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Beware these 5 terrible tax surprises

Taxes » Tax Law » Beware These 5 Terrible Tax Surprises

Prize winnings
Prize winnings

Think you're pretty lucky because you won $1,000 in a radio contest? Uncle Sam is even luckier. He's due part of your winnings.

Prize winnings are included in the long list of "other" income that tax law says is taxable. And it's not just limited to cash awards. You have to pay taxes on the fair market value of any property you win.

Be careful when reporting the amount of a noncash prize. In most cases, companies and groups that award prizes, cash and property will send you a 1099 form declaring the value of what you won. If your tax return reports substantially less than what the giver claims, your underreporting could mean a long, hard look from an IRS auditor.

And don't forget about gambling proceeds. They're taxable, too, but at least you get the chance to reduce the tax bite here by subtracting any betting losses from your winnings.

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