Understanding Gross Income: Expert Advice from Michael S. Gawel, CPA, JD
By Michael S. Gawel, CPA, JD
I was at Wilbur’s Friday night enjoying a cold PBR and someone asked me, “Mike, what Income do I have to report on my Tax Return?” My simple answer was ALL. Gross income for Federal Income Tax purposes means all income from whatever source, except if specifically excluded. That includes wages, business income, interest, rent income, royalties, dividends, alimony, annuities, pensions and forgiveness of debt. What is not income? Gifts, inheritances, return of capital, governmental assistance and strike and lockout benefits.
Wages on payment for personal services are always taxable. Wages, salaries, commissions, bonuses, percentages of profit rewards, retirement pay, pensions and any compensation are included in gross income. Compensation for the personal services of a child is included in the child’s gross income even if the compensation is or must be received by the parent. Most other types of income are also taxable. This includes tip income, pension income, unemployment, deferred compensation, interest income, dividends and sales of property. Business income or profit is also reportable and taxable. Gross receipts less cost of goods sold and expenses less expenses.
Rent income is another common source of income for residents of Niagara Falls. Commercial rents, apartment rentals or a room in the basement are all considered rental income. As a taxpayer you are allowed to deduct the expenses used to create that income, RE: taxes, mortgage interest, utilities, repairs and other reasonable expenses.
Other types of income are also included in gross income, for example, gambling income whether from the Seneca Niagara Casino or betting on the Buffalo Bills. So is illegal income such as selling weed or embezzlement.
Finally, virtual currency or crypto currency received by a taxpayer as payment for goods or services must be included in your gross income.
