Stephen Merritt, CPA, PC | Certified Public Accountants | (757) 420-5778
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- What Income Are You Required to Pay Tax On?
- Cool Tech: Drones
- April Days
- Office Hours
What Income Are You Required to Pay Tax On?
In general, income can be received in three ways – money, services, and property – and IRS requires you to declare most of this income on your tax return. Income is taxable unless specifically exempted by law, and in some cases, even nontaxable income must be disclosed on your tax return.
Typically, the following types of income are required to be declared on your tax return, and you must pay tax on them:
- Strike pay
- Rental income
- Alimony (for divorces finalized before 2019)
- Royalty payments
- Gains on stock sales
- Dividend and interest income
- Self-employment/business income
Keep in mind that there are other forms of compensation that may be taxable, including fringe benefits or stock options. Fringe benefits are part of your income unless they are specifically excluded by law – or, if you pay fair market value for them. You do not need to be an employee of the provider of such a benefit to be a recipient, and if you perform the services for which a fringe benefit is being provided, you are the recipient and required to report/pay tax on it as applicable, even if it is given to another person and not you (for example, a family member). Examples could include:
- A company-paid offsite gym membership
- A company vehicle that can be used personally
- Holiday gifts from an employer in the form of cash or gift certificates
- Company-paid tuition exceeding a certain amount
- Employer-paid group life insurance over a certain amount
The following types of income are usually deemed nontaxable by IRS and aren’t required to be reported on your tax return:
- Inheritances and bequests
- Cash rebates
- Alimony payments (for divorces finalized after 2018)
- Child support payments
- Most healthcare benefits
- Money that is reimbursed from qualifying adoptions
- Welfare payments
- There are some types of income that may or may not be taxable, or may be partially taxable. Examples include proceeds from cashing in a life insurance policy or money from a qualified scholarship, depending on how it was used. Income from retirement accounts may also fall into this category. Consult with your tax professional to determine how much of such income should be included on your tax return, if any.
- Certain types of income may not be readily identified as taxable, but are generally required to be included on your return. Examples include: the fair-market value of property received for your services; disability retirement or sickness/injury payments from an employer-paid plan; property and services for which you bartered; money/income from offshore accounts; or canceled/forgiven debt.
- IRS rules state that you are taxed on all income available to you, regardless of whether it is actually in your possession. For example, if a check is received by or made available to you before the end of the tax year, but you do not cash or deposit the check until the next year, the income was “constructively received” before year-end and, therefore, is taxable in that year.
- If you have a contract with a third party (agent) to receive income on your behalf, the income is considered received by you (and therefore taxable) in the year the agent received it.
- If you receive payment for future services to be provided, the income is generally included in income/subject to tax in the year you receive it. An exception to this is if you report on an accrual basis of accounting – consult with your tax professional for more information.
- Note that in some cases, the tax treatment of certain income for State purposes is not consistent with Federal tax law. For example, while alimony is no longer reportable on Federal returns for divorces finalized after 2018, California still requires such income to be included on the state tax return. Check with your tax professional to learn more about federal and State tax law differences.
For more information, please refer to IRS Publication 525, Taxable and Nontaxable Income: 2022 Publication 525 (irs.gov)
Cool Tech: Drones
Drones were considered fun when they first came out, but they are far from toys. Drones have surprising benefits with extremely high return on investment to certain business owners.
A drone is a robot that can fly and that is controlled by a remote device. The technology includes GPS (global positioning system) and built-in sensors. There are many benefits to using drones:
- They can go places where it might be dangerous for employees to access, improving employee safety.
- They increase efficiency and productivity while decreasing workload and costs.
- They can improve accuracy.
A drone can be used in the following ways:
- To gather information for pricing estimates, such as roof repair
- To inspect items, such as a tree’s disease progression
- To monitor systems or the status of certain items, such as landfill fire risks
- To photograph items from an aerial view
There are many industries that have begun to routinely use drones, such as:
- Waste Management
- Disaster Relief Services
- Real Estate
- Event Planning
- Highways, Traffic, and Road Safety
Rules for Drones
Before you fly your new drone, there are rules you’ll need to follow. The FAA (Federal Aviation Administration) has put into place the rules for flying drones safely. There may also be rules passed at the state and local levels that you’ll need to check on.
When using drones for commercial purposes, you’ll need to register your drone, familiarize yourself with the operating rules for your type of drone, and pass a pilot’s test. Find out more here: https://www.faa.gov/uas
Cost of Drones
Drones can cost anywhere from $50 to $25,000 and more. A beginner recreational drone can cost under $100, while a beginner commercial drone can range from $300 to $500. A commercial drone typical starts at a $1,000 price tag. Drone prices will vary depending on their size, features, and intended usage.
If your industry is one that is adopting drones, it might be a good time to start researching them for your business.
Here are some Days to Remember in April!
April – Monthly Awareness
Here are just some few things that are observed monthly in April:
Autism Awareness Month
Alcohol Awareness Month
April 7th – Good Friday
Good Friday falls on the Friday before Easter, and this year will be on April 7th. Good Friday is, for many, an intensely personal day of prayer and devotion.
April 9th – Easter
East falls on the first Sunday after the full moon that occurs on or after the spring equinox. It celebrates the resurrection of Jesus Christ.
April 15th – National Anime Day
Anime has grown in popularity over the past few decades and National Anime Day is celebrated by anime fans worldwide. Celebrate today by cosplaying your favorite anime character, reading manga, or watching your favorite or a new anime!
My favorites are Jujutsu Kaisen, Wotakoi: Love is Hard for Otaku, Fruits Basket, Buddy Daddies, & Demon Slayer – Vikkie 🙂
April 18th – Tax Day
April 18, 2023 is the day Individual Taxes are due this year! Tax Day was first introduced in 1913, when the Sixteenth Amendment was ratified.
April 22nd – Earth Day
Earth Day has been celebrated by billions of people around the globe for the past 50 years by promoting awareness for the health of our environment.
Some ways to help support your environment and celebrate Earth Day:
Support your native pollinators, clean up litter in your area, use native plants and wildflowers in your gardens, Reduce Reuse Recycle.
We only have one Earth.
Tax Season Hours Begin January 2, 2023
Monday – Friday
8 AM to 5 PM