• June 3, 2016
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Taxpayers often cite a lack of awareness as the main reason for not paying taxes. When the time arrives, many taxpayers find themselves at a loss about their taxable incomes. While it’s best to leave it to the courts to decide whether the person claiming negligence is telling the truth or not, our focus should be on avoiding being under the radar. Therefore, in this two-part series, What’s Your Income Type – Taxable or Nontaxable?”, we will cover some of the most common taxable and nontaxable income types. Let’s take a look.

Taxable Income Types

Employee Compensation

Everything that you receive in return for the services that you provide for work should be included in your gross income. This includes not only the regular compensations such as salaries, wages, commissions, and tips but also any stock options or fringe benefits as well.

Fringe Benefits

All fringe benefits that you receive in return for the services you perform should be part of your income at the time of filing returns. For example, if your employer  gives you a car for your family to use, it should be included in your tax return as a fringe benefit. Since you are the recipient of the car, not your family members, the benefit will be reported as income to you.  Remember that it is not necessary that you be an employee of a company to receive fringe benefits. You can receive these benefits even if you are a director or partner of an organization.

Bartering

In simple words, bartering is about exchanging goods or services. The IRS requires all the bartering transactions to be reported at the time of tax filing as taxable income. The parties involved in bartering must report the fair market value of the product or service they receive. The taxes will be applicable in the year bartering takes place.

Royalties

Just Like ordinary income, Royalties that individuals or companies receive in the form of patents, copyrights, oil, gas and mineral properties are subject to tax.  Income is reported in Part I of Schedule E (Form 1040). If you are a self-employed inventor, writer, artist, or hold an operating oil, gas or mineral interest, all income and expenses must be reported on Schedule C or Schedule C-EZ,

Virtual Currencies

Bitcoin and other virtual currency are taxable according to the guidelines issued by the IRS. Individuals and businesses using virtual currencies as a mode of payment for goods or services, or holding them for the purpose of investment need to carry the tax liability associated with these transactions.

The Way Forward

Keeping in mind the taxable income types discussed in this post can help you accurately file your tax returns and avoid being penalized by the IRS. In Part 2 of this blog, we will delve into various income types that are specifically excluded by law and considered nontaxable.

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What Our Clients Have to Say

Susan WilsonSusan Wilson
03:27 25 Jan 23
I have been very pleased with the solid counsel and guidance that Nick Nemeth has provided me regarding my tax issue. I found him to be honest and straightforward which I appreciated. I was impressed with his relevant experience and knowledge . He has definitely brought me peace of mind during a difficult and stressful time.
Sarah HowardSarah Howard
03:44 14 Nov 22
I would like to thank Mr. Nick and his staff for the superb help that I received from them. My IRS problem was resolved quickly and efficiently. It took 2 visits to convince me that I was over my head. I thought that I could call the IRS, appeal my tax notices and settle on a payment plan on my own. After many phone calls to the IRS, waiting sometimes more than 4 hours with no resolution to speak of, it proved to be extremely difficult and stressful. Revisiting Mr. Nick was a huge wake up call. My account was reviewed, and a payment plan was established with the IRS within a week. I will be forever grateful to the staff who worked on my case and especially to Lorna who listened to me vent while going through this painful process.
M WM W
00:33 07 Aug 22
I cannot say enough good things about Nick and his team. When I first met with Nick he was up front, honest, friendly and efficient. When I worked with one of his attorneys, Eric B, I was just as pleased. All of the staff there are nice and very helpful. I wish I hadn't waited so long to get help with my issue. Over 6yrs I tried getting through and getting anywhere with the IRS and hardly made any progress. I know this may not be the case for all, and even I thought it would take longer than it did, but 3mos and they had my situation straightened out. I still can't believe it. Thank you thank you THANK YOU for all that you did for me. This is a huge burden gone out of my life now thanks to you. If anyone needs help out there, I know you may not want to shell out more money to get their help but it may just save you in the long run.
Spoilly GirlSpoilly Girl
23:49 03 Aug 22
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Eddie WaltEddie Walt
19:44 12 Jul 22
During a time in which competent, professional service at a fair price seems to have disappeared, Mr. Nemeth and his team are a refreshing breath of fresh air.From my first phone call to the final settlement of our case with a non-responsive IRS, they under-promised, over-delivered and were in constant courteous contact to make sure we knew exactly what was happening and where we stood.I hope to never need their services again, but, should I receive another friendly letter from the IRS...I know who to call!
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