What Income is
you wondering if there's a hard and fast rule about what
income is taxable and what income is not taxable?
The quick answer is that all
income is taxable unless the law specifically excludes it.
But as you might have guessed,
there's more to it than that.
Taxable income includes any money you receive, such as wages
and tips, but it can also include non-cash income from
property or services. For example, both parties in a barter
exchange must include the fair market value of goods or
services received as income on their tax return.
Here are some types of income that are usually not taxable:
Gifts and inheritances
Child support payments
Damage awards for physical injury or sickness
Cash rebates from a dealer or manufacturer for an item you buy
Reimbursements for qualified adoption expenses
In addition, some types of income are not taxable except under
certain conditions, including:
Life insurance proceeds paid to you because of the death of
the insured person are usually not taxable. However, if you
redeem a life insurance policy for cash, any amount that is
more than the cost of the policy is taxable.
Income from a qualified scholarship is normally not taxable.
This means that amounts you use for certain costs, such as
tuition and required books, are not taxable. However, amounts
you use for room and board are taxable.
If you received a state or local income tax refund, the amount
may be taxable. You should receive a 2016 Form 1099-G from the
agency that made the payment to you. If you do not receive it
by mail, the agency may have provided the form electronically.
Contact them to find out how to get the form. Be sure to
report any taxable refund you received even if you did not
receive Form 1099-G.
Important Reminders about Tip
If you get tips on the job from customers, that income is
subject to taxes. Here's what you should keep in mind when it
comes to receiving tips on the job:
Tips are taxable. You must pay federal income tax on any
tips you receive. The value of non-cash tips, such as tickets,
passes or other items of value are also subject to income tax.
Include all tips on your income tax return. You must
include the total of all tips you received during the year on
your income tax return. This includes tips directly from
customers, tips added to credit cards and your share of tips
received under a tip-splitting agreement with other employees.
Report tips to your employer. If you receive $20 or more
in tips in any one month, from any one job, you must report
your tips for that month to your employer. The report should
only include cash, check, debit and credit card tips you
receive. Your employer is required to withhold federal income,
Social Security and Medicare taxes on the reported tips. Do
not report the value of any noncash tips to your employer.
Keep a daily log of tips. Use the Employee's Daily Record
of Tips and Report to Employer (IRS Publication 1244), to
record your tips.
Bartering Income is Taxable
Bartering is the trading of one product or service for
another. Small businesses sometimes barter to get products or
services they need. For example, a plumber might trade
plumbing work with a dentist for dental services. Typically,
there is no exchange of cash.
If you barter, the value of products or services from
bartering is taxable income. Here are four facts about
bartering that you should be aware of:
Barter exchanges. A barter exchange is an organized
marketplace where members barter products or services. Some
exchanges operate out of an office and others over the
Internet. All barter exchanges are required to issue Form
1099-B, Proceeds from Broker and Barter Exchange Transactions.
The exchange must give a copy of the form to its members who
barter and file a copy with the IRS.
Bartering income. Barter and trade dollars are the same as
real dollars for tax purposes and must be reported on a tax
return. Both parties must report as income the fair market
value of the product or service they get.
Tax implications. Bartering is taxable in the year it
occurs. The tax rules may vary based on the type of bartering
that takes place. Barterers may owe income taxes,
self-employment taxes, employment taxes or excise taxes on
their bartering income.
Reporting rules. How you report bartering on a tax return
varies. If you are in a trade or business, you normally report
it on Form 1040, Schedule C, Profit or Loss from Business.
If you have any questions about taxable and nontaxable income,
don't hesitate to contact the office.
If you have any questions about what income is taxable, don't hesitate to call. Help is just a phone call away at
SMEED CPA Adds Financial
Services To Help Clients With
Investments & Insurance
often we here at SMEED CPA are asked about financial issues
that impact our clients investments and their portfolios.
We always offered our opinion and suggestions but in order to
help our clients actually execute the changes we suggest,
SMEED has created a Financial Services division.
SMEED Financial Services, Inc. will be able to
work with both individual and business clients on their
investment portfolios and manage assets on their behalf.
SMEED Financial will include Michael Uadiale,
ACA, CPA, CGMA; and Pablo Blanco who has
recently joined SMEED and comes with over 18 years of
financial sales and advising experience with affluent
Watch your inbox and mail boxes for more specific information
on services SMEED Financial Services, Inc will make available
Would You Give Me Your
Feedback & Testimonial
on Our Hotline?
Hello it’s Michael Uadiale, CPA of
SMEED CPA Inc. We’ve just installed a toll-free
number that I would like for you to call and tell me how you
think we are doing as your CPA firm.
Just dial 800-609-9006
extension 3638 and follow the instructions. If we’ve
done a good job please let me know. And if we can
improve on anything, please mention that too.
Us Be Found on
Also as we expand our business,
we find more and more people are using
YELP and Google
to look for us by searching Brentwood accountant or
When they do this we want to
be FOUND on GOOGLE. One way you can help us
is to give us an
ONLINE REVIEW on our Google Maps/Places listing --->
or check us out at our YELP local listing
click here to go to our Google Listing for SMEED CPA and
click on the
YELP link to go there.
Scroll down to the Review area.
On either site it may say: Been here?
Rate and review
You will click on the Rate and
review link and then log in, then
give us a review!
You can choose between 1 and 5
STARS and write in what you think about the tax or accounting
work we have done for you.
It's that simple. Thank
you in advance for your help and cooperation!
As always you can call our offices if you have any
questions about these or any other accounting related issues, at
Regards, Michael Uadiale, CPA,
Managing Partner, SMEED CPA,