currencies are not legal tender, but the IRS treats them as property and taxable. So, when you sell or exchange Bitcoin, you will have a gain or loss based on what you originally paid for the currency, similar to when you buy or sell a stock.
Also if your employer or someone else pays you in Bitcoin for goods or services, you must factor in the fair market value of the currency on the day you receive it when calculating your income for tax purposes.
Sorry, the answer is False.
You answered 4 out of 11 questions correctly.
Go to next question
A portion of your benefits becomes taxable once your “provisional income” reaches certain limits. Calculate your provisional income by adding up your adjusted gross income, tax-free interest plus half of your annual Social Security benefits. If the sum is less than $25,000 and you’re a single filer or under $32,000 and you file a joint return, your Social Security benefits won’t be taxed. If your provisional income is higher, a portion of your benefits will be taxable.
Sorry, the answer is C.
You answered 5 out of 11 questions correctly.
Go to next question
Bribes, stolen property and other ill-gotten gains are taxable.
Note: You don’t have to report a cash rebate on a vehicle as income, but you will have to reduce the cost basis of the auto by the amount of the rebate to figure the gain or loss on the vehicle when you sell it.
Sorry, the answer is D.
You answered 6 out of 11 questions correctly.
Go to next question
According to the IRS, found treasure or other property is taxable at its fair market value in the first year it’s in your undisputed possession.
This unfortunate taxation goes back to a ruling in the 1960s, when a couple discovered $4,467 hidden in a second-hand piano that they had purchased for $15 in 1957. The couple argued that the windfall wasn’t income, but a court ruled in favor of the IRS, which claimed found property was income.
Sorry, the answer is False.
You answered 1 out of 11 questions correctly.
Go to next question
All of this money comes from gambling, and the IRS expects you to report gaming income on your tax return. In fact, if your winnings reach certain limits, say, $1,200 or more at bingo or more than $5,000 at a poker tournament, the payer will issue you a Form W2-G that shows your winnings and the type of gambling (info that is also shared with the IRS).
But not all is lost. Your gambling losses are tax deductible on your return if you itemize on Schedule A. You can’t, however, deduct more than the amount you won. So if your winnings for the year amount to $3,000 and your losses total $5,000, you would report $3,000 of winnings on Form 1040 but deduct only $3,000 of losses on Schedule A.
Sorry, the answer is E.
You answered 8 out of 11 questions correctly.
Go to next question
According to the IRS, debt that is canceled or discharged for less than the amount owed is generally considered taxable income. There are numerous exceptions. For example, it’s not taxable income if the debt was discharged in bankruptcy, eliminated as part of a student loan forgiveness program or the lender agreed to cancel or reduce the mortgage debt on your primary residence in 2007 through 2020.
A creditor will send you—and the IRS—a Form 1099-C showing the amount of your canceled debt if it amounts to $600 or more.
Sorry, the answer is True.
You answered 9 out of 11 questions correctly.
Go to next question
The Wrongful Convictions Tax Relief Act of 2015 eliminated taxation of compensation awarded to people who had been wrongly imprisoned.
NOTE: If you do win a Nobel prize, you can avoid paying taxes on the award if you donate the money directly to a tax-exempt charity without pocketing the check first.
Sorry, the answer is B.
You answered 10 out of 11 questions correctly.
Go to next question
Consider this a lesson from the school of hard knocks. Scholarship money designated for tuition, books, fees or other required supplies
at an eligible educational institution is tax free. But scholarship
funds that can be used for other things, such as travel and housing,
are taxable.
Sorry, the answer is True.
You answered 11 out of 11 questions correctly.
Get your results
True
A.
False
B.
True
A.
False
B.
True
A.
False
B.
True
A.
False
B.
Social Security benefits are fully protected from taxation.
A.
You don’t have to pay tax on Social Security benefits if you are 72 or older.
B.
Up to 85% of your benefits could be subject to taxes depending on your income.
C.
Child support payments
A.
Money your carpool passengers pay you for driving them to and from work
B.
Cash rebate you receive from an auto dealer
or manufacturer
C.
Bribes
D.
True
A.
False
B.
Fantasy football
A.
Poker tournaments
B.
Bingo
C.
Lotteries
D.
All of the above
E.
True
A.
False
B.
The $1 million+ award for winning a Nobel prize
A.
Compensation for being wrongly incarcerated
B.
Payment for donating your eggs to infertile couples
C.
The market value of goods or services bartered
D.
True
A.
False
B.
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Take the Quiz
Take the Quiz
You expect to pay taxes on the money you earn on the job or on a big gain after the sale of stocks or bonds. But you may be surprised to learn that the IRS has taxable plans for other income. Do you know what they are? Take the quiz to find out.
What’s taxable or not?
Test your tax knowledge