What Is Ordinary Income?

Ordinary income is a term used in the United States to describe the income earned from certain activities that are not categorized as capital gains or investment income. Ordinary income includes wages, salaries, tips, commissions, and other forms of compensation received for work performed. It also includes interest income from savings accounts and other interest-bearing … Read more

Annualized Income.

Annualized income is the total income that an individual earns in a year. This includes income from all sources, including wages, investments, and other sources. What does annualized salary mean? Annualized salary means the total amount of money that a person earns in one year. This includes all forms of income, such as wages, salary, … Read more

The tax year is the year in which income is taxed.

For most people, the tax year is the same as the calendar year. The tax year ends on December 31. There are two types of tax years: the fiscal year and the calendar year.. The tax year is the yearly period used for calculating taxes. It usually runs from January 1 to December 31, but … Read more

Vertical Equity Definition.

The principle of vertical equity states that people with a higher ability to pay taxes should pay more taxes than those with a lower ability to pay. The ability-to-pay principle is the most commonly used basis for determining who pays how much in taxes. There are two main theories of vertical equity: the benefit principle … Read more

1099-MISC form: what is it and what is it used for.

. What is the 1099-MISC form? The 1099-MISC form is a tax form used to report miscellaneous income. Does a 1099 mean I owe money? The IRS Form 1099 is issued to taxpayers who have received income from sources other than their regular job or salary. This includes interest income, dividends, capital gains, rental income, … Read more

Adjusted Cost Base (ACB) Definition.

The Adjusted Cost Base (ACB) is the cost of an investment adjusted for capital gains or losses. The ACB is used to calculate the capital gain or loss when an investment is sold. The cost of an investment includes the purchase price, plus any commissions or fees paid. If the investment is a security, the … Read more

Form 8689: Allocating Individual Income Tax to the U.

S. Virgin Islands. Form 8689: Allocating Individual Income Tax to the U.S. Virgin Islands Can I efile with 8689? Yes, you can efile with 8689. Does the U. S. Virgin Islands tax Social Security? Yes, the U.S. Virgin Islands taxes Social Security. However, the tax rate is only 3.84 percent, which is lower than the … Read more

What Is Earned Income?

The IRS defines earned income as “wages, salaries, tips, and other taxable employee pay,” as well as “net earnings from self-employment.” In order to qualify as earned income, the money must have been earned through active work, rather than passive income sources such as investments. There are a few exceptions to what is considered earned … Read more

Income Splitting.

Income splitting is the process of allocating income between family members in a way that minimizes the overall tax liability. This can be done through a variety of methods, including: -Transferring income-producing assets to lower-income family members -Setting up a family trust -Estate planning Income splitting can be a complex process, and it’s important to … Read more