What Income is Taxable?

What Income is Taxable?

What Income is Taxable?Are you wondering if there’s a hard and fast rule about what income is taxable and what income is not taxable? The quick answer is that all income is taxable unless the law specifically excludes it. But as you might have guessed, there’s more to it than that.

Taxable income includes any money you receive, such as wages and tips, but it can also include non-cash 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.

Nontaxable Income

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

In addition, some types of income are not taxable except under certain conditions, including:

  • Life insurance proceeds paid to you because of the death of the insured person are usually not taxable. However, 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 received a state or local income tax refund, the amount may be taxable. You should have received a 2014 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. Be sure to report any taxable refund you received even if you did not receive Form 1099-G.

Important Reminders about Tip Income

If you get tips on the job from customers, that income is subject to taxes. Here’s what you should keep in mind when it comes to receiving tips on the job:

  • Tips are taxable. You must pay federal income tax on any tips you receive. The value of non-cash tips, such as tickets, passes or other items of value are also subject to income tax.
  • Include all tips on your income tax return. You must include the total of all tips you received during the year on your income tax return. This includes tips directly from customers, tips added to credit cards and your share of tips received under a tip-splitting agreement with other employees.
  • Report tips to your employer. If you receive $20 or more in tips in any one month, from any one job, you must report your tips for that month to your employer. The report should only include cash, check, debit and credit card tips you receive. Your employer is required to withhold federal income, Social Security and Medicare taxes on the reported tips. Do not report the value of any noncash tips to your employer.
  • Keep a daily log of tips. Use the Employee’s Daily Record of Tips and Report to Employer (IRS Publication 1244), to record your tips.

Bartering Income is Taxable

Bartering is the trading of one product or service for another. Small businesses sometimes barter to get products or services they need. For example, a plumber might trade plumbing work with a dentist for dental services. Typically, there is no exchange of cash.

If you barter, the value of products or services from bartering is taxable income. Here are four facts about bartering that you should be aware of:

1. Barter exchanges. A barter exchange is an organized marketplace where members barter products or services. Some exchanges operate out of an office and others over the Internet. All barter exchanges are required to issue Form 1099-B, Proceeds from Broker and Barter Exchange Transactions. The exchange must give a copy of the form to its members who barter and file a copy with the IRS.

2. Bartering income. Barter and trade dollars are the same as real dollars for tax purposes and must be reported on a tax return. Both parties must report as income the fair market value of the product or service they get.

3. Tax implications. Bartering is taxable in the year it occurs. The tax rules may vary based on the type of bartering that takes place. Barterers may owe income taxes, self-employment taxes, employment taxes or excise taxes on their bartering income.

4. Reporting rules. How you report bartering on a tax return varies. If you are in a trade or business, you normally report it on Form 1040, Schedule C, Profit or Loss from Business.

If you have any questions about taxable and nontaxable income, don’t hesitate to contact the office.

Start Accounting & Bookkeeping services for as low as $150 per month

How a point of sale system saves smart restaurants money

How a Point of sale system saves smart restaurants

There are always some of the errors that are unavoidable for a restaurant with an electronic cash register or bad Point of sale and quite manageable with a properly configured point of sale system. the way this is accomplished is mostly through the method orders entered forcing wait staff to enter all the important details to create their order.

The three most costly errors that IPOs P systems can correct are:

  • Missed beverage charges
  • Price change mix-ups
  • Missed add-on charges

Before we get on to those, let’s see an example of the linear ordering system I mentioned:

If we add an entry say a stack to the order, the system is smart enough to know it needs to prompt the user for modifiers,

Such as; level of cooking, the side items available with the archery and then their modifiers.

Lastly, the system can be configured to automatically prompt the wait staff to enter a beverage order for every entry entered.

Let’s imagine a real world example to explain how this avoids errors and saves you money if we were to compare two diners, one using an electronic cash register and one using up properly programed point-of-sale.

The difference becomes clearer. Industry studies show that in a normal shift, on average a waitress at the first diner will miss the charging two beverages with the prompt thing at a point of sale terminal. Our second waitress will hardly ever miss a beverage order.

point of sale system for restaurants

If the first diner has four order takers in total and charges $1.75 a drink, these mistakes will cost a diner over $5040/year.

Another problem restaurants with cash register face is making sure that wait staff are charging the right prices after the prices are adjusted. To have the staff enter the prices means that every waiter and waitress needs to know the price for every meal.

With a correctly formatted point-of-sale the prices come from a backend system, controlled by the manager. All the price adjusting, arithmetic and so on are done by the terminal making mistakes much less likely. Compare the guest checks available from each of the system and we can see why mistakes are less likely on a well maintained POS system.

It’s important to remember that these mistakes can rarely be corrected even with retraining of the staff members.

This was a short informative post to help you run your restaurant business accurately with the point of sale system and save smart money.

Focus on growing your business and taking it to the next level – Leave Bookkeeping and Accounting to us!!

You Can start Bookkeeping and Accounting services for as low as $150

Five Last Minute Tax Tips for 2015

tax-tips

Are you one of the millions of Americans who hasn’t filed (or even started) your taxes yet? With the April 15 tax filing deadline less than a week away, here is some last minute tax advice for you.

1. Stop Procrastinating. Resist the temptation to put off your taxes until the very last minute. It takes time to prepare accurate returns and additional information may be needed from you to complete your tax return.

2. Include All Income. If you had a side job in addition to a regular job, you might have received a Form 1099-MISC. Make sure you include that income when you file your tax return because you may owe additional taxes on it. If you forget to include it you may be liable for penalties and interest on the unreported income.

3. File on Time or Request an Extension. This year’s tax deadline is April 15. If the clock runs out, you can get an automatic six-month extension, bringing the filing date to October 15, 2015. You should keep in mind, however, that filing the extension itself does not give you more time to pay any taxes due. You will still owe interest on any amount not paid by the April deadline, plus a late-payment penalty if you have not paid at least 90 percent of your total tax by that date.

Call the office if you need to file an extension or file for late-filing penalty relief.

4. Don’t Panic If You Can’t Pay. If you can’t immediately pay the taxes you owe, there are several alternatives. You can apply for an IRS installment agreement, suggesting your own monthly payment amount and due date, and getting a reduced late payment penalty rate. You also have various options for charging your balance on a credit card. There is no IRS fee for credit card payments, but processing companies generally charge a convenience fee. Electronic filers with a balance due can file early and authorize the government’s financial agent to take the money directly from their checking or savings account on the April due date, with no fee.

5. Sign and Double Check Your Return. The IRSwill not process tax returns that aren’t signed, so make sure that you sign and date your return. You should also double check your social security number, as well as any electronic payment or direct deposit numbers, and finally, make sure that your filing status is correct.

Remember: To avoid delays, get your tax documents to the office as soon as you can.