Tag Archives: non-taxable income

Summer Activity that May Affect Your Tax Return!

Things people do during the summer that might affect their tax return next year

IRS Tax Tip 2021-102, July 15, 2021

It’s summertime and for many people, summertime means change. Whether it’s a life change or a typical summer event, it could affect incomes taxes. Here are a few summertime activities and tips on how taxpayers should consider them during filing season.

Getting married

Newlyweds should report any name change to the Social Security Administration. They should also report an address change to the United States Postal Service, their employers, and the IRS. This will help make sure they receive documents and other items they will need to file their taxes.

Sending kids to summer day camp

Unlike overnight camps, the cost of summer day camp may count towards the child and dependent care credit.

Working part-time

While summertime and part-time workers may not earn enough to owe federal income tax, they should remember to file a return. They’ll need to file early next year to get a refund for taxes withheld from their checks this year.

Gig economy work

Taxpayers may earn summer income by providing on-demand work, services or goods, often through a digital platform like an app or website. Examples include ride sharing, delivery services and other activities. Those who do are encouraged to visit the Gig Economy Tax Center at IRS.gov to learn more about how participating in the sharing economy can affect their taxes.

Normally, employees receive a Form W-2, Wage and Tax Statement, from their employer to account for the summer’s work. They’ll use this to prepare their tax return. They should receive the W-2 by January 31 next year. Employees will get a W-2 even if they no longer work for the summertime employer.

Summertime workers can avoid higher tax bills and lost benefits if they know their correct status. Employers will determine whether the people who work for them are employees or independent contractors PDF. Independent contractors aren’t subject to withholding, making them responsible for paying their own income taxes plus Social Security and Medicare taxes.

 

IRS Tips about Taxable and Nontaxable Income

Are you looking for a hard and fast rule about what income is taxable and what income is not taxable? The fact is that all income is taxable unless the law specifically excludes it.

Taxable income includes money you receive, such as wages and tips. It can also include noncash income from property or services. For example, both parties in a barter exchange must include the fair market value of goods or services received as income on their tax return.

Some types of income are not taxable except under certain conditions, including:

  • Life insurance proceeds paid to you are usually not taxable. But if you redeem a life insurance policy for cash, any amount that is more than the cost of the policy is taxable.
  • Income from a qualified scholarship is normally not taxable. This means that amounts you use for certain costs, such as tuition and required books, are not taxable. However, amounts you use for room and board are taxable.
  • If you got a state or local income tax refund, the amount may be taxable. You should have received a 2013 Form 1099-G from the agency that made the payment to you. If you didn’t get it by mail, the agency may have provided the form electronically. Contact them to find out how to get the form. Report any taxable refund you got even if you did not receive Form 1099-G.

Here are some types of income that are usually not taxable:

  • Gifts and inheritances
  • Child support payments
  • Welfare benefits
  • Damage awards for physical injury or sickness
  • Cash rebates from a dealer or manufacturer for an item you buy
  • Reimbursements for qualified adoption expenses

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IRS Tax Tip 2014-12