Reynolds + Rowella

GET THE LATEST NEWS CLIENT ACCESSONLINE PAYMENT BLOGCOVID-19
  • About Us
  • Who We Are
    • Meet the Partners
    • Our Team
  • Consulting
  • Tax
  • Industries
  • Assurance
  • Culture
  • Careers
  • Contact

Taxable or not taxable?

May 31, 2017 by Reynolds & Rowella Leave a Comment

Taxable or not taxable? The taxability of income, gifts, or services you receive might surprise you.

Have you ever wondered about the taxability of funds or services you receive? There are many areas in the tax code that cause confusion regarding what’s taxable. These are some of the most common.Alimony.

Alimony

is taxable to the person who receives it and deductible to the person who pays it. Special rules apply. Make sure you have proper documentation as part of a divorce decree to ensure you can support your tax position.

Child support

Child support is not taxable to the person who receives it on behalf of their dependent. It is also not deductible for the person who pays it.

Free services

Free service is almost always taxable as ordinary income under IRS barter regulations. You should report the fair market value of services received as income on your tax return. If you exchange services, you can deduct allowable business expenses against the value of services received.

Illegal activities

Even income received from illegal activities is taxable income and must be reported. Incredibly, the IRS even states that stolen items should be reported at the fair market value on the date the thief stole the item.

Jury duty pay

This is taxable as ordinary income. Yes, even doing your civic duty can be a taxable event.

Legal settlements

A general rule of thumb with legal settlements is to consider what the settlement replaces. If the settlement revenue replaces a taxable item, like lost wages, the settlement often creates taxable income. This area is complex and often requires a detailed review.

Life insurance proceeds

Generally life insurance proceeds paid to you because of the death of an insured are not taxable. However, there are a number of exceptions to this general rule. For example, if you receive benefits in installments above the value of the life insurance policy at time of death, or if you receive a cash payout of a policy, you could have taxable income.

Prizes

Most prizes received should be reported as ordinary income using the fair market value of the item received. This area has been a major surprise to contestants on game shows and celebrities who have received large gifts at celebrations like the Academy Awards.

Unemployment compensation

Typically unemployment compensation is to be reported as taxable income. Many are confused by this because of a temporary federal tax law that made unemployment compensation non-taxable during the recent economic recession. This is no longer the case.
Some of these areas can be complicated. What is most important is to realize when to discuss your situation.

Contact us at consulting@reynoldsrowella.com if you need help.

Filed Under: Tax Planning, Uncategorized Tagged With: Accounting Services Fairfield County CT, Best Accounting Firms Fairfield County CT, Financial Planning Fairfield County CT, Tax Returns Fairfield County CT

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Receive Our Blog Updates by Email

Recent Posts

  • Opening the Door to Home Office Deductions
  • Work or Pleasure: The Tax Rules for Hybrid Travel
  • Enhance Your Flexibility by Outsourcing
  • TO OUTSOURCE OR NOT TO OUTSOURCE…THAT IS THE QUESTION!
  • Outsourced Accounting Services: A Cost-Effective Solution

Contact Us

  • This field is for validation purposes and should be left unchanged.
  • About Us
  • Meet the Partners
  • Our Team
  • Consulting
  • Tax
  • Industries
  • Assurance
  • Culture
  • Careers
  • Blog
  • Contact

where to find us and how to call us

90 Grove Street / Ridgefield, CT 06877 / Office: 203.438.0161 / Fax: 203.431.3570
51 Locust Avenue / New Canaan, CT 06840 / Office: 203.972.5191
© 2022 Reynolds + Rowella. LLP
follow us on twitter follow us on facebook follow us on linkedin
Website Design: Wieting Design
  • About Us
  • Who We Are
    ▼
    • Meet the Partners
    • Our Team
  • Consulting
  • Tax
  • Industries
  • Assurance
  • Culture
  • Careers
  • Contact