Friday, January 24, 2020
SOURCES OF INCOME YOU HAVE TO PAY TAXES ON - AVOID A TAX AUDIT!
Most income is taxable. However, you might not have to pay tax on certain types of income. Income can come to you in the form of money, property, or services. Read on to gain insight into sources of taxable income.
The most common types of taxable income are:
Wages, salaries, and tips — By law, your employer must send you a W-2 that shows how much you were paid in:
Salary, Tips, Commissions, Bonuses, Vacation pay, Sick pay, Severance pay
Extra cash from side jobs – Extra money you make for side jobs is taxable and is considered self-employment income. Report this income on Schedule C. If you make more than $400 from your side job, you’ll need to file a Schedule SE and pay Social Security and Medicare taxes on the income.
Alimony — If you receive alimony as a result of a divorce decree or separation agreement executed prior to 2019, the payments you receive are fully taxable. If you paid alimony during the year, you can deduct it even if you don’t itemize deductions.
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Unemployment benefits — Unemployment compensation benefits are fully taxable.
Jury duty pay — Jury duty payments are taxable. However, you can deduct any part of the payment you give to your employer in exchange for continuing your salary.
Pension and annuity payments — Pension and annuity payments are taxed. However, a portion might be tax-free.
Awards — If you receive an award from your employer for your job performance, it’s usually taxable. The award’s fair market value (FMV) is included in your W-2 income. This can include an all-expenses-paid trip or some other type of goods or services.
Barter income— The FMV of property or services you receive or provide in exchange for work done is taxable income. Report this income on Schedule C. You can use another form or schedule if you barter property items instead of services.
If you’re a member of a barter exchange, you should receive a Form 1099-B. This shows the FMV of all property and services you traded during the year.
Disability payments — If your employer pays the premiums for your disability insurance, disability payments you receive are usually fully taxable. However, if you pay the premiums, the payments you receive are tax-free. Veterans’ disability benefits and workers’ compensation are also tax-free.
Gambling winnings — Gambling winnings are fully taxable and include:
Prizes — All prizes are taxable. If you win a prize, you must include the FMV of the prize in your income.
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