Throughout the month of March, we discussed information that had to be reported to the Internal Revenue Service (“IRS”) if a taxpayer wished to reduce their tax debt. Among this information is the taxpayer’s income, expenses, and any assets he/she may own. Here is a quick recap of the information we brought you during the month:
Income that must be reported
Personal income that must be reported ranges from self-employment income to interest in any dividends the taxpayer receives. Remember, if you are self-employed, you must ensure to report the corresponding expenses to the income generated. Also, if reporting any rental income, remember that rental income also includes advance rent, regardless of the period covered or the method of accounting used (this includes security deposits used as final payment of rent); payment received for cancelling a lease; expenses paid by the tenant; and property or services received in the place of money for rent. And finally, remember that dividend payments must be reported – and this includes the corporation paying the debts of the shareholder, the shareholder receiving services from the corporation, or the shareholder being allowed the use of the corporation’s property.
Expenses that must be reported
Remember to divide expenses between personal and expenses regarding self-employed business. Personal expenses include: food and clothing, housing and utilities, costs related to a vehicle, public transportation, healthcare payments, taxes and debts. Additionally, for self-employed expenses, expenses that may be reported include gross wages and salaries, rent, and utilities. Self-employment expenses, however, also include materials purchased for the business. And finally, the tax payer may report both taxes and debts. Taxes include current year taxes and debts that may be reported as secured debts.
Assets that must be reported
As a final point of recap, recall that there any asset a taxpayer owns must be reported. Among others, this includes cash, stocks and bonds, vehicles (both owned and leased), real estate, and life insurance policies. Recall also that not only domestic assets have to be reported, also foreign assets. It is important to err on the side of caution and report any and all assets a taxpayer owns.
That’s it for the month of March! As with all of our blogs, if you have any questions regarding the information we have provided, please contact office. We would be happy to help you.