In recent years, the economy has been having its share of ups and downs. When businesses and private citizens want to secure financing from financial institutions to make large purchases, the economy can greatly influence the bank’s willingness to loan funds. In an unknown or down-turned economy, the installment sale lends itself as a great alternative option. An installment sale occurs when property is sold with at least one payment being made in the year of the sale, and at least one payment being made in the tax year after the sale is completed. Generally, the buyer will make regular payments to the seller to complete the debt owed on the sale. This is mostly done in the real estate environment but may also transpire in business sales as well. To qualify under the IRS definition, the property sold must be something other than publicly traded securities, and the seller cannot be a dealer of that particular piece of property.
Most of the time, children are considered to be an extension of their parents when it comes to legal application until the age of majority. Therefore, many taxpayers are surprised to learn their child is a separate taxpayer, even as a minor. If your child has enough income, he or she has an obligation to file a return and pay the tax. In some cases, you may include their income on your tax return; in others, they’ll have to file their own tax return, or you will have to file a separate return on their behalf. Whether this is required depends on both the amount and source of the minor’s income.
“You should sell those.” It’s a phrase many people have heard when showing someone their crafts. When does a hobby become a business? Is it when you first start selling your items? Is it when you first turn a profit? When can you start deducting expenses against the income?
In recent years, raising money online through third-party backers, or crowdfunding, has grown in popularity. Originally utilized mostly by musicians, filmmakers and for other creative endeavors, it has now become a more widespread method of raising money for a trip, medical expense, or startup, and is often a quicker and easier alternative than conventional fundraising. Often the creator of a campaign puts little thought to the tax ramifications before launching and collecting the funds. With this increase in utilization, the business of its taxation has become an increasing question. While Congress and the IRS have not addressed crowdfunding income specifically, applying standard tax principles and common sense may help when talking through the issues surrounding taxable crowdfunding income and deciding how to report and pay taxes on it.