As you are aware, the IRS isn’t among the most popular government agencies as far as the taxpayers are concerned. There are many reasons for this, starting with the most obvious, which is that nobody likes having their money taken away. The IRS is also notorious for their aggressive collections efforts and the life-altering consequences from a dispute with the agency. And then there are stories like we have today, which can’t help but make you laugh in exasperation.
Forbes.com reports:
Winning a whole year’s worth of free doughnuts for being first in line at a Krispy Kreme opening is something to crow about. Adam Brown, a second-year law student at Arizona State University, was first in line for the grand opening of a new Krispy Kreme in Mesa, Arizona. He waited nearly 24 hours in line before the store opened. His prize?
A dozen free doughnuts every single week for a whole year. Other early birds not in the coveted numero uno spot stand to collect a dozen free doughnuts each month. But not content to just eat them, Brown is an aspiring tax attorney. Therefore, he wondered whether the year’s worth of sweet treats are a prize or a gift.
Gifts aren’t taxed to the recipient while prizes are. Can you guess which these doughnuts are? Since 1986, prizes and awards are fully taxable. In fact, the IRS website warns that cash prizes and awards are taxed whether you win the lottery, a Nobel prize or even Olympic medals.
If you win a car? It’s taxed. A year’s worth of doughnuts? Taxed. All such in-kind winnings must be reported at their fair market value. It’s all other income on Form 1040, Line 21.
So yes, the IRS really will tax your doughnuts. And if you don’t pay taxes on your doughnuts, you better believe that they’ll be coming after you if they find out about it. Sure, it’s a humorous situation—but it illustrates why the agency is so difficult to deal with. They are notoriously inflexible, and even a simple mistake can lead to an overwhelming amount of penalties and interest.
If you’re facing an IRS dispute, we can help! Give us a call today and let us get the IRS off your back.
Additional Readings
Getting a notice that you’re facing an IRS audit can be unnerving, to say the least. Last year, 3.8 of every thousand tax returns were audited. An IRS audit is something no one wants to face, but it’s always a possibility. Even if you’ve followed every rule for filing your taxes and think you have accurate returns,...
We have compiled this comprehensive guide to help businesses understand their obligations related to sales tax in the state of Kansas. The guide covers various topics, including what items are subject to sales tax, how to register and file sales tax, and how to collect and remit sales tax. In addition to providing information on...
We’re in an era in which more small businesses are launching like wildfire. Recent studies showed that 17 million new small businesses were expected to launch in a single year. Small businesses are the backbone of the economy. But they’re often more tumultuous, have fewer resources, and are run by less experienced professionals. If you...
April 18 is fast approaching. That’s the official deadline for filing your 2022 federal tax return. As you gather your documents and assemble your information, it’s important to know about recent changes that have occurred. This year, the Internal Revenue Service (IRS) adjusted many of its 2023 tax rules. While you’ll still follow 2022 rules to...
Sales tax is paid to a local or state governing body for the sale of certain services and goods. In Oklahoma, the state sales tax is 4.5%, which is charged on sales of certain services and tangible personal property. Along with the state sales tax, local sales taxes and special district taxes may apply. Business owners...
If you have been struggling to pay the bills or your taxes, you may receive a notice that a garnishment or levy has been placed on your wages or bank account. Even if you make every effort to pay your back taxes, your circumstances may make paying your taxes difficult, such as a job loss...