With the 2018 tax season far away, it is easy to forget about what is necessary to process a proper return. It is akin to kids being on summer vacation and forgetting most of what they learned the previous year. But like children preparing for another school year, it is never too early to review tips for avoiding reporting problems.
This is especially important if you are realizing income from multiple sources, and taxes are not being taken out on a quarterly basis. The same applies if you may be losing money on investments or property. With that said, taxpayers should be wary of the following forms of income that should be reported.
Non-salary income – Most people understand that income from w-2 employment must be reported (because their employer will detail how much they were paid), but income from “side-hustles” and other part-time pursuits must be reported. Depending on the type of income, it may be reported on a different form, but it must be reported nonetheless.
Tax exempt income – It may be counterintuitive, but income that is exempt from taxation must also be reported. So failing to report income from certain investments, payments from personal injury claims and certain benefits may lead to trouble.
Income from foreign property – Even if you have reported income and paid taxes on such income in a foreign country, you are required to report such income on your U.S. tax return. After all, you want to take advantage of all related expenses and depreciation that could save you money.
If you have additional questions about reporting income, an experienced tax attorney can advise you.