What does the tax code mean by the term “income”? The tax law doesn’t care whether you receive income from your business, W2 wages paid by your employer or from an investment you made 3 years ago. It is taxable to you as an individual.
Definition of Business Income
Besides the obvious, receipt of cash, stocks and bonds, income for tax purposes can take many forms.
Goods and services. Goods, property or services received are within the definition of income.
Constructive income. As soon as money or property is available to you (constructive receipt), or is credited to your account, it becomes income-whether you take it or not. For instance, if you provided services in November 2015, received the check and wait until Januar...
Eleven Ways to Take Compensation Out of Your Company
There are quite a few ways to get cash, compensation or benefits out of your company. Each method may have different tax implications and of course, there is no single set of tax-savings strategies that work for everyone. However, if you stick to the “reasonable” test authored by the IRS (ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business), the likelihood that they will be disallowed or considered fraudulent is diminished especially. The deduction depends on your ability to prove a profit motive. Thus, you are not in business unless you are trying to produce a profit. When you are trying to make a profit, you may deduct your “ordinary and necessary” business expenses. If there is anything I...
Cheri S. Hill “Wealth Protection Diva”, has been a successful entrepreneur/business owner and premier business strategist for the past 27 years as President & CEO of Sage International Inc. She is a national speaker, best selling author of Incorporate & Get Rich!, and motivational teacher of financial education, business development and wealth protection strategies.