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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.

Ask a Tax Professional

Wallstreet Esq.
Wallstreet Esq., Tax Attorney
Category: General
Satisfied Customers: 572
Experience:  10 years experience
16356563
Type Your Tax Question Here...
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5 Tax Professionals are Online Now

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Tax Professionals are online & ready to help you now

Wallstreet Esq.
Tax Attorney
Satisfied Customers: 570
10 years experience
Wendy Reed
Enrolled Agent
Satisfied Customers: 3052
15+ years tax preparation and tax advice.
Mark D
Enrolled Agent
Satisfied Customers: 985
MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Recent Taxes on Income Questions

  • Can an LLC schedule K profit for a participating member (100%

    Can an LLC schedule K profit for a participating member (100% participating in the LLC and also majority member) offset a long-term loss from stocks accrued for that individual member? I have about 100K in loss carryover from previous years and will have a 40K profit from my LLC that I work at full time and receive guaranteed payments for this work.
    Also, I own 70% of the company but will take 100% of the profits as outlined in our LLC operating agreement. Is this a red flag and should I be concerned about this? We receive 100% of our revenue from government grants (SBIR), which allow for the company to make a profit.
    Finally, If I took company draws that are more than this profit should I pay this back by Dec 31? Would there be any penalties if I did not pay back or paid back after Dec 31?
  • For S Corp- income earned from US & Canada. File taxes in US

    For S Corp- income earned from US & Canada. File taxes in US as S corp. Servicing center in PH & main headquarters in US. Can we maybe defer taxes on income by putting income on PH books instead of US? Or shift profit overseas PH bank acct rather than keeping profits in US, so US earned income & Canadian earned income sent & held in PH? Reference:
    Corporate income taxes- US taxes worldwide income US persons. However, foreign income of a foreign subsidiary of a US company is not taxed until it is transferred to US parent by payment of dividends or a liquidation distribution. This is concept of deferral. http://www.cengage.com/resource_uploads/downloads/0324288417_68122.pdf
  • Are there other ways to reduce tax liability for S Corp? Already

    Are there other ways to reduce tax liability for S Corp? Already have employee reimbursements, SEP IRA. Should we add a 401K, trusts, offshore asset protection, purchase prescribed annuity? Or any other means to reducing taxes?
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