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Tax Q & A Cash From Tracks Financial Inc.

 

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The following material is reprinted from the podcast transcript originally recorded Tax Answers Advisoron VoiceAmerica on October 7, 2021. This program is presented by Marcelino Dodge, Enrolled Agent, owner of Cash Tracks Financial, Inc. Cash Tracks Financial is an accountant firm, tax services, financial advisory, business planning, and retirement planning, insurance advisory company located in Lamar, Colorado and serving all communities in Southeast Colorado. Contact Cash Tracks Financial Inc., your tax accountant in Lamar Colorado if you have tax questions.

What Is Taxable Income Or Non-taxable Income?

Next question, what is considered taxable income versus non-taxable income?

Oh, well, first thing I will say is cash payments, I will stress this cash payments received as a sole proprietor is still considered taxable income. Okay, they talk about paying under the table, well, whether it’s under the table above the table around the table, the IRS don’t care, its income. Sure. Cash, cash payments are as much as income as anything else when you’re getting receiving money for services rendered even as a self-employed person. So that’s vital now, okay, back to taxable. Now, of course, there’s many phases to this, which include wages, of course wages you receive as an employee, if you’re receiving interest on your bank accounts.

Capital gains from sale of property could be sale of property could be sale of stock could be all kinds of different things there. Now, one that also is there is an entity flow through income. So if you’re, you have a partnership or like an S corporation, that issues you a K1 out for your business, well, you should do a k one as, an part owner of the business while that income is also considered taxable to you. Now, the interesting part on that is you may, you may have say you have $5,000 of flow through income from an S corporation, you may not even have even gotten that $5,000 Or even touched that $5,000 or been distributed that $5,000. But it’s still taxable income to you because you’re part owner in the business.

What Are Other Types Of Income?

And there’s a lot of other facts that come in a lot of other types of taxable income, we’re talking like most many retirement plan distributions. IRA distributions you get. Now, some of these courts we’re talking have to be also over and above the, your filing status, like married, there’s the standard deduction, they also have to exceed that as well. But many in many cases, these do so it’s just some, basically and there’s a broad, broad definition for tax for even one thing that most people don’t realize that even scholarships amounts can be considered taxable income. And there’s a little trick you can do with those to help parents and students to get some, some tax benefits even though it’s considered taxable, but there’s some tricks in there I learned this last year that are really, really good with that.

Is Social Security Income Taxable

So in some circumstances, now, as far as non-taxable, usually Social Security is non-taxable. However, there are times when Social Security can become taxable depending on income pay individuals. Yeah, so it’s and I encounter. This was several people, your here’s a, here’s a fact regarding Social Security tax ability is that Social Security became taxable back in 1986. And the amounts they use to determine that whether it’s taxable or not have not changed since 1986.

So the percentage of people who pay tax on their Social Security has greatly increased between 1986 and 2021. It’s, it’s a fascinating fact, also considered like dividends from a municipal bonds, those, are usually non-taxable. And even that includes like a mutual fund as well. Now they’re used for other calculations, but you usually don’t pay tax on it. For the most part. If a person does foster care in their home, that’s an example. That’s, that’s like a reimbursement from the county to take care of the child, you don’t pay tax on that. And then like, if you get a reimbursement from your employer for, for some business related expense you have and your employer reimburses you for that. That’s usually considered non-taxable income as well. There’s a few other areas, but those are kind of some of the main ones to kind of, kind of get a little bit of that answered there. And the most common ones that that we encounter anyway.

Should I Separate Income Types For Tax Ppurposes?

For just record keeping purposes, I suggest having like the sources of income separated, okay, times on a tax return, I’ll go in and, you know, put because there’s just one line for income, like gross income on the tax write? Well, you go in for record keeping purposes, it’s not, it’s good to know, okay, well, we made like, for this type of service, we made this much for this type of service we made this much, which is usually that’s more like a profit and loss kind of statement is where most of those are because usually, we’ll just take that number right there and just plug that in on the tax return. That’s more that’s more in the bookkeeping area, then for the tax or as far as the source of the income there. Unless, unless you’re dealing with, like inventory. And that kind of adds another little quirk into it. But we don’t need to get into that.

The previous information can be found at the IRS Tax Accountant Q & A From Cash Tracks Financial Lamar CO. web page on our website.

 

 

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Cash Tracks Financial Inc.
117 W Beech St
Lamar, CO 81052
(719) 336-8739
Latitude: 38.0891768
Longitude: -102.6202815
https://cashtracksfinancial.com