Bartering Is Income

Bartering is trading goods or services for another person's goods or services.  For example I do the tax return for the auto repair shop and they repair my car.  No money changes hands.  This is income to both sides.  I need to show income in the amount I would have charged for the tax return.  The auto repair shop shows income an amount equal to what the repairs would normally cost.  Since we both report the income, tax will be due on the sale but no money changes hands and now neither person is able to pay the tax due.

People also belong to Bartering clubs or groups.  Like with the above transaction I do the tax return for the auto repair shop.  Since I don't need my car repaired I get credits at the Bartering club.  The Bartering club moves the credits from the auto repair shop's account to my account.  I can pay my yard service person with credits in my account at the Bartering club. 

The IRS treats all bartering transactions as though actual cash was transferred between the parties.  All transactions need to be reported as income and the tax paid.  If you have large amounts of credits at the bartering club that could create a tax problem.  Money earned but no cash to pay the IRS is not what they want to hear.  Give KatTax a call before you get involved.

Are my Social Security Checks Taxable

Not many hard and fast rules for Social Security income.  If you only have social security income then it is not taxable.  The more income you have the more of your social security is included in your taxable income.  Gaming income is one of the items that forces more of your social security to be included in taxable income.  Even though you can write off the losses against the win the taxable income portion of the social security stays as taxable income.  The best approach if you have questions is give us a call at 796-1040 and we can help your figure out if any tax is due.

Good News Tax Breaks for Parents

If you have children you can take them as dependents and if they are under 17 at the end of the year you can get up to $1,000 per child in tax credits to off set taxes or be refunded to you.  Depending on your income level you may qualify for Earned Income Tax Credits (EITC).  If you have a child in day care or safe key you can qualify for child care credits.  Thinking of adopting a child.  Adoption credits will offset some of the expenses.  If you child has earned income they may need to file a return.  If they have investment income they may be taxed at your tax rate.  That is called a "kiddie tax".  That is one way the IRS tries to stop parents from putting the investments in the children's name to reduce the tax rate.  Children in college then education credits to cover some of the school costs.  Student loan interest deductions let you reduce you income by the amount of interest paid.  Health insurance through work or as a self employed person allows for coverage of your children up to age 27.  Lots of new and different things going on.  Call us and we can help.