• Schedule 1 Line 8 is used to report any income not reported elsewhere in the return, such as gambling winnings, taxable cancellation of debt, taxable HSA distributions, prizes, awards, jury duty pay, Alaska Permanent Fund dividends, income from outside of the United States not reported on a W-2 or other U.S. tax form, and recovery (repayment/reimbursement) of expenses claimed in prior years as itemized deductions.
    • Small amounts of compensation for holding an appointed public office should be reported on Line 8, rather than Schedule C, because officeholders are not considered to be engaged in a “trade or business.” 
    • Do not check the “earned income” box for amounts on Line 8 where this might seem to be applicable, such as for jury duty pay. If you check that box, TaxSlayer assesses self-employment taxes.
    • Note: Activities that generate income and offsetting expenses (no longer deductible on Schedule A) but don’t meet the criteria of being for income or profit (say, coin collecting) are classified by the IRS as a hobby and make the return out-of-scope. 
  • Neither gifts nor inheritances are taxable income for the recipient. For example, $200 in disaster relief from a non-profit organization is a gift, and so isn’t taxable or reportable on the recipient’s tax return. 
      • Note: A foreign “bequest” (inheritance or gift) involves several federal forms, all of which are out-of-scope:
  • Form 8938, which must be filed with a tax return (not required if the taxpayer has no filing requirement).
  • Form 3520, filed separately, for receipt of any amount from a foreign trust, or more than $100,000 from a bequest other than a trust. 
        • FinCen Form 114, e-filed separately, if the bequest was deposited into a foreign account owned by the taxpayer.
      • Note for CA returns: A few states do have an inheritances tax; California isn’t one of them. 
  • If more than one “other income” item is entered in TaxSlayer, TaxSlayer generates a supporting statement that’s sent to the IRS. This statement is included in the PDF for the return when the print set specifies that the PDF includes statements and worksheets.
  • Note: The procedure for entering a paper 1099-MISC document in TaxSlayer, when the income is to go on Schedule 1 Line 8z, Other income, is described in the section Form 1099-MISC, page 55.

Gambling Winnings (Form W-2G, Form 1099-MISC, or Cash) 

  • Gambling winnings appear on Schedule 1 Line 8b.
  • If the taxpayer has a Form W-2G, go to the W-2G Gambling Winnings page [Income > Other Income > Gambling Winnings]. 
    • Check the box for Taxpayer or Spouse, if a MFJ return.
    • If the Payee’s Address information does not match the information on the paper Form W-2G, change the information on the TaxSlayer page.
    • The Payer’s federal ID number (EIN) is required. If, when this is entered, TaxSlayer then fills in the rest of the Payer Information section, verify that the payer’s name and address match the Form W-2G exactly; if not, make changes.
    • As stated on the TaxSlayer page, do not enter information on the four state-related lines in the “Winnings Information” section unless there is withholding. 
  • Note for CA returns: If there is an amount for “State Tax Withheld”, then the State ID number is required to avoid a CA e-file reject; use “999999” if there’s no State ID number on the paper W-2G.
    • Enter the amount won, date, and type of bet.  Don’t waste time entering other fields; they aren’t required.
  • If there is more than one paper Form W-2G, click “Save & Enter Another” to add another W-2G Gambling Winnings page, and repeat the steps above.
  • Gambling proceeds are occasionally reported on a 1099-MISC.  If so, treat like any other 1099-MISC form, but report bets placed elsewhere; see the options outlined in the next section, Gambling Bets.
  • New for tax season 2024:  If the taxpayer has gambling income not on a Form W-2G, go to the page [Income > Other Income > Other Compensation > Other Gambling Income not reported on a W-2G] to enter total winnings and any cost of bets placed. This income flows to Schedule 1 Line 8b, the bets to Sch A.
  • Note for CA returns:  California Lottery winnings aren’t taxed by CA (California State Lottery, EIN 68-0064952, 700 North 10th St, Sacramento 95811). Subtract the amount at State Section > Subtractions from Income > California Lottery Winnings; then see Note on CA Returns under Gambling Bets, next section.

Gambling Bets Placed (aka “Losses”) 

  • The amount of gambling bets placed (not truly net “losses”!) can be deducted on Schedule A (but see the third bullet, below); however, the total amount of bets deducted can’t be greater than total reported winnings.

Note: Though IRS publications refer to “gambling losses”, that term is defined (and always used) as including the cost of bets placed as well as net loss.  Pub 529 Miscellaneous Deductions has examples of what is deductible and the records gamblers should keep.

    • Gambling bets don’t have to be from the same source (location or type of game) as winnings.  
  • The taxpayer is responsible for having written substantiation for the amount of bets claimed—such as a personal log book.
    • As with most things, you should take the word of the taxpayer as to the amount bet. (Customers who play at a casino using a customer card can get a printout from that casino, showing “cash in” – bets (“losses”), and “cash out” – winnings, but such a statement is not required.)
  • Gambling bets usually appear on Schedule A Line 16.  In that case, deducting gambling bets can only help the taxpayer if the taxpayer itemizes for federal or state.  However, the NTTC whitepaper “Gambling Income, Losses and Expenses”, available on the AARP Volunteer Portal, has examples of certain circumstances where gambling bets may be deducted directly as negative income on Form 1040 without itemizing.
    • Note: It is typical that bets placed exceed gambling winnings, and so equal amounts can be reported on Form 1040. This doesn’t necessarily mean no effect on the taxpayer. Specifically:
      • The increase in AGI can reduce or eliminate credits (EIC, say) or reduce ACA subsidies.
      • Social Security income can become (more) taxable, up to 85%.
      • If the taxpayer would otherwise have used the standard deduction, and would have owed taxes, then taxable income increases by some amount (potentially almost as much as the standard deduction), and taxes owed increase accordingly.
  • To enter gambling bets placed, there are usually two options (but see the white paper mentioned in the previous paragraph for a possible third option in a few cases for “Cost of Winning Ticket”):
  1. Bets can be directly entered on a W-2G Gambling Winning page.
    • On this page, bets placed cannot be entered in excess of winnings entered on the page. That tends to make option (2) better if there are a lot of W-2Gs – just leave all bets off the W-2G entries.
  2. Go to Schedule A - Miscellaneous Deductions page [Deductions > Itemized Deductions > Miscellaneous Deductions] and enter the amount on the line “Gambling losses” (sic).
      • Warning: TaxSlayer does not reduce the bets reported on this page to equal, and not exceed, total winnings. If you enter excess bets on this page, TaxSlayer issues a warning when you go to the E-file section, but won’t block e-filing. A return that’s e-filed with bets exceeding winnings will reject. So if you pick this option, make sure you enter only the amount of bets that equal winnings.
  • Note for CA returns: If gambling bets include an amount to offset California Lottery winnings, manually remove such bets from the CA return, since California doesn’t tax its lottery winnings.
    • In the State Section, on the “Itemized Deductions” page, enter the amount of offsetting bets in the “Subtractions - Other Miscellaneous Itemized Deductions” box
    • However, if the cost of winning lottery ticket(s) was deducted directly from income, as described in the whitepaper in the two preceding paragraphs, then:
      • In the State Section go to the Subtractions from Income page, select “California Lottery Winnings”, and enter the net amount of those winnings (minus the cost of winning ticket(s)).

Cancellation of Debt

  • Cancelled debts that are treated as income flow to Schedule 1 Line 8c.
  • Non-business credit cards:1099-Cs for Cancellation of Debt (COD) from non-business credit card is in-scope, including an amount in box 3 (interest). See the screening sheet on Pub 4012 page D-72.
    • To enter the amount of credit card debt that was cancelled, as taxable income, go to the Form 1099-C page [Income > Other Income > Cancellation of Debt > Cancellation of Debt (Form 1099-C)], described on Pub 4012 page D-71.
      • Confirm with the taxpayer(s) that they agree with reporting this amount as income before beginning the tax return in TaxSlayer. 
      • Note: The amount in box 1 includes the interest amount in box 3.
    • Note: While any cancelled debt, whether a Form 1099-C was received or not, must be reported as income (to be in-scope), it’s also true that credit card companies often delay issuing that form. The problem with reporting income without the form, should the taxpayer raise that matter, is that the credit card company might issue a Form 1099-C in a subsequent year if the amount involved is $600 or more. 
      • If a Form 1099-C is issued in a subsequent year for an amount reported in the current year, the earlier return needs to be amended to remove the income, and that income then needs to be reported again, for the tax year which is on the Form 1099-C.
      • However, if the taxpayer elects to use an exception to make the Cancellation of Debt amount nontaxable, then the return is out-of-scope. 
  • Qualified principal residence indebtedness. In-scope for the federal return.
    • CA policy: CA does not conform to federal rules with regard to excluding income that results from the cancellation of debt for a mortgage (“qualified principal residence indebtedness”). [The federal exclusion is available through tax year 2025.] Accordingly, within CA, this type of cancellation of debt is out-of-scope, even though the Tax-Aide Scope manual says this type of loan forgiveness is in scope.
  • Student loan debt: For tax years 2021 through 2025, most forgiven student loans are excluded from income on the federal return. The taxpayer should not receive a Form 1099-C for such debt forgiveness. For what to do if a form is received that should not have been issued, see Pub 4012 page D-69.
    • Note for CA returns: CA doesn’t conform to the federal exclusions. If a taxpayer has a 1099-C for a student loan, seek FTB assistance to determine the proper CA treatment, since CA considers student debt forgiven due to death or permanent disability of the student to be nontaxable income. 
      • It isn’t necessary to ask taxpayers if they had a student loan forgiven during the tax year if they have no 1099-C; if they volunteer that information, determine if the forgiven debt is income for CA.

Distributions from LTC Plans-Form 1099-LTC

  • Any taxable distributions from LTC plans (this is unusual) flow to Schedule 1 Line 8e; such taxable distributions are in-scope.
  • If the taxpayer has a Form 1099-LTC, Long-Term Care and Accelerated Death, ask the taxpayer if payments were made on a per diem basis, or on another periodic basis, such as a fixed amount each month.
    • If NO, then no entry is required in TaxSlayer. 
  • If YES, then go to the “Long Term Care (LTC) Insurance Contracts” section of the Form 8853 - Medical Savings Account page [Deductions > Adjustments > Medical Savings Account]. 
    • For MFJ returns, note that the policyholder’s name on the Form 1099-LTC can be different from the payer name and from the insured’s name. 
    • If the first box, “Check here if anyone other than you received payments ... “, should be checked, the return is out-of-scope. [The “you” in the sentence to the right of the checkbox is the policyholder.]
    • Enter the number of days in the LTC period.
  • Check the appropriate box if the insured individual was determined to be terminally ill (defined as being certified by a physician as having an illness or condition that can reasonably be expected cause death within 24 months of certification). [Note: this information may be in box 5 of Form 1099-LTC.] Then:
    • If there’s an amount in box 2, “Accelerated death benefits paid”, on Form 1099-LTC, then this must be split if any accelerated death benefits were paid before the insured was declared to be terminally ill.
      • If such benefits were paid before the declaration was made, then the dollar amount paid should be entered on the line “Accelerated death benefits received on a per diem.” 
      • If none of these benefits were paid before the declaration was made, and there is no amount in box 1 of the Form 1099-LTC, then no further entries are required in this TaxSlayer form; click “Continue.”
  • If there’s no amount in box 1 of Form 1099-LTC, click “Continue”; otherwise, for the amount in the box: 
    • If “Reimbursed amount” is checked in box 3, enter the amount from box 1 on the line “Total reimbursements received or that you expect to receive”. No further entries are needed.
    • If “Per diem” is checked in box 3, enter the amount from box 1 on the line “Gross LTC payments received on a per diem basis”, and then:
      • IF box 4 on Form 1099-LTC is checked, enter the same amount on the line “Portion of ‘Gross LTC payments’ above that was from qualified LTC insurance contracts.”
      • Enter the number of days covered by the per diem (this number must be provided by the taxpayer).
      • IF the taxpayer’s actual costs on qualified LTC services, during the period that per diem was being received, exceeded the 2023 standard tax-free threshold of $420 per day, enter the amount on the second-to-last line of the TaxSlayer page. Otherwise, leave the line blank. (If necessary, see the Instructions for Form 8853 for the definition of qualified LTC costs.)
  • Note: Unreimbursed medical expenses for long-term care can be deducted on the Schedule A, if the taxpayer itemizes and has sufficient medical expenses to exceed the 7.5%-of-AGI threshold. 
    • If receiving per diem, the taxpayer would have had to spend more than the per diem amount paid in order to have any unreimbursed expenses.

Payments from a Qualified Education Program - Form 1099-Q

  • Form 1099-Q is used to report gross distributions from a qualified tuition program (529 plan) or a Coverdell Education Savings Account (ESA)(530 plan).
  • If these distributions were fully used for adjusted qualified expenses, they aren’t taxable, and the return is in-scope. If there were not so fully used, the excess flows to Schedule 1 Line 8e, and the return is out-of-scope.
    • Qualified educational expenses include the student’s expenses for computer equipment, software, and Internet access, as well as tuition and fees, books, and room and board. Distributions from 529 plans can also be used for K-12 expenses. See Pub 970 for complete details.
      • Distributions can also be used for apprenticeship costs, and for up to $10,000 of qualified student loan principal and/or interest payments. 
        • Note: The $10,000 is a lifetime limit; if you see this type of distribution, add a TaxSlayer note stating how much of the $10,000 limit has been used, and for whom (see page 8).
    • Expenses used to offset distributions cannot be used elsewhere in the tax return.
  • Note for CA returns: CA does not conform to the 2018 and later federal changes. Withdrawals made for K-12 expenses or apprenticeship costs are taxable on the CA return. 
    • You must ask taxpayers whether expenses were college-level. 
    • Expenses taxable by CA are entered on CA Schedule CA, as discussed in the section Additions to Income, page 107.

HSA Distributions

  • Any taxable HSA distributions (this is unusual) flow to Schedule 1 Line 8f.
  • If a distribution is received on a Form 1099-SA:
    • Form 8889 must be prepared, and a tax return must be filed even if there is no other income.
    • Go to the Form 8889 - Health Savings Account page [Deductions > Adjustments > Health Savings Account].
  • Get information from the taxpayer to complete the type of coverage, and the second and third boxes in the “HSA Distributions” section.
    • Unreimbursed expenses from a prior year (but after the HSA was set up) are qualified medical expenses IF they weren’t used as a Schedule A deduction. If the taxpayer wants to count expenses from a prior year as qualified medical expenses, the taxpayer must have good records, to avoid double-counting.
  • Qualified medical expenses for HSA accounts include over-the-counter (OTC) medicines and feminine hygiene products. Pub 969, Health Savings Accounts and Other Tax-Favored Health Plans, is the definitive guide; Pub 4012 page E-14 has a short list. An extensive list can be found at https://learn.hellofurther.com/Individuals/Spending_Your_Account/Eligible_Expenses .
  • If the entire distribution was matched or exceeded by qualified medical expense, or rolled over, there is no taxable amount, and no exception is needed; the TaxSlayer form is complete. But if the second and third amounts in the “HSA Distributions” section, totaled, are less than the first amount, then the difference is taxable and there is a potential penalty. 
    • TaxSlayer puts the difference on Schedule 1 Line 8e, Other Income.
    • For the penalty:
      • If the excess distribution (the difference) was made after the beneficiary become disabled, turned 65, or died, then check the exceptions box.
      • If there is no exception, there is a 20% additional tax. TaxSlayer carries this amount to Schedule 2 Line 6, Taxes.
  • Note: If a distribution is used for qualified medical expenses, those expenses can’t be put on Schedule A.
  • Note for CA returns: CA doesn’t recognize HSA contributions, distributions, or expense deductions – see the section Health Savings Accounts in CA, page 112.
    • Manual adjustments are required for interest, dividends, or other income earned within an HSA account; for any distribution in excess of qualified medical expenses; and – if the taxpayer is itemizing on the CA return and could have medical expenses exceeding 7.5% of AGI – for qualified medical expenses covered by HSA distributions. 
      • It’s unlikely that the taxpayer will bring a document showing how much income was earned within their HSA account, and, in any case, the amount is likely to be insignificant. Do not ask taxpayers for this information if they don’t bring it with them.

Foreign Income 

  • Income from Canadian and German social security programs are treated like U.S. Social Security payments. Calculate the U.S. dollar equivalent (see below), then follow the instructions in the section Canadian or German Social Security, page 48.
  • Except for those two types of social security income, any other social security or pension income from a foreign country that is in-scope (per Pub 4012 page D-44) is simply “Other income”, and flows to Schedule 1 Line 8z. After converting the foreign currency (note that some payments may be in U.S. dollars), go to the Other Income page [Income > Other Income > Other Income Not Reported Elsewhere], select “Other Income”, and enter the amount.
    • Note: Compensation received from a foreign employer, if not on a W-2, is still reported on Form 1040 Line 1a, and is out-of-scope for preparers without International certification. 
  • To convert a foreign currency to U.S. dollars:
  • The IRS publishes “Yearly Average Currency Exchange Rates”:  irs.gov/individuals/international-taxpayers/yearly-average-currency-exchange-rates. 

Jury Duty Pay 

  • Jury duty pay is not “earned income” for the purpose of EIC. Normally, such pay is not reported on a 1099-MISC; if it is, treat it like any other 1099-MISC form.
  • Go to the Other Income page [Income > Other Income > Other Income Not Reported Elsewhere], select “Jury Duty Pay”, and enter this income, which flows to Schedule 1 Line 8h.
    • Note: If the taxpayer was required by their employer to turn over jury duty pay to the employer, then the pay is still reported on Schedule 1 Line 8h, but an adjustment is made as described in the section Schedule 1, Line 24 - Other Adjustments, page 75.

Other Income Without a Supporting IRS Form

  • For taxable income that doesn’t fit anywhere else, go to the Other Income page [Income > Other Income > Other Income Not Reported Elsewhere].
  • The pull-down menu on this page has 13 entries, only seven of which are in scope:
    • Alaska Permanent Fund Dividend [rare] (Schedule 1 Line 8g)
    • Jury Duty Pay (see the paragraph above)(Line 8h)
    • Prizes and awards (Line 8i)
    • Pension or annuity from a nonqualified deferred compensation plan or a nongovernmental section 457 plan (Line 8t)
  • Taxable grants (Line 8z)
    • Wages earned while incarcerated (in prison), not on a W-2 or other tax form (Line 8t)
    • “Other Income” (Line 8z)
      • Taxpayers who receive small amounts of compensation for holding an appointed public office are not considered to be engaged in a “trade or business”. Similarly, someone receiving a one-time payment for being an executor or administrator of a will is not engaged in that trade or business, and should not report this income on Schedule C.
      • This entry is also used for payments for participating in a medical study.

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