Know Your Taxable Income and Non-Taxable Income!
An individual who has been filing taxes since a long time might find it hard to differentiate between taxable and nontaxable income, and might even think that wages and self-employment income is the only income considered for tax purposes. Lack of appropriate tax knowledge will invite inquiry, penalty or audit notices from the Internal Revenue Service, State Income Tax Departments, City or Local Income Tax Departments.
Being a taxpayer, an individual should have a better understanding about what kind of income is taxable and non-taxable, this better understanding will help in saving taxes. In addition to knowing your taxable and non-taxable income, you must know how to save taxes in order to save your hard-earned money from losing towards income taxes.
This article will give you a better understanding about your income assessed for taxes, and also will help you to choose qualified or retirement plans to save taxes and also plan your retirement.
What Is An Income In IRS View?
An amount received in the form of money by wages, fringe benefits, income from bartering, royalties, partnerships, S corporations, services, or property etc. will be an income in IRS view.
What Are The Types Of Taxable Income?
The individual income is classified in two types, earned and unearned income.
Earned Income: Wage income through form W-2 and Self-employment income through form 1099-MISC
Unearned Income: Capital gains, pensions, interest, rents, dividends etc.
What Are The Types Of Employee Received Payments Taxable?
Taxable: Amount received by the way of wages, commissions, bonus, sick time, overtime, accumulated sick leave, vacation pay, prices, awards, advance commissions, back pay, retroactive pay, back pay settlements, severance pay, reimbursement of expenses, employee payment contribution towards social security and Medicare taxes, cash or holiday gifts, incentive payments from manufacturer to the sales person, fringe benefits, survivor benefits, etc.
Nontaxable: Retirement plan contributions, Noncash gifts example: holiday turkey with a nominal value, employee safety achievements awards, accountable plan reimbursements, health and accident coverage, group term insurance coverage, accommodation of employer like: lodging, meals provided by employer, educational assistance, qualified transport fringe benefits, Qualified retirement planning services,
Other Types Of Income Apart From The Employer:
Is Income From Foreign Countries Taxable In The United States?
An income of an individual who is a citizen or resident alien of the United States fully taxable unless the income is exempted by the United States tax law, even if the individual resides in foreign country subjective to conditions.
I Am A Non-Resident Alien, Is My Foreign Income Taxable?
You will be considered as a non-resident alien, if you are an international student or do not qualify by substantial presence test, so you need not report your foreign income on the United States tax return.
Is Price Money And Price Medals or Objects Are Taxable And How It Is Defined?
The prize money and medals through the Olympic Committee may not be taxable, for better understanding you should talk to us to check the eligibility of the price for tax exclusion.
What Are Public Safety Offers And Are They Taxable?
Public safety offers can be excluded from the taxable income, it means it is non-taxable. Public Safety Offers is disability benefit to a public safety officer and death benefit to the spouse of a former public safety officer. It is not possible to mention the complete information about the public safety offers since it is vast, so it’s better you can have much information from us over the phone or email.
Are Qualified Medicaid Waiver Payments Tax Deductible?
Yes, your payment for qualified Medicaid Waiver may be tax deductible, if you have paid for the eligible individual.
Can Losses or Damages By Terrorist Attacks Be Excludable On Tax Returns?
As per the IRS publication 3920 & 907 (Tax Relief for Victims of Terrorists Attacks) payments of assistance of disaster, disability and death can be excludable from the income.
Is An Income Taxable Which Is Available For Use But Is Not Is Possession?
Yes, the income is taxable which is available for use but was not in your possession.
Example 1: A check or money is ready for pick up, though you did not pick is considered the amount ready for your use though you did not use it.
Example 2: The postal services tried to deliver a check to you in the end of the year, but you were not available to receive it, since the check is out from the sender and the amount of check is set for your availability, the amount on the check is considered as income.
Is Prepaid Income Taxable?
Prepaid Income of compensation of future services is considered as an income, and the income will be taxable.
Is Income Of Personal Services Taxable?
Any amount you receive for personal services is taxable, it is added to your gross income by your payer (employer) and you would receive form W-2.
Should I Pay Tax If There Is An Income From Bartering?
Taxable: If you receive an income through bartering by assessing Fair Market Value (FMV) is taxable, and income reporting should be through form Schedule C.
Nontaxable: Noncommercial activity income is nontaxable, example carpooling.
My Debt Is Cancelled, Should I Pay Taxes?
Taxable: Your cancelled debt is absolutely taxable if the debt is nonbusiness, you should report the cancelled debt amount on schedule 1 of form 1040.
Nontaxable: Student loan debt cancelled due to the account of disability or death, bankruptcy, business indebtedness, cancelled due to intention of a gift.
Are Gambling Winnings Taxable?
Taxable: Not only your gambling winnings are taxable, but also prizes and awards. You can claim a deduction of gambling losses up to the gambling winnings and the reportable tax form is Schedule C.
You should also pay taxes on received gifts, inheritance, lawsuits, insurance claims, life insurance proceeds, wage replacements, government payments, recoveries, fellowships, scholarships, discounts of tuitions, disability and sick pay, military pensions etc.
Nontaxable: The award or prize got due to literary or civic achievement, for outstanding educational achievement, the winner refused the prize.
Are Inheritance And Gifts Taxable?
Taxable: A decedent gross income through traditional IRA distributions, dividends, U.S. savings bond and accrued interest received before his/her death is taxable.
Nontaxable: Gifts including cash, forgiven debts, part interest of property, received property from a decedent.
Are Insurance Claims Taxable?
Taxable: Medical insurance expenses reimbursements of previous year up to the tax benefit,
Nontaxable: Non deducted medical insurance reimbursements of a previous year.
I Am a Professional And Busy With My Work, Can I Get Help In My Tax Planning And Filing?
We fully understand that the employees and self-employees are entirely busy in their day to day work, and hardly you will make any time to upskill yourself with the latest technologies to get a head in the competitive world.
In fact, we wish that you spend your time to create your career by learning new things and upskilling yourself for challenges. We can save your time and hard earned money, we are the only taxation firm of the United States serving thousands of fully satisfied clients throughout tax experts who are CPAs and Enrolled Agents working throughout the year.
Why Choose Crescent Tax Filing For Tax Planning Guidance And Assistance?
As you have gone through the information about taxable and nontaxable income, there is a lot more information yet to be mentioned, as the information is vast and it is not quite possible to elaborate through this article you can get all your doubts clarified through phone or email.
You can sign up on our website crescenttaxfiling.com, the movement you sign up you will get audit support on your already filed last 9 years tax returns. If there is any audit or query from the IRS, we will help you in dealing with that, you can even enjoy our value added tax services worth $2,000 without any cost so please check our website, and also you can call anytime throughout the year.