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I was given money that was owed to me and want to know if I…

Customer Question
I was given money...

I was given money that was owed to me and want to know if I have to pay taxes or anything on it

Accountant's Assistant: What state are you in? It matters because laws vary by location.

Washington

Accountant's Assistant: Has anything been filed or reported?

Not that I know

Submitted: 7 months ago.Category: Tax
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Answered in 3 minutes by:
10/5/2017
Tax Professional: Lev, Tax Advisor replied 7 months ago
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 32,859
Experience: Taxes, Immigration, Labor Relations
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If you were owned the money for services you provided - that will be your compensation and will be included into your self-employment income.

If you were owned the money for assets you sold - a part of that amount that is above your basis will be your taxable gain.

If you loaned the money - and that is a repayment of the loan - the interest you collect will be taxable, but the amount repaid will not be taxable.

Questions?

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Customer reply replied 7 months ago
ok thankyou it was money for work that I had done for her in the house and when I left she paid me it was several thousand dollars
Customer reply replied 7 months ago
I don't want to spend any more for a call just answer on this
Customer reply replied 7 months ago
I guess there is not an answer to question a little upset by this so will try and cancel with you.
Tax Professional: Lev, Tax Advisor replied 7 months ago

Because that payment is a compensation for services - that will be taxable income.

Moreover - that will be your self-employment income - and additional self-employment taxes will be due.

The good news is that you will be able to deduct your qualified business expenses - and will be taxed only on net business income.

Let me know if you need any help with reporting.

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Tax Professional: Lev, Tax Advisor replied 7 months ago

You actually will be treated as running your own business and will report all business income and expenses - on the schedule C -

http://www.irs.gov/pub/irs-pdf/f1040sc.pdf

You will deduct qualified business expenses on that form.

The net income (after deductions) will be reported on the form 1040 line 12 -

http://www.irs.gov/pub/irs-pdf/f1040.pdf

If the business has net income over $400, it may be required to file Schedule SE, Self-Employment Tax

http://www.irs.gov/pub/irs-pdf/f1040se.pdf

and net self-employment income is subject to 15.3% self-employment tax.

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Lev
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