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Taxes on Income

A tax on income is charged to an individual or business, including corporations and other legal entities. Income taxation can be progressive, proportional or regressive. When the taxes are levied on the income of companies it is called a corporate tax, corporate income tax or profit tax. Individual income taxes usually tax the total income of the individual allowing for some deductions. Corporate income taxes often tax net income which is the difference between gross receipts, expenses and write-offs. Listed below are some of the most commonly asked questions about taxes on income answered by the Experts.

A person received income from consideration for easement and damages, along with tree damage, in connection with exercising a Right-of-Way agreement. Do they need to pay taxes on this income?

In most cases, if a person sells or leases a right-of-way easement, they would report this in the form of a capital gain on schedule D when they file their returns. Any compensation they receive for tree damage would be reported as a casualty loss where the value of the trees is diminished. Therefore, they would report both the loss and the income from the loss, and depending on whether there is a net market value loss, they could claim additional deductions. h2> An insurance policy that a person paid for on their own now pays them back after they were suspended from work. Does the person have to pay taxes on this income? In most cases, since the individual paid the premiums, the insurance payments will not be taxed under the Federal Insurance Contribution Act (FICA). However, if the amount that the insurance company pays the individual is higher than the premiums paid out by them, the income would be subject to taxes. They would need to report the difference between these amounts on the Internal Revenue Service (IRS) form 1040.

Would a person who teaches piano lessons in their own home be required to keep records and deductions, pertaining to this income, for tax purposes?

As a general rule, if an individual is given a 1099 by anyone, then they would need to file the income. Even though the IRS does state that any income is reportable, they would have a difficult time knowing that a person earned a little money on the side. However it would be recommended that in the future they keep records of income and expenses.

Do inmates pay income taxes on income earned outside of prison?

Although the rates might change every year, typically, if an inmate receives taxable income exceeding $8,950, they would have to file a federal income tax return.

When a deceased person’s assets are designated as Transfer On Death (TOD), with minimal cash and scant personal effects, what is the way that tax would be paid on income and gains from January 1st to the date of death?

Typically the executor of the estate will need to file the last tax return. Also he can pay the taxes from whatever source is in the probate estate, but the TODs will bypass probate and become the beneficiary’s assets immediately.

The concept of taxing income is a modern innovation and is the result of an orderly society with reliable records. For most of history, these preconditions did not exist and taxes were based on other factors such as wealth, social position, and ownership of the means of production. These precursors to our tax system helped to open the door to many issues and questions involving taxes on income. If you have any more questions on this topic, put them to Tax Professionals on JustAnswer who can offer insights and information to help you with your own case.
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Recent Taxes on Income Questions

  • My niece is deaf and only gets a $600 SS check a month, so

    My niece is deaf and only gets a $600 SS check a month, so doesn't pay any taxes. She recently found out her deceased ex-husband had a pension plan, so the plan will send her $155 a month going forward, but wants to send a lump sum check for the years she should have been getting the $155 but didn't know about it. The check will be $18k. Does she have to claim all that $$ this year and then pay taxes on it? She has so little money, and it doesn't seem fair, because if she'd been getting it all along, it would have added so little a year it wouldn't have made much difference. Is there something she can roll it in that would be tax-free for her? She's about 40 years old.
  • Hi, my question is: whether a non-US resident, citizen of Russia,

    Hi, my question is: whether a non-US resident, citizen of Russia, shareholder of a C-corp is eligible for 10% tax rate for the dividends from the C-Corp?

    More details:
    I am a shareholder of a C-corp, I am non-US resident, citizen of Russia and live in Russia.
    There is a tax treaty agreement between the USA and Russia.
    So according to the article 10 of Convention between the United States of America and the Russian Federation for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital (June 17, 1992):
    «dividends that are paid by a company which is a resident of a Contracting State and that are beneficially owned by a resident of the other Contracting State may be taxed in that other State. However, such dividends may also be taxed in the first Contracting State, and according to the laws of that State, but the tax so charged shall not exceed:
    a) 5 percent of the gross amount of the dividends if the beneficial owner is a company which owns at least 10 percent of the voting stock (or, in the case of Russia, if there is no voting stock, at least 10 percent of the statutory capital) of the company paying the dividends; and
    b) 10 percent of the gross amount of the dividends in all other cases.»

    There is a corresponding instruction too:
    http://www.irs.gov/pub/irs-pdf/p515.pdf, Page 41.

    But the C-company says that they will withdraw 30% referencing to the footnote “ff” on the Page 43 of the instruction stating:
    “The rate in column 6 applies to dividends paid
    by a regulated investment company (RIC). Dividends paid by a real estate investment trust (REIT) are subject to a 30% rate.”
    In my opinion this footnote is given to explicitly exclude REIT company but not cover C-corp at all and for C-copr the 10% rates according to the Convention should be applied.

    Could you please help me to discover what is correct?
  • I moved to the USA from the UK in 2003, am now a US citizen,

    I moved to the USA from the UK in 2003, am now a US citizen, and have paid US taxes since my arrival here. The position I left in the UK was associated with a pension, payment of which was deferred until my 60th birthday, which is in September this year. The payout includes a lump sum of $160K, approx, (tax free in the UK), and a monthly income of $3.5K approx. How can I minimize my USA tax liability on the lump sum payout? I understand that it will not qualify for roll-over into a tax deferred IRA
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