Hobby activities are a source of income for many taxpayers. For instance, during the pandemic many people may have started making handmade items and selling them for a profit. As a reminder, this income must be reported on tax returns.
While the Net Investment Income Tax (NIIT) tends to affect wealthier individuals most often, in certain circumstances, it can also affect moderate-income taxpayers whose income increases significantly in a given tax year. Here’s what you need to know.
The shift to remote working during the COVID-19 pandemic has been embraced by both employees and employers. This change will likely continue to varying degrees by many companies.
Although remote working offers great benefits, employees need to know about the possible tax consequences and how to navigate them.
In general, income from renting a vacation home for 15 days or longer must be reported on your tax return on Schedule E, Supplemental Income, and Loss. You should also keep in mind that the definition of a “vacation home” is not limited to a house. Apartments, condominiums, mobile homes, and boats are also considered vacation homes in the eyes of the IRS. Tax rules on rental income from second homes can be confusing, especially if you rent the home out for several months of the year and use the home yourself.
Special tax rules may apply to some children who receive investment income. The rules may affect the amount of tax and how to report the income. Here are five important points to keep in mind if your child has investment income this year:
Whether the goal is to gain experience or earn some spending money or help pay for college, summer is the prime job season for teens and college students. This year, however, with the coronavirus pandemic, the job situation has not been as easy – not to mention that it is starting later than usual. Nonetheless, if you are a high school or college student (or the parent of one) who has been lucky enough to find summer employment, here’s what you should know about income earned during the summer months:
Many people enjoy hobbies that are also a source of income. From soap making to pottery and jewelry making to calligraphy, these activities can be sources of both fun and finances. Taxpayers who make money from a hobby must report that income on their tax return.
- Are you prepaying your 2020 rent so that you have a big 2019 tax deduction?
- How do you identify in your accounting records the monies you put on your IRS Form 1099-MISC for the business rent payments to your landlord?
An IRS CP2000 notice is mailed to a taxpayer when income reported from third-party sources such as an employer, bank, or mortgage company does not match the income reported on the tax return.
It is not a tax bill or a formal audit notification; it merely informs you about the information the IRS has received and how it affects your tax. It is, however, important to pay attention to what your CP2000 notice states because interest accrues on your unpaid balance until you pay it in full.
Your Side Gig Could Be Your Main Tax Headache…Thanks to the Hobby Loss Rule
Imagine this. By day, you’re a software engineer. By night? You’re an author on a mission to publish the next great American novel.
You take writing seriously. It’s your side business. But the IRS isn’t so sure…