by Kristin P. Sinclair – A Accu Tax – October 1, 2018 – Rock Hill, SC – Charleston, SC
The IRS describes taxable compensation in general terms as what you earn from working.
This includes, wages, salaries, tips, professional fees, bonuses and other amounts you receive for personal services. We are familiar with these traditional concepts of taxable compensation.
Let’s expand this conversation further to include the concept of the Barter economy of being paid for services rendered. You have a business venture and are self directed, possibly self employed. You have the ability to determine that instead of being paid in a more traditional monetary value for the work you complete you are willing to accept Widgets valued equal to what can be utilized to further your future work.
You have determined that the Widgets value is equal to the work completed if paid in more traditional monetary value. You have been compensated in general terms for work completed. This value is to be included in your taxable compensation, and you in turn have a tax liability for the compensation and factor in your cost of doing business just like you would if you had been paid in a more conventional monetary fashion.
Let’s expand further the conversation to include the concept of Treasure Trove. You find Treasure. You are able to prize this treasure for its value to you and the conventional value of this treasure. Whether you convert this treasure into a monetary value, or you hold this treasure in a vault, you have a taxable value added to your taxable income. This however is not necessarily an example of self employed income but taxable all the same. Once you have acknowledged and paid the tax liability you at that point have a cost basis on this treasure you have found.
Let’s expand further the conversation to include the concept of scholarship income. Your student has excelled and has been awarded scholarships that exceed the cost associated with the cost of the education during the annual period. Your student does have taxable income realized as a result. It could be tempting for your student to use all of that additional money to pay for lifestyle choices, but since a tax liability exists it would be prudent to account for this obligation.
www.IRS.gov is a fabulous resource for more information. And / or consult your tax advisor.
Updated in Rock Hill, SC and Charleston, SC by Kristin P Sinclair A Accu Tax 803-329-0615