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The answer is no. Welfare and other governmental benefit payments are usually not included in your income and are not taxable.
Notes…
If you are part of a work-training program through a state welfare agency, the income you receive does not need to be reported as long as the total is less than the welfare benefits you would have received otherwise. However, if the payments you receive are more than the benefits, you need to include the entire amount as part of your wages and that amount is taxable. Make sure you file so that you don’t have Unfiled Tax Returns.
Alternative trade adjustment assistance (ATAA) payments should be included on your Form 1040 as other income and yes, they are taxable.
If you have a disability, compensation you receive IS taxable, excluding any amount you receive for training and rehabilitation because of your disability.
Disaster relief grants should not be included in your taxable income as long as you have not already received benefit by deducting casualty losses on your return.
Disaster mitigation payments are not taxable and should be excluded from your income. Make sure you report correctly to make sure you don’t have any Back Taxes.
Qualified disaster relief payments can be excluded from your income. You may only exclude the amount to the extent that it paid any expense not covered by insurance. Unemployment assistance payments under the Disaster Relief and Emergency Assistance Act are taxable as unemployment. Qualified disasters include:
* Disaster resulting from a terrorist attack or military action
* Any federally declared disaster
* Disaster determined as catastrophic by the Secretary of the Treasury
Qualified disaster payments are:
* To pay reasonable and necessary personal, family, living, or funeral expenses
* To pay reasonable and necessary expenses for the repair of your home or replace the home’s contents
* By a federal, state, or local government to promote the general welfare after a qualified disaster
* By a business under license by a regulatory body (common carrier) that transported goods or people because of the death or physical injuries incurred because of a qualified disaster
Home Affordable Modification Program (HAMP) Payments are not taxable.
Payments for mortgage assistance under section 235 of the National Housing Act are not taxable. However, interest paid on the homeowner’s mortgage by the program cannot be deducted like it normally would be.
Grants to Indians under the Indian Financing Act of 1974 are not taxable.
Medicare benefits are not included in the beneficiary’s income.
Food benefits received under the Nutrition Program for the Elderly are not taxable. The income you receive from working for the program is taxable and has to be included in your income, even if you are also a beneficiary of the program.
Replacement housing payments are not included in your income, but should be included in the basis of the property. Relocation payments and home rehabilitation grants are also not to be included in your income.
Old-age, survivors, and disability insurance benefits (OASDI) paid to you are not included in your gross income.
Payments made by a state to reduce its resident’s expense for winter energy are not taxable.
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Tags: Unfiled tax returns
Posted in Taxes · June 12th, 2010 · Comments (0)
Making sure that you meet your tax liabilities is something that you need to seriously consider and plan for before you start working as a freelancer or contractor. Failure to have a proper system in place could see you being hit with a big, unexpected, tax bill, and possibly even a fine too. As well as paying the right amount of taxes, you need to make sure that the system that you opt for does not make it difficult for your clients to pay you.
Your choices are to set-up a limited company or to operate under what is called an tax umbrella company. Setting up a limited company, in which you are the director and only shareholder, is the most tax efficient way of working, and means that you can claim back a wider range of expenses, such as equipment and software costs.
As you would expect though, there are lots of legalities and paperwork involved with setting up a limited company. There is the cost to factor in too; it is not a cheap thing to do. As well as paying to register the company, you will also have to pay for a solicitor and an accountant. If you would prefer to avoid the hassles involved, and to focus on simply making money, then a tax umbrella company is what you need.
If you use the services of a tax umbrella company, you enter into a contract with them and effectively become a PAYE employee again. However, you get the benefits of being an employee, without the hassles. Of course, the umbrella company cannot tell you what to do, but for you they will look after your invoicing, payments and tax contributions.
The tax umbrella company system is fairly simple to use, and you can have everything set-up within a few days. Once you are in their system, you will get paid from them every couple of weeks or every month, with the amount being whatever your clients have paid for your services, minus your taxes and the fee that you have to pay the umbrella company. You should only have to pay the umbrella company a set monthly fee, and not a percentage of your earnings.
Deciding which tax umbrella company to use can be a bit of tricky process, as some of the less reputable ones try to charge you a percentage of your earnings, or make claims that are false. One false claim, which is unfortunately not that uncommon, is that if you sign up with a particular company they will give you ‘special dispensations’, implying that you can claim more expenses by using their services; however, as any accountant will tell you, these claims are untrue, and expenses are either allowed or disallowed according to taxation laws, and not at the discretion of the company that you use to calculate your payroll.
Find Out More – ir35 Umbrella
Tags: Business, finance, tax, tax umrella company
Posted in Taxes · May 19th, 2010 · Comments (0)