Sources of Taxable Income
As you prepare to file your 2017 taxes, you may wonder what types of income you need to include. In this article, we will go over different sources of taxable income, so you can identify the documents that you need to gather for your tax preparer.
If you are an employee, you should receive a Form W-2 from your employer by January 31st. A Form W-2 reports your wage/salary information. This includes tips, commissions, bonuses, vacation pay, sick pay, and severance pay. It also reports federal, state, and other taxes that are withheld. It will also show if you contributed any money to a qualified retirement plan or received any employer-provided benefits, such as health insurance.
There are many different types of Form 1099s. The most common use is to report contractor payments. If you are a contractor or do freelance work you will receive a Form 1099-MISC from the company that hired you, showing how much they paid for your services. You may also receive a Form 1099 for other types of income, such as dividends and interest.
Trusts, partnerships, and S-Corporations all utilize Schedule K-1s. All these entities utilize pass-through taxation. This means that the tax liability passes from the entity to those with a beneficial interest in the entity. The Schedule K-1 Is how the tax liability is passed on. It will outline each person’s share in the entity’s loss or income.
Other Sources of Taxable Income
There are also other sources of taxable income that you should be aware of. Some of them you may not even realize are taxable. These include:
- Alimony: All alimony payments that you receive are fully taxable.
- Unemployment: Unemployment benefits are fully taxable.
- Pension/Annuity Payments: These payments are taxable. A portion may be tax-free if the annuity was funded with post-tax dollars.
- Disability Payments: If your employer paid the premiums for your disability insurance coverage, then any payment of benefits you receive will be fully taxable. However, if you are the one paying the premiums, then the benefits are tax-free.
- Gambling Winnings: All gambling winnings are fully taxable. This includes lottery payouts, sweepstake payouts, bingo winnings, raffle winnings, and casino winnings.
- Prizes: You are responsible to pay tax on the fair market value of any prize that you win.
- Bartering: If you barter for any good or service, you are required to pay taxes on the fair market value of the goods or services that you received.
- Jury Duty: Reimbursement for serving on a jury is taxable.
Determining Your Taxable Income
If you are still unsure of what your taxable income consists of, you may want to meet with a qualified tax preparer. They can help you to identify all of your sources of income, as well as identify ways you can reduce your taxable income.
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