Category: tax


Federal Income Tax Filing Online

It really is time for you to get began in your Federal revenue tax return, and get your tax refund on its way into your bank account. You’d be shocked at how rapidly you will get your refund by performing your Federal earnings tax filing on the internet. Filing on the web may be the easiest and quickest method to prepare and file your taxes.

Electronic revenue tax filing is actually a rapidly, correct and handy method to file your tax return together with the IRS more than the web. More than 70 million taxpayers are anticipated to file their Federal revenue tax on the internet this year. From tax calculators, to all of the types you are probably to need to have, tax filing on the internet has it all.

Handy Hint: This quick article is just hoping to blow your mind away from the subject about Federal Income Tax Withholding Chart, all the tips through this short content aim to educate only and in case you would love to study further regarding this matter, do a simple search concerning “Federal Income Tax Withholding Chart for 2013, 2014” on any search engine and you’ll be granted loads of ideas which are helpful for you.

Right here are a couple of Federal revenue tax filing guidelines:

  1. Search for a tax filing web site that provides a cost-free trial of their solutions to ensure that you’ll be able to see if their plan is proper for you personally.
  2. Try to find a tax filing web site which has tax data and support it is possible to access, when you have inquiries about a certain deduction or credit.
  3. Seek out a tax filing site which has a simple to comply with interview technique for getting your data.
  4. When you have a tax refund due, be sure you possess the funds direct deposited into your bank account. You’ll be able to typically have your cash in ten to 16 days in the time you file

Regardless of whether you’re filing a 1040ez or even a much more complicated tax kind, most on-line tax filing applications will probably be capable to manage all your demands. Whatever the case, I am confident you will discover that Federal earnings tax filing on-line, will be the greatest method to do your taxes. Satisfied Filing!

It is little things, such as this idea which might aid you in your particular search concerning Federal Income Tax Withholding Chart. So, sit down and decide which avenue and mean would be better for you to take. Please visit for further information.


What Are Tax Havens – And Will Governments Crack Down On Them?

What Are Tax Havens – And Will Governments Crack Down On Them?
Every so often we read that governments are going to crack down on tax havens and offshore bank accounts. The latest threats to do this have come in the wake of the financial crisis and economic recession that began in 2008.

However, attacking offshore tax havens is not new. And it would appear that such attacks by various politicians rarely amount to more than window dressing to placate the masses and an attempt to divert blame for any economic woes from themselves.

Before answering the second question posed in the title of this article, it would be a good idea to clarify exactly what a tax haven is.

A tax haven is a country which has little or no income tax. Some tax havens have zero income taxes, while others may have very low taxes – or only tax local income not worldwide income.

To give a few examples: If you live in Hong Kong you will be taxed at a flat rate of 17% on your income. On the other hand, if you live in New Zealand you will be taxed on a sliding scale all the way up to 38%. Obviously if you lived and worked in Hong Kong, then you?d be keeping a lot more of your own money.

Another issue is whether a country taxes domestic income only or worldwide income. Most countries tax worldwide income, which means if you live in the USA but earn income in the UK, then the UK income is also taxable and is to be considered part of your total income for tax purposes.

But if you lived in Singapore and made money outside that country, then you wouldn?t be liable for income tax on the overseas income, only your local income. So while Singapore is not considered a tax haven in the usual way, it is in fact a tax haven for those who live there and earn money outside Singapore.

The attraction of tax havens is obvious. If you live there, or do business there, you could end up keeping a lot more of your own money. For it never pays to forget that income tax is a tax on your very life. Your labour is part of your life. If someone were to claim 80% of your labour without pay, and only give you food and shelter in return, then you?d have a good working definition of slavery. And the rates of tax prevalent today are akin to slavery in every way – with most developed countries raking off 50% or more of their resident?s money with income and other forms of tax.

So a tax haven is exactly that – a safe haven, if you will, from predatory taxes.

Trouble is, high-taxing countries hate this. They don?t like having to compete with other countries in the matter of tax. And if truth be told, most governments of the developed world would very much like it if such tax competition was abolished, by getting rid of tax havens.

But it?s not as simple as it appears. The tax code of any particular country is a matter for that country to decide. If Hong Kong levies an income tax of 17% on its residents and New Zealand levies up to 38% – who?s to say that Hong Kong shouldn?t be allowed to do it?

And that?s the problem. The very notion of abolishing tax havens implies abolishing each country?s sovereignty. It means that someone, somewhere, is going to dictate to every country what its income tax rate will be – and that in order to eliminate tax competition the rates for all countries must be the same.

Of course, this will not happen – not without a one world government and a one world tax system.

The truth is tax competition, like any competition, is healthy. The very existence of low tax or no tax jurisdictions keeps other countries on their toes, and draws a line in the sand as to how high they can push their own tax rates – without causing an exodus of their best and most productive people.

But there are other reasons why tax havens and offshore bank accounts will not be abolished any time soon. Human nature. And in particular the nature of many politicians. You see, if there were no tax havens, no places to ?hide? money – then what would the corrupt politicians of this world do with their ill-gotten gains?

No, the powers that be, at the very top echelons, require places where they can stash their cash. All their threats about abolishing or doing away with tax havens are but hot air – and hypocritical to boot. Because at the end of the day the people who benefit most from the existence of different tax rates around the world are the people with money – the same people who pull all the strings. To abolish tax havens would be akin to cutting their own throats.

So don?t expect tax havens and offshore banking to disappear any time soon!

Taxpayer Relief in Canada – Do I Qualify

If you have a tax problem in Canada, repercussions with the Canada Revenue Agency can be severe. If you filed your income taxes late or committed an infraction under the Canadian Income Tax Act, like failing to disclose income or writing off expenses that you weren’t entitled to, the Canada Revenue Agency has incredible power to punish you. By far the most common weapon that they use to punish you is your pocket book.When an income tax return is filed late and the CRA assesses what you owe, or a previously filed return is re-assessed and new monies are owed, the CRA will add interest and penalties to the amount of the tax debt that you owe. Often times, when an individual has a tax debt, the amount that they owe will double in size once the interest and penalties are calculated.Sometimes individuals have personal circumstances that led to their tax problem which is why taxpayer relief in Canada exists.

Taxpayer relief in Canada is a formal program offered by the Canada Revenue Agency where the CRA can agree to cancel all or part of the interest and penalties. You can qualify under the Taxpayer relief program in Canada for one of the following reasons:A natural disaster like a fire or flood. For example, you misstated expenses resulting in an inaccurate return filing because your basement flooded and all of your receipts were financial hardshipA documented personal issue like a medical problem or death in the familyAn error on the part of the CRAThe only challenge with the Taxpayer relief program in Canada is that it is a long and complicated process and very few applications under this program are granted. To hire a professional to make an application under this program could cost you thousands. In addition, the CRA will not reduce the principal tax debt owed. The CRA does not offer any program that will reduce the principal tax debt that is owed.Before considering making an application under the Taxpayer relief program in Canada you may want to first look at the principal amount of the tax debt you owe and whether you can afford to pay it off at all. Often people who owe a large tax debt are not even in a position to pay it, regardless of whether or not they receive interest and penalty relief under the Taxpayer relief program in Canada.

The longer you stretch out the time that you have a tax problem, the worse the tax problem will become. If the application under the Taxpayer relief program in Canada is denied, you will owe further interest that will have accumulated through the application period. The CRA will also continue to try to collect on the principal tax debt owed.There are other financial programs available that will freeze the interest on the tax debt that you owe and can even eliminate or reduce interest, penalties and the principal tax debt that you owe. These programs can also stop CRA collection action and provide you with immediate relief. These programs are not available through the Canada Revenue Agency, however you may access them through a financial consultant who works with people who have debt problems.

Tips To Reduce Your 2006 Income Taxes In 2007!

Income taxes are a substantial burden for business owners and real estate investors. There are few actions which can reduce your 2006 taxes after December 31, 2006. Unfortunately, most options to decrease revenues or increase exepnses are no longer available after year-end. This article summarizes four options for reducing your 2006 federal income taxes during 2007. These include reducing revenue, increasing real estate depreciation, increasing expenses by conducting a fixed asset audit and increasing expenses by converting capital expenditures into operating expenses.

The basic process for calculating income taxes is simple:

Revenue – expenses = net income, or taxable income,

Taxable income x tax rate = income taxes

Two options for reducing income taxes are to reduce revenues or increase expenses. It is not possible to change the tax rate except through congressional action. It may be possible to reduce revenue for taxpayers on an accrual accounting system. Taxpayers may be able to increase expenses by increasing real estate depreciation, personal property depreciation or operating expenses.

Accrual accounting recognizes revenue when it is earned. Cash basis accounting recognizes revenue when payment is received. Accrual basis taxpayers can review revenue which has been booked but not yet received. In some cases, it may be appropriate to increase the allowance for bad debt. There is little cash basis taxpayers can do to reduce revenue (after the end of the year).

Most real estate owners can sharply increase depreciation by obtaining a cost segregation study. Real estate depreciation schedules are typically established by simply separating land and long-life property. Long-life property is depreciated over 27.5 years for rental residential property and 39 years for commercial property. Cost segregation can usually increase depreciation by 50% to 100% during the first five to seven years of ownership by allocating a portion of the cost basis to 5, 7 and 15 year property. In addition, real estate owners can “catch-up” depreciation under reported in prior years without filing amended tax returns.

Fixed asset audits can be a cost effective means to increase operating expenses by removing phantom assets, removing operating expenses mistakenly coded as capital expenditures and correcting the depreciable life for incorrectly coded items. Phantom assets can include assets which have been lost, stolen or disposed of without removing them from the accounting records. The undepreciated basis of these assets can be converted to an operating expense after the error is discovered. In some cases, substantial operating expenses are incorrectly added to the fixed asset listing as capital expenditures. This could include items such as substantial roof repair or parking lot repair. The undepreciated basis of these items can be converted to an operating expense and written off when the error is discovered. The fixed asset listing is massive for many companies, sometimes exceeding 1,000 pages. With so many assets, it is difficult to ensure all are accurate. For items added with an incorrect and excessive depreciable life, it is possible to revise the asset life and “catch-up” depreciation under reported in prior years without filing an amended tax return. Instead, a form 3115 is filed with the tax return.

The difference between capital expenditures and operating expenses is often subjective. Are substantial roof repairs a capital expense or an operating expense? Reviewing disbursements which were listed as capital expenditures in 2006 may uncover items which can be converted to operating expenses.

Federal income taxes are a substantial expense for successful businesses. Tax planning is less glamorous than purchasing a new company or developing a new division. However, a modest effort focused on reducing federal income taxes can sharply increase net income.

Patrick O?Connor, MAI is president of O?Connor & Associates, a 180-person real estate services firm in business since 1974. Further information on reducing income taxes is available at: O?Connor can be reached at 713 686 9955 or poconnor@.


High Tech Tax Accountants – Ready at Your Services

It has been rightly said that people must adopt their work in a proper manner. The right person must always have right kind of job. This is one certainty that makes people to achieve the desired job that they are seeking to attain. It has primarily been observed that the basic thing that comes to your mind when discussing regarding the continuation of any business is going on is the nature that you will retain for your business type. It is a very important thing to be confirmed with the type of business you are about to pursue.After considering the fact next step involves the matter of kind of business, is it sole proprietor or partnership. It is pretty sure that after you are done with such formalities the important thing that is left with you is the issuing of professionals for your company that will help you access your company in a smooth and retainable manner. It is pretty obvious that every company requires an accountant that looks after various expenses and the accounts department. With the use of services rendered by Apex services it has become a certain thing for you to make in use of some well qualified and dignified Accountants in London that will not only assist your accounting department but will also suggest you in taking some sound decisions which proof fruitful for your company worth.The company is not only excelling in providing you with best of apex services but it is also keeping in mind various accounting tasks, like that of book keeping, finance, etc. At apex services you can feel free to put your things in a simplified manner and you are assured to get a perfect solution for it.

The company is making its best efforts in recognizing your accounts in best possible manner. It is also providing you with best of Accountants London that are always ready to assist you in every possible manner and condition. It is a time saving option for you that help you in calculating the average sales and corporation tax of the company.You can easily get things in most modified and collective manner. In real terms if it comes to notice you always need to keep a proper balance between the expenses of the company along with the amount that is being rendered in tax and all. For this purpose you can also issue the prompt Bookkeeping Services that are available for you and helps you maintain a proper balance in just no time. For any company, it is only its accounts department which is the major operator of business, but when it comes to qualifying on the Tax Returns, you certainly need a hand that not only assist you but also provide you with some suitable options in order to maintain your records in a linguistic manner. So, now you can get in proper training from London’s best Tax Accountants which are there at your help from Apex services.


Smsfs: Auditing And Contraventions ? How To Keep Your Self Managed Super Fund Compliant
Self managed super fund (SMSF) audit and compliance strategies can help SMSF trustee(s) to meet their legal responsibilities, to reduce administrative burdens and to avoid unnecessary breaches of the superannuation law.
SMSF trustee(s) must know and understand their obligations to ensure their SMSFs are compliant.

Australian Tax Office (ATO) Compliance Program 2009-10

The ATO Compliance Program 2009-10 details the tax and superannuation compliance risks the ATO is most concerned about for SMSFs ? and explains what the ATO is doing to address those risks. You can access the program at the ATO.

The compliance program for 2009-10 concentrates on regulatory issues including:

? loans;
? in-house assets;
? borrowings; and
? non-arms’ length transactions.

ATO tips for SMSF compliance

The ATO’s key tips for SMSF compliance are:
? Trustee(s) and their advisors must treat the SMSF on the one hand, and the trustee(s) personal business assets on the other hand, as independent.
? Lodge income tax returns on time and pay the supervisory levy. Non-lodgement is seen as a contravention and an SMSF can be made non-complying as a result. If an SMSF does not lodge on time, then it immediately attracts the attention of the ATO which will then examine the SMSF’s overall compliance.

? Avoid misreporting and calculation errors with SMSF annual returns.
? Ensure all assets are re-valued to their current market value before starting to pay a pension.
? Keep all documents used to prepare the SMSF’s annual return. You need to keep documents that:
o explain how the SMSF’s income has been generated;
o explain the SMSF’s deductible expenses;
o are used to prepare the SMSF’s returns, accounts and statements;
o are used to calculate the SMSF’s income tax liability; and
o are used by an independent auditor to determine how the SMSF’s has complied with super laws.

What are the most common reporting errors?

The most common reporting errors made by SMSFs relate to:
? Residency ? the SMSF must meet the criteria to be classified as an Australian super fund. See taxation ruling TR2008/09 and previous ClearLaw articles
o Compliance with SMSF residency rules ? recent case
o Changes to the SMSF residency trap
o SMSFs borrowing and residence “Into the red: non-compliance and leveraged SMSFs”
? Reporting of non-arm’s length income ? often reported incorrectly due to misreporting and tax agent error i.e. incorrect trust codes;
? Insurance premium claims ? an SMSF may use a variety of life policies to provide super benefits on death or temporary or permanent disability of members. There is an allowable deduction of 30% of the premium if the policy is a whole-of-life policy.
? Capital Gains Tax (CGT) ? the CGT consequences of certain transactions must be considered;
? Illegitimate deductions for investment expenses ? due to either overstatement or incorrect claims on the annual return. The ATO has found the most common reason for misreporting was recording items that were capital in nature using the incorrect “label”;
? In specie distributions ? failing to record the true market value of an asset in the accounts can lead to circumvention of the contribution caps and a transfer can lead to revenue risks including the avoidance of CGT; and
? Recording SMSF assets ? SMSF trustee(s) should appropriately record the assets of their SMSFs as being held on trust for the beneficiaries of the fund.

In certain states, the legislation may prevent trustee(s) from holding assets using the SMSF’s name in the title. In this case, the ATO states that a caveat, instrument or declaration of trust must be executed for the asset. For example, this may include the trustee for the SMSF as the asset owner (i.e. John Smith as trustee for John Smith Super Fund).

How does the ATO deal with SMSF compliance breaches?

The ATO’s stated approach in response to a breach is to further educate trustee(s) and tax agents so that they are aware of their responsibilities and obligations. The action the ATO then takes when an SMSF breaches the law depends on the individual circumstances.

When considering action taken by SMSF trustees, the ATO looks at:
? the seriousness of the breach;
? the behaviour of the trustee(s); and
? the tax consequences.
When non-compliance is established, the ATO will issue a non-compliance notice to the SMSF trustee(s).

The ATO’s approach is to work with SMSF trustee(s) to help them rectify breaches largely caused by circumstances outside their control. However, if the trustee(s) make no effort to rectify the breach, then the SMSF may be classified as non-complying. As a consequence, its concessional tax treatment will be cancelled retrospectively.

What are the regulatory penalties?
Failure to comply with the Superannuation Industry (Supervision) Act 1993 and the Superannuation Industry (Supervision) Regulations 1994, can result in the ATO imposing a range of penalties.

The ATO may:
? Suspend or remove a trustee, or all of the trustees of a SMSF. If they are suspended, then the ATO must appoint a constitutional corporation or an individual as the ‘acting trustee’ during the period of suspension. The ATO may then direct the acting trustee to do any number of acts or things which may include winding up the SMSF or disqualifying the trustee(s);
? Disqualify a trustee (or a director of a trustee) for not being a fit and proper person;
? By written notice, direct a trustee (or a director of a trustee) not to dispose of or otherwise deal in a particular way, any of the assets of the SMSF until the notice is revoked;
? freeze an SMSF’s assets; and
? impose fines and imprisonment. If a trustee (or a director of a trustee) is found guilty of either any civil or criminal offence under a civil penalty provisions, then the maximum penalties that may apply under Part 21 of the SIS Act are $220,000 (civil proceedings) or five years imprisonment (criminal proceedings) (or both).

Do any other types of penalties exist?

For less serious matters, the ATO may agree to allow trustee(s) to rectify the problem (without the ATO necessarily imposing regulatory sanctions).
Administrative income tax penalties may apply if the trustee(s) make a statement (or fail to lodge a statement) that results in the underpayment of tax. The penalty imposed depends on the conduct of the trustee(s).

A general interest charge is also applied to tax payments not received by the due date. The general interest daily charge rate is worked out by adding seven percentage points to the 90 day bond accepted bill rate for that day, and dividing that total number by the number of days in the calendar year.
Can SMSF trustee(s) appeal ATO decisions?

Trustee(s) can appeal an ATO decision by applying to the Administrative Appeals Tribunal to reverse the decision.

What information does the ATO make available on SMSFs?
The main types of ATO SMSF advice available are:

  1. SMSF public rulings, SMSF determinations and SMSF product rulings; and
  2. SMSF specific advice.
    Read about the differences between private and public rulings here under paragraph 1 of the Pre-Audit Strategy.

The requirement for SMSF product rulings and SMSF specific advice is that the ATO must be provided with all relevant facts in relation to the matters on which the SMSF advice is sought.

The ATO provides SMSF specific advice in writing to a specific transaction or arrangement that SMSF trustee(s) have entered into, or might, enter into. The ATO advice is based on the facts of the specific transaction or arrangement defined in the application for SMSF specific advice. While similar in form to a tax private ruling, SMSF specific advice is not binding on the ATO and does not have the same review rights as a private ruling.

Outsource Your Tax Service Instead of Increasing Your Hassles Level And Risking Your Health

CEOs have one of the most stressful jobs as they are the company’s owner. Being the company leader, you should oversee the entire operations of your company. With the many responsibilities and grand expectations that come along with your job, a worry-free day may be rare for you. However, do not let this be the case! While your job may require a lot from you, you have to keep in mind that your health is as precious as your company. Running your business properly wouldn’t be possible when you are unhealthy. So, instead of increasing your hassles level and risking your health, search for a company offering tax service. Currently, other enterprises are doing the same thing because this option is deemed more beneficial for businesses. Entrusting the preparation and filing of your taxes to a professional tax service provider is a good way of ensuring that your taxes are properly and accurately computed. This is because a professional company specialising in tax services is staffed with qualified and trained tax specialists.

Furthermore, by working with a tax service provider, you don’t have to worry about filing your taxes as the firm’s going to do it for you. They ensure you that your tax returns are filed on time and you don’t have to worry for the last moment searching CPAs to file your return. Basically, the greatest benefit of outsourcing the preparation of your corporate taxes is that you spare your company from having unnecessary expenditures because of government fines and sanctions arising erroneous tax computations or delayed payment. What’s more is that you get expert service at a lower price as compared to forming your in-house accounting team. Outsourcing your tax return preparation services is helpful for companies as they don’t have to appoint seasonal employees and they can save their overhead expenses. With the relatively affordable cost and the several benefits of outsourcing tax service, there is no reason for you to not prefer this. More and more CPAs and accounting firms are opting to outsource tax return to India to help minimize operating cost and maximize efficiency and gain competitive advantage. As a business owner your time is best spent doing what you do well – working with customers. Time spent on preparing tax returns add little or no value to your customer relationship. Remember that with this option, you don’t just safeguard your health but also your company’s welfare.


Managing Migration Tax Australia

Managing the taxes in any new country can be a cumbersome task. If you are migrating to a new country you have to understand its rules and regulations very well so that your taxes can be managed properly. Those who are migrating to Australia will have to keep tab on the different taxes that will be levied on them. One such tax is the Migration Tax Australia. You can find about this tax from your tax consultant.It is advisable that you use the services of a tax consultant in Australia. It will relive you of the entire burden. The taxation policy of Australia is not easy to understand. It is best to hire a tax consultant so that you are not confused and end up paying extra tax. Australian businesses may be required to pay taxes to all levels of local, state and federal governments. In Australia, these taxes are used to pay for the delivery of public services such as the public hospital system and roads.If you are buying a property on Australia you need to pay tax for it. The Mortgagee specialist will guide you through the whole process and you will be able to understand Australian property tax without any problem. To solve the entire problems of Australian Property Finance and the complication of tax to be paid while buying or selling a property you can take the services of a consultant. Your entire headache will be gone and you will be totally free of stress with regard to tax matters. You can concentrate solely on your business after taking a consultant’s services.

When you have been staying in this country for a few years you will be able to understand the policies, but in the initial stage of your stage it is very difficult to comprehend the various rules and regulations. The services of a tax consultant comes in very handy and you will be able relaxed regarding your tax affairs.The services provided by the companies can be taken by you according to your convenience. If you want to use any one service you can take that service only. It is advisable to select a company that will provide you the services that you want. There can be no doubt that it will be for your advantage if you use them.

Tax Mythbusters: The Top 5 Tax Tips To Amaze Your Friends And Family

Tax MythBusters: The Top 5 Tax Tips to Amaze your Friends and Family

I commonly find there are sooo many misconceptions about taxes out there. I have heard a lot of them so many times, they make me laugh. I would like to dispel some untruths about taxes and educate you just a little. Here is my top 5:

  1. “I cannot afford to earn any more money this year because I will jump into the next tax bracket.” or “Boy, I would not want to win the lottery. It would cost me too much in taxes.”
    Tax Brackets: In the US, our tax brackets are marginal. Only the next dollar that falls into that bracket will increase to the next higher rate. Even if you earn a $1,000,000, there is still a portion of income that is taxed in each bracket: 0%, 10%, 15%, 25%, 28%, 33% and 35%.
  2. “I will go ahead and give to charity since it is a tax write-off.”
    Deductions: Remember that deductions are not a $1 for $1 reduction in tax. A $100 deduction will save about $15 in taxes for someone with $60,000 income. This does not mean that you should not give to charity, but use your money wisely and make sure it is put to good use.
  3. “My customer did not pay their bill. I would like to write it off.”
    Bad debts can only be written off if they were claimed as income previously. In most cases, small business owners are cash basis tax payers and therefore, only pay taxes on the income when it is received. In this case if your customer did not pay you, you never have claimed it as income so you can not reduce your income further.
  4. “I don’t want the IRS to come knock on my door to audit me.”
    IRS Audits: Most audits are not face to face. They are letter audits based on notices for matching or numbers that are out of the normal range on tax returns. If you do have a face to face audit, you should be well prepared and represented by your CPA or a tax attorney. Worst of all, be prepared to write a check. The IRS does not do face to face audits to see if you seem to be a nice person, their purpose is to collect revenue.
  5. “I can deduct the cost of my vehicle since I have my business advertised on it, right?”
    Auto Deductions: Unless you want to be the one writing the big check to the IRS as discussed in item #4, the answer is “no.” You cannot write off the cost of a vehicle for advertising. You can write off the cost of the magnetic signs or the painting to put your advertising on it, but you still must follow the same rules for deducting automobile expenses. Don’t forget, unless the vehicle is 100% business use, you must keep track of your business and personal mileage for any deduction of your mileage. Remember, at 50.5 cents per mile for 2008, this can be a substantial deduction so it is worth while.

We hope we have given you the ammunition to join in the conversation with your friends to tell them about the tax mythbusters listed here. Keep in mind that you would not let your “friends” do your root canal, so you probably should not depend on your “friends” for authoritative tax advice. Ask your CPA!

Required US Dept of Treasury Circular 230 Disclosure: Any written advice concerning one or more federal tax issues arising from any entity, plan or arrangement that concludes at a confidence level of “more likely than not (i.e., a greater than 50% likelihood) that the subject manner of the advice would be resolved in the taxpayer’s favor if challenged by the IRS, and the principal or significant purpose of the subject matter is the avoidance or evasion of any tax imposed by the Internal Revenue Code (IRC). The advice provided in this email is not intended or written to be used, and cannot be used by you or any other person or entity for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or any applicable state or local tax law.

7 Most Commonly Overlooked Sources Of Taxable Income

7 Most Commonly Overlooked Sources Of Taxable Income

  1. Social Security Income
    Social Security benefits may be non-taxable, or partially taxable. It depends on your total income from other sources. If your sole source of income during the tax year was Social Security, your benefits are probably not taxable. But, if you have other forms of income, including tax-exempt income, it could make your Social Security benefits taxable. If you add half the amount of your Social Security Benefits to all other forms of income, and the total exceeds a ?base? amount, then a portion of your benefits will be taxable. In 2008, the base amount is $25,000 if single, married filing single, or head of household, and $32,000 if married filing jointly.
  2. Unemployment Compensation
    People are always surprised that unemployment compensation is taxable income. This includes any amounts you received under federal or state unemployment compensation laws, state unemployment insurance paid by a state (or District of Columbia) from the Federal Unemployment Trust Fund. If you received unemployment compensation during the year, you should receive IRS Form 1099-G, showing the amount you were paid, and if any taxes were already withheld. If your unemployment benefit payments were made from a private, non-union fund to which you voluntarily contribute are only taxable if you received more money than you put into the fund.

Please note that as a result of passing the American Recovery and Reinvestment Act (ARRA), starting in 2009, the first $2,400 earned in unemployment compensation is excludable as taxable income.

  1. Gambling Winnings
    Gambling winnings are fully taxable and must be reported on your tax return. Gambling winnings include any winnings from lotteries, raffles, horse races, or casinos. Both cash winnings and the fair market value of prizes such as cars and trips are counted as taxable income. If you win a prize in a lucky number drawing, television or radio quiz program, beauty contest, or other event, you must also include it in your income. A payer (such as the casino or track, etc.) is required to issue you an IRS Form W-2G if you receive certain gambling winnings or if your gambling winnings are subject to Federal income tax withholding. All gambling winnings must be reported no matter if any portion is subject to withholding or not.

Please note that you may deduct gambling losses only if you itemize deductions. You may claim your gambling losses as a miscellaneous deduction, however, the amount of losses you deduct may not be more than the amount of gambling income you have reported on your return.

  1. Bonuses
    Bonuses or awards from your employer based on work performance are included as taxable income. Money, gift cards, property, or prizes such as a vacation trip all count as ?bonuses?. If the award you receive is a good or service, then you need to include the fair market value in your income. Even holiday bonuses count if your employer gives you cash, a gift certificate, or a similar item that you easily can exchange for cash.

Please note that if you receive personal property (e.g. something other than cash, gift card, or its equivalent) as an award for length of service exceeding five years, the fair market value of the award is less than $1,600, and the award is presented as part of a meaningful presentation, it can generally be excluded as income.

  1. Punitive Damages
    If you were awarded damages for actual monetary losses (due to property damage or medical care for injuries) the funds are generally not taxable. However, if any damages were awarded beyond compensating you for monetary losses, like punitive damages, (usually to punish or make an example of a defendant based on outrageous conduct), interest, emotional distress, injury to reputation etc these are all taxable income.
  2. Reimbursed Business Expenses
    Reimbursed business expenses may be considered taxable income, depending upon whether your employer meets the requirements for an Accountable Plan. To be considered an Accountable Plan, your employer?s reimbursement or allowance arrangement must meet all of the following rules:

Employee paid or incurred expenses that are deductible while performing services as an employee.

Employee adequately accounts for these expenses to employer within a reasonable time period.

Employee returns any excess reimbursement or allowance within a reasonable time period.

If your employer?s reimbursement arrangement does not meet all three requirements, the reimbursements you receive for business expenses should be shown on your W-2, and the payments should be reported as income. You can get this income back by itemizing your deductions and completing IRS Form 2106 with your return.

  1. Severance Pay
    Any type of severance pay or payment on the cancellation of your employment contract is taxable income. This includes a lump-sum payment for accrued vacation or leave time, or back pay awards as the result of a judgment or settlement. If you choose a reduced severance payment in exchanged for your former employer paying for an outplacement service or employment agency, you must include the unreduced severance pay as income.