Income

Question: How is income separated between business income and S-Corp income? My friend is a professional snowboarder who set up an S Corp last year at his accountant's insistence. He has parted ways with the accountant and wants to file on his own, but on the "Income tax summary" he received from his accountant last year, there is "Business income" and "Rent, royalty, partnership, SCorp, Trust" income and he has amounts in both areas. My question is how the accounant determined which amounts belonged in which areas--his income comes directly from his sponsors and he gets 1099 forms from them, and the only other income he has is from contest wins. He is the only owner/employee of the SCorp and does not have any complex accounting issues. I pretty much just want to know if income needs to be separated (onto Schedules C and E) and how this is done. Thanks!

Answer: The most likely reason is that the S-corp did not exist at the beginning of the year and all income from before it's existance would be considered self-employment income (Schedule C). S-Corps do NOT use Schedule E. They are their own entity and have to file their own return and pass the income to your friend via a K-1 or similar document. My advise to you and your friend is to forget doing this on your own and find a competent CPA or Premium H&R Block office (Premium offices are rarer and handle the really complicated returns like this).

Question: Transfer of Rental income to spouse and interest earned from such income - Is it taxable on transferor? I am planning to transfer the rental income from my house to my wife account for her personal expenses. I will club the rental income in my total income and accordingly paying the tax. Is any interest earned in my wife's account (from the rental income) to be clubbed in my total income?

Answer: Rental income is liable to club in your income as property pertain to you and rent can not be taxed in tha hand of person other than its owner. Interest earned on account of saving bank is taxable in hand of your wife as account belong to your wife and it does not matter whose money this account contain. Interest has been earned by her on account of efficiancy to keep the money in sb account and hence it is totally a matter of her skill and judgement.

Question: What are the firms income tax liability and its after tax income? What are the company's marginal and average The Tally Corporation had a taxable income of $365,000 from operations after all operating costs but before (1) interest changes of $50,000, (2) dividends received of $15,000 (3) dividends paid of $25,000 and (4) income taxes. What are the firms income tax liability and its after tax income? What are the company's marginal and average tax rates on taxable income?

Answer: Try posting this in the homework forum.

Question: What is the annual income I should write on the form I-864, Total income or adjusted gross income? I'm self employed, and, in my tax return my total income is enough to be a sponsor, but after "self employed taxes", my adjusted gross income falls a little behind the line. They ask to write my adjusted gross income for the last three yeas, I understand that, but I don't know what to write on line 23 where they ask my "individual annual income". Any help? Thanks Ok, just to be sure, so it's not adjusted gross income?

Answer: Self-employment taxes are not a reduction from gross income to arrive at AGI. The instructions tell you to show your total earned income or retirement income for the year. That's what you put down -- total earned income, etc. Earned income is income from wages or self-employment. It does not include unearned income such as dividends, interest, capital gains, etc. Total income is always before any taxes, since eveyone's tax situation is unique.

Question: How mucy should I put aside to pay income tax in Illinois? Hi, I am a Illinois resident and currently doing an internship in Florida. I will be here only for 13 weeks and my expected income from this internship is $9880. I also have other sources of income from Illinois, so my expected total income for this year will be around 45~50K. I heard that when I file an income tax report in Illinois, I will have to pay state income tax to Illinois for the Florida income portion, since Florida does not collect income tax. Out of the income of $9880, how much should I put aside? Thank you in advance for your answers.

Answer: Without considering any exemptions, the Illinois rate is 3%.

Question: Is Rental Income considered in the calculation of the business income limitation for Section 179 expense? Under what conditions would rental income be considered an active trade or business income for determining the business income limitation for section 179 expense? I cannot seem to find any concrete evidence either way on this.

Answer: http://www.acatcredentials.org/pdf/08SoleProprietorships.pdf Pages 172-175 seem possibly applicable. It seems to me that if the section 179 is for a Schedule C business, that the rental income on a Schedule E has nothing to do with it - unless the Schedule E rental IS the business. If none of this helps, try to 179 the assets in the tax software and see what happens! Hope this helps.

Question: What is the difference between an income tax and a payroll tax? What is the difference between an income tax and a payroll tax? A. Income taxes reduce the demand for harmful goods while payroll taxes don't affect this demand. B. Income taxes are collected based on income while payroll taxes are collected based on wealth. C. Income taxes are used for a wide variety of government activities while payroll taxes pay for specific programs. D. Income taxes increase the purchasing power of the government while payroll taxes increase the purchasing power of workers.

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Question: What income documents are needed when verifying income for someone on disability? I am refinancing someone who is on disability and is receiving disability income for two children that are disabled. What do I need to collect from this person to document their income?

Answer: Normally 3 years of tax returns, any W-2's and copies of 1099's.

Question: What income level families can afford computers? I'm doing research on Peterborough, Ontario and families affordability when it comes to computers. (But this can be looked at from an North American family POV) As the age of technology is advancing, some technology is become cheaper. What the bottom line is, I would like to know what class of family can afford computers. Where is the affordability line drawn? Which of the following options below would you say is the minimum for the ability for a family to afford the cost of a computer? (I know some figure below are obvious that those types of families can afford a computer, but I want to know WHERE does the get drawn?) What is the exact, absolute minimum income of a family to be able to afford a computer. I suppose that this question could be asked on any global scale, but at least in North America. What do you think personally? What do you know through a research? (if you do find a helpful site for me, please post it!) Persons with income under $5,000 Persons with income of $5,000 and over Persons with income of $10,000 and over Persons with income of $15,000 and over Persons with income of $20,000 and over Persons with income of $25,000 and over Persons with income of $35,000 and over Persons with income of $50,000 and over Persons with income of $75,000 and over Persons with income of $100,000 and over Persons with income of $150,000 and over Persons with income of $200,000 and over Persons with income of $250,000 and over Thanks in advance to all who'll state their input.

Answer: Persons with income of $10,000 and over Um... I have owned several personal desktops and one laptop making under 15,000. Not all at once of course. I mean to say each time I have purchased a new computer my income was under 15,000 gross a year. Mainly I can afford this because I do not have to pay property taxes since I rent and also because I do not have debt that requires me to use my income tax return. So I can use my income tax return towards new purchases. Dunno if this helps at all but I thought I would offer the info.

Question: What is income Tax expense a percetage of? I have an adjusting journal entry that says Income Tax Expense is .32 with no extraordinary or unusual items to consider in this calculation. What is this a percentage of? What is the calculation? I have the entry as a debt to Income Tax Expense and a Credit to Income Tax Payable.

Answer: Income Tax Expense is a percentage of Net Income. Your entry is correct. So you have to calculate Net Income Before Income Tax, skip a line, put Income Tax and the formula of .32*the cell with NIBIT, then total it and call it Net Income After Income Tax.

Question: How much Income do I need to have in order for me to be considered a legal independent person? How much Income do I need to have in order for me to be considered a legal independent person? I am over 18, and I need to be independent, how much income do I need to earn?

Answer: You must be asking a FAFSA question. First off, there is no income requirement. In order to be considered independent you MUST provide more than 50% of YOUR support. If you still live at home with parents, you will never meet this threshold.

Question: What percentage of your income do you feel is proper to pay in taxes? Add up your taxes from the Federal, state, and local income as well as sales taxes. I figure that mine are close to 50% of my income. What percentage of your income do you feel is fair to pay to the government?

Answer: I believe if every one paid 5-7% to the fed and no more than 3-4% to their sate and local it would be more than fair, and if the government couldn't make it on that then guess they need to work for free, so 9-11% in total taxes

Question: How do income taxes work in this situation? Hi there. My friend has taken a full-time nannying job for $8 an hour and I'm wondering how income taxes work in this situation. She asked the family and they are planning on declaring the income. How does this work if they are not withholding taxes?

Answer: First, they are required to withhold taxes because your friend is an employee. Assuming they refuse... and that's not unusual, then your friend will have self employment tax of 15.2% on income if it exceeds $400 in the year, plus state and federal income taxes the total income from all sources is enough to be taxable. Complicated, I know

Question: How much income is needed to be able to file income tax in IL? I made close to $4,000 last year and I have two dependents and I was wondering is it enough to file income tax and if so, what is the estimated amount I may get back? Thanks.

Answer: 1) Yes you can file if you want to get the money they took out of your pay during the year (period you worked that year). Federal witholdings is what its called. So yes for that reason. 2) Yes, you have 2 dependents and with 4000 I think you would still get the maximum EIC plus Child Tax Credits. Now this is tricky because you have to be under a certain age for the Child Tax Credit but you have to meet certain criteria for the EIC (Earned Income Credit)... 3) I could give you an exact estimate if you want and let you know exactly what you would get back but I would need more details in order to do your calculations!

Question: What are all the Income tax deductions in a Payroll from Philadelphia PA? My husband is getting paid $12/hr this payroll gross was $918. The deductions are $278.40 (child support) and all the other taxes deductions. I see everything in order but they started also holding Philadelphia local Income tax for $88.04. I did know about Federal Income tax and PA income tax but this Philadelphia taxes I never herd of them and the withold amount is almost 3 times higher than the PA one. So he is only receiving $ $344.28 this payroll. Is this right?

Answer: Many states allow cities to have local income taxes. Philadelphia does have such a tax. The rate is 4.301% of Gross Wages. The PA state income tax rate is 3.07%. There should be Philadelphia tax withheld, but 3 times the PA tax sounds high. You overall deductions, not counting child support, are about the same % of gross as mine.

Question: Foreclosure: What income determines what type of loan modification program you qualify for? My relative is in foreclosure. He's been in contact with the lender and is trying to work out a modification. They ask about income, rental property, all expenses, etc, then determine what type of program you qualify for. What determines which plan? They have said that he may not qualify for any based on his income. Is there a certain calculator they use or a certain percentage?

Answer: he probably would have had to have a LARGE income DECREASE (loss of job), etc since he got the original mortgage to have any chance of getting a modification - if it's just gotten too expensive or he had an adjustable rate that just went up - he won't get any modification

Question: What proportion of your income should be spent on car payments ? I was wondering what proportion of your income should be spent on car payments. If you should only spend no more than 25% and of your income on rent to be safe financially, I am assuming that no more than 10% of your income should be spent on car payments. Is this a good estimate of how much money I should spend on my next new car yearly?

Answer: You should save up your money and pay cash for a decent used car. No payments.

Question: What annual income is needed to buy a $325,000 house? I am planning to purchase my first home in the next 6 months. Just wondering what is the average yearly income requirements are for a mortgage loan of this amount? My annual income is just over $90,000 will I qualify?

Answer: Housing payments are typically composed of four items: Principal, Interest, Taxes, and Insurance (often called PITI). Many first time buyers are not aware of the big picture of the financial responsibility that is required when you own a home. Principal and Interest are linked together and are paid to the bank on a monthly basis. Taxes are due twice a year, and insurance is typically an annual policy. However, many borrowers opt to set aside money monthly in an "impound" or "escrow" account. This way they accumulate money to pay the taxes and insurance rather than having to come up with a lump sum when the obligations come due. As for qualifying, there are four basic areas that the bank looks at: Credit Scores, Loan-To-Value, Debt-To-Income Ratio, and Assets/Reserves. This is a bit of an oversimplification, but in your case, assuming that you have reasonably good credit, have minimal existing debt, and plan to put down at least 10%, you should qualify with no problem. There are certain details and specifics which could come into play. For example, if you borrow more than 80% of the value of the home, you will be required to also pay mortgage insurance on top of the PITI mentioned in the first paragraph. It is a good idea to consult with a mortgage broker who can guide you as to the specifics of your situation. I hope that helps and good luck!

Question: What percentage of your income should you spend on a mortgage? I dont want to overextend my budget? Im 25, I am in shock when i see my friends (same age, same entry level income) go out and buy 250k-300k houses like its nothing. They dont have 20 bucks to fill up the gas tank but they can afford 250k house??? I dont want to be in their position where 90% of their income goes to mortgage, without having any savings on hand. what is a proper mortgage payment/income ratio?

Answer: A simple rule of thumb is no more than 30% of your income to mortgage. Keep in mind that the mortgage is only one part of the expense of owning a house - insurance, property taxes, maintenance, utilities also have to be paid. Then there's your personal expenses, like food and transportation and medical and savings.

Question: How much Income do I need to have in order for me to be considered a financially independent person? How much Income do I need to have in order for me to be considered a financially independent person? I am over 18, and I need to be financially independent, how much income do I need to earn?

Answer: Financial independence means that you don't have to work (i.e. have an 'income') and you can pay your bills and maintain the life-style you've grown accustomed to. If you earn $200k/year and spend $200k/year, you are not financially independent. You still need to work or you will be in hawk very quickly. If you have $10M in the bank and spend $200k/year, you would be considered financially independent because you don't have to work and your money would still last 50 years.