Taxable Income

Individuals, who work, receive an income, based upon the wages that they make from their employment. This income is considered to be taxable income. Some individuals have deductions from their income that are pre-tax and some that are post-tax. Pre-tax deductions make the taxable income lower. But are there other things that are considered to be taxable income? Are monetary gifts considered to be taxable income? Below are questions that have been asked of and answered by the Experts, regarding taxable income.

What is taxable income?

Taxable income is the base from which income tax systems impose taxes. This income usually has included many types of income and has often been reduced by deductions and expenses. These things such as income, deductions, and expenses may vary by the income tax system or the country the income tax system is based. An individual’s income, businesses income, and other groups such as partnerships are known as taxable income. There are some income tax systems that use as their base on taxable income for a given period of time or a period of time prior. Also some income tax systems have some income that is not considered taxable income and that expenses are not considered to be deductible.

Are monetary gifts considered to be taxable income?

Due to the current IRS regulations having an annual exclusion on gifts of $13,000; if the monetary gift received is less than that amount, and then gift is not taxed and not considered taxable income. All taxpayers have a lifetime amount of 1 million dollars that is not taxable. If the annual monetary gift is more than the amount that is allowed, then the individual that is gifting the money will be required to make a report on the money that is gifted, by filling out a IRS form 709. The individual may give as many monetary gifts as they desire as long as the amount of money given to any one individual is not more than the allowed amount.

Are funds received from a retirement plan for disability considered to be taxable income?

If the individual, who is receiving the funds from the retirement plan for being disabled, also receives a 1099 form yearly, then yes the income is considered to be taxable income. If the individual does not file a tax return or pay the taxes on the monies that they have received, the IRS will be after them for the back taxes that the individual owes on the monies that they have received. If this does happen then the individual should talk to a local tax service to help them get the situation with the IRS corrected.

How is taxable income computed for a corporation that must follow the standards of Generally Accepted Accounting Principles (GAPP)?

Corporations that are required to use GAAP when reporting the company’s financial income will have a difference between taxable income and GAAP income. One difference is tax depreciation, in which immediate write-offs or depreciation that is accelerated over useful life that is shorter, as well as salvage value is not recognized by tax depreciation. If either of these methods of depreciation is used on GAAP financial statements then income will be distorted. Also GAAP allows for the recognition of bad debts where tax law does not. For computation of taxable income, the GAAP income will first need to have adjustments made to it that were different for tax. On a tax return, the schedule M-1 will need to be used to balance the difference between the income on the books and the taxable income.

When dealing with taxable income, questions arise. These questions can vary from how to reduce taxable income, what is federal taxable income, and what is state taxable income? These and many more questions regarding taxable income can be answered by the Experts.