Archives for February 2018

Taxable and Non-taxable Income

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To make your income-tax planning more effective, you should have a clear picture of your current tax situation. This means knowing what your taxable income was last year and what it is estimated to be in the following year.

Generally, you are required to report and pay taxes on all income that derives from your labor or capital. This applies to income received in any form (e.g., cash, services, meals, stock, property, etc.). However, certain types of income are tax exempt. The following lists include the most common items in both the taxable and nontaxable categories.

Forms of Taxable Income

  • Wages, salary, fees, tips, commissions, or business profits
  • Gains received from dealings in real estate, securities, and other property
  • Dividends
  • Rents
  • Alimony and separate maintenance payments that the payer can deduct
  • Royalties
  • Income from your share of an estate or trust, aside from gifts or bequests
  • Annuities and pensions
  • Certain fringe benefits
  • Prizes and awards
  • Some legal settlements proceeds
  • Up to 85% of your Social Security benefits, depending on the amount of your other income.
  • Accrued interest earned but not actually received (for example, accrued interest earned on a zero-coupon bond held in a taxable account or accrued interest earned on U.S. Treasury inflation-protected securities (tips))

Forms of Nontaxable Income

  • Interest earned from state, tribal, and municipal bonds and mutual funds that own such bond
  • Gifts and inheritances
  • Expense reimbursements received from your employer
  • Returns of capital such as loan principal repayments and the portion of annuity and pension payments that represent a return of your original investment upon which you have already paid taxes
  • Home sale gains up to $250,000 for single homeowners and $500,000 for married homeowners filing jointly
  • Scholarships, as long as you satisfy some conditions

These lists are not all-inclusive. You can find more information on the IRS website.

Contact us today with any questions.

Unclaimed Checks – How to Deal With Them

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Maybe the owner of the check lost or tossed the check. While it may be hard to understand how checks can go un-cashed, it happens. Unclaimed checks, such ad payroll checks, commission checks, shareholder dividends, checks to vendors, and even unredeemed gift cards create problems for businesses. This represents a revenue opportunity for cash-strapped state governments. That could be an unfortunate combination if your company isn’t in full compliance with state law.

Unclaimed Checks 

Generally speaking, the states do not allow businesses to hold on to un-cashed checks indefinitely. Each state has its own laws regarding unclaimed property. And businesses must follow the rules for reporting and remitting such property to the state.

In Texas, depending on the type of property, there are different periods ranging from one to fifteen years after which the state considers unclaimed property to be “abandoned”. And you must make a good faith effort to contact the owners during that period, so that they can claim their property. If these attempts fail, businesses must turn over the abandoned property to the Comptroller’s office. You can read more about Texas unclaimed property rules here.

States Want To Know

To supplement tax revenues, states have generally been stepping up their audit and enforcement efforts regarding abandoned property. For businesses, the cost of noncompliance can be quite high, especially if they haven’t been keeping reliable records. In the absence of records, auditors may — and often do — estimate a business’s liability. This may result in an exaggerated assessment.

Protect Your Business

Take steps to protect yourself by putting someone in charge of handling your business’s unclaimed property, keeping accurate records, regularly filing required reports of unclaimed property with the Comptroller’s office, and promptly turning over any unclaimed property according to Texas law. This helps you avoid costly problems in the future.

Don’t get left behind. Contact us today to discover how we can help you keep your business on the right track.