Overview
There is a hard and fast rule that all income is taxable. On a very basic level, any money you receive, such as wages and tips, are categorized as taxable income. However, there are certain sources of income you are not required to report.

Miscellaneous Income
​​​​Below are some types of income that are not taxable:

· Gifts and inheritances below limits

· Child support payments

· Damage awards for physical injury/sickness

· Cash rebates received from a manufacturer or car dealership

There are certain types of income that are not taxable except under certain circumstances:

· If you received any refunds from either a state or local income tax return, this may be taxable. This would normally be given to you through a Form 1099-G.

· Income received from qualified scholarships are not taxable depending on what you use those funds for. For example, if you use these funds on room and board, then those amounts will be taxed. However, if you spend them on tuition and textbooks, then you will not be taxed on those amounts.

· Getting funds from a life insurance policy is not taxable. If you decide to redeem any funds that is more than the cost of the policy, you will be taxed on those amounts.

Income from Tips

Tips that are $20 or more should be reported to your employer. You must include all of your tips on your tax return, as well as report them to your employer. It is important to keep a daily log of your tip amounts, however, most service organizations keep an electronic file for those amounts.

Bartering Income

Bartering is any non-cash trading in the marketplace where people exchange products or services. Since it is viewed by the IRS as a form of trading, therefore any and all income has to be reported. Here are some reminders:

· Since there is zero cash involved, you must report the fair market value of the items that are getting exchanged.

· Bartering is taxable in the year that it occurs and certain transactions will involve certain other taxes depending on the individuals involved. If the individual is a full-time barterer, then they will be subject to self-employment taxes, employment taxes or other types on top of their income taxes.

· All barter exchanges are required to issue Form 1099-B (Proceeds from Broker and Barter Exchange Transactions). Both individuals must have copies which should then be filed with the IRS. If you are a part of a business, then it is reported on Form 1040 – Schedule C (Profit or Loss from Business).

Ex. Tom and Suzy agree to a barter in exchanging a coffee machine for a blender. Both parties in this transaction would need to report the fair market value of both goods received as taxable income.

HSA Information

As technology has advanced, so has scammers’ creativity. As your trusted CPA practice, we have taken the steps and established protocol to protect your data. You must also take the necessary steps to keep your information safe. There are different versions of IRS scams, but here are a few popular ways they use:

· Posing as a debt collection agency officials who “act on behalf" of the IRS. They will contact you and say that your refund was erroneously deposited and that you need to direct your money to their specific collection agency.

· Will use a recorded voice from the IRS and will threaten you with criminal fraud charges, arrest warrants, and other serious claims. They will then provide you with a case number and phone number to call to discuss your refund and where to direct it.

Rejected Tax Return & Returning Erroneous Refunds to the IRS

In the event that your tax return is rejected, this should be a red flag for you. This might be a case of identity theft due to the fact that the IRS now has your Social Security Number on record as filed. Please read the IRS publication, Taxpayer Guide to Identity Theft or if you have received an amount that is different from what you were expecting, then please refer to the IRS publication, Tax Topic Number 161, Returning an Erroneous Refund.

How to Reduce Your Risk

Always use your common sense when you are cornered into a difficult situations. Some general tips you can use are:

· Use security software, such as ShareFile, with firewall and anti-virus protections.

· Keep your personal documents in a secured locker or location

· Avoid opening any emails or texts from unknown sources from weird locations you have no relations to

· Avoid opening any emails or texts from legitimate organizations that are explicitly demanding your personal and confidential information

As always, contact us if you have any immediate questions and we will guide you through this situation.
IRS Scams: What To Do & How To Prepare

In an effort to simplify the tax code, Congress has chosen a framework that eliminates most itemized deductions. Virtually all tax deductions will be going away for 2018 so it is important now to take the steps to ensure that you will hedge possible future tax payments. Here are some of the deductions that will be gone starting in 2018:

Personal Exemptions

This will be the largest deduction removal the new tax law will take away. This exemption normally allowed a taxpayer to reduce their taxable income by $4,050 per person. However, policymakers believe that this exemption would merge with the standard deduction, which rose significantly.

Home Equity Loan Interest

If this deduction is important for you, then in 2018 you should potentially look into repaying your existing home equity loans sooner. Mortgage interest on purchase loans is still deductible up to $750,000, but the interest on home equity loans will be nondeductible starting this year.

Casualty and Theft Losses

Before tax reform, individuals were allowed to itemize casualty losses that exceeded $100 plus 10% of your adjusted gross income. “Casualty losses” were generally any natural disasters, fires, robberies, or other events. Those will now go away under the new tax law, except for disasters in which a presidential disaster area declaration was made.

Subsidized Parking and Transit Reimbursement

Employees were able to get $255 per month from their employers to cover their parking costs or transit passes. Since the corporate deduction will be going away, employers will now have less of an incentive to offer this perk to employees

Deductions on the Chopping Block
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