When most people think about taxable income, they picture their paychecks and maybe investment earnings. But the reality is that the IRS keeps tabs on far more than just your regular income. Certain transactions and life events can trigger unexpected tax consequences if you’re not paying attention.
7 Things That Get Overlooked for Tax Returns
These lesser-known taxable events can catch even diligent taxpayers by surprise. Without knowing what they are in advance, you could be looking at unanticipated tax bills or penalties. Understanding what counts as a taxable event is the first step to keeping your tax return accurate—and keeping stress to a minimum when tax season arrives.
1. Gambling Winnings
Hitting the jackpot at a casino or winning big on a sports bet might feel like free money, but the IRS sees it differently. If you receive a W-2G form from the casino or gaming platform, it means the winnings have already been reported to the government.
What many people forget is that only your winnings are listed. Your losses aren’t included on the form. This is where a little homework comes into play. To claim gambling losses and reduce your tax liability, you’ll need solid documentation, including receipts, tickets, or other records. Without those, you may be stuck paying tax on the full amount won, even if you walked away with much less.
2. Maturing CDs in Retirement Accounts
If you’re using Certificates of Deposit (CDs) within your retirement accounts, you might not think twice when they mature and are automatically rolled over. But there’s a catch.
Some financial institutions report these transactions as distributions instead of rollovers. This could lead the IRS to believe you’ve taken money out of your account when you actually haven’t. This could trigger a tax notice. Or worse, you might be dealing with a penalty. It’s crucial to double-check your tax forms, especially any 1099-Rs, and ensure rollovers are reported accurately on your return.
3. Retirement Account Distributions
Pulling funds from your retirement accounts isn’t always as straightforward as it seems. Depending on your age and the account type—whether it’s a traditional IRA, 401(k), or another plan—you might face early withdrawal penalties, income taxes, or even required minimum distribution (RMD) rules.
Failing to report these distributions correctly can lead to penalties or underpayment notices. Be sure to review all Forms 1099-R and consider speaking with a tax professional to avoid missteps that could cost you in both the short and long term.
4. Gift Tax Limits
Giving a large gift to a child or relative may require a little paperwork. If you give more than $18,000 to any one person in a single year (or $36,000 as a couple), you’ll need to file a gift tax return using IRS Form 709.
This type of generosity doesn’t necessarily mean you’ll owe taxes immediately, but it does count against your lifetime gift and estate tax exemption. Many people overlook this requirement, thinking it only applies to large estates.
5. Contemporaneous Documentation
Deductions are only as good as the records you keep. Contemporaneous documentation often gets overlooked. Whether you’re donating to charity, tracking business mileage, or logging expenses for a side gig, having the proper records is essential.
The IRS typically requires “contemporaneous” records—meaning they were created at the time the expense or donation occurred. Trying to recreate receipts months later or requesting a new document from a charity won’t always meet the standard. That’s why it’s important to build a habit of saving receipts, logging miles, and keeping organized files throughout the year. It’s the best way to stay audit-proof.
6. Unemployment Income
If you’ve received unemployment benefits during the year, those payments are typically considered taxable unless the government specifically excludes them (as it did during the pandemic). Many taxpayers are surprised when they owe more than expected, simply because federal taxes weren’t withheld from their unemployment checks.
To avoid this issue, you can request voluntary withholding or make estimated payments throughout the year. Otherwise, that support check may come with a tax bill down the road.
7. Cryptocurrency and Digital Assets
Cryptocurrency is a taxable asset in the eyes of the IRS. This still seems strange to some taxpayers. But every time you sell, trade, or use digital currency to buy something, it can create a taxable event. Even swapping one coin for another is treated like a property exchange and must be reported.
These transactions can lead to short- or long-term capital gains. If you don’t report them, the IRS may find out anyway. Reporting requirements for digital assets continue to become more stringent, so keeping detailed records of all your crypto activity is key to filing correctly.
Got a Unique Situation? We Can Help!
Tax surprises aren’t just frustrating—they can be costly. The good news? Most of these overlooked taxable events are entirely manageable with some foresight and accurate record-keeping. By staying aware of the less obvious transactions that can trigger tax consequences, you’ll put yourself in a better position to file correctly and avoid IRS red flags.
Whether you’re navigating crypto trades, helping a loved one financially, or just hoping your casino streak doesn’t come back to bite you, it pays to stay informed. And if you’re unsure how these events affect your tax return, we’re here to help you get it right the first time. Contact NSO & Company at any time throughout the year. We can answer your questions!