The Tax Questions Blog

Archive for June, 2010

Question: Are corporate compensatory damage settlements taxable?

My company recently negotiated a settlement with a subcontractor for damages resulting from his failures to properly and timely complete a project. The settlement amount was less than the actual direct damages. Moreover, we had claims for intangibles for which we will not be compensated in this settlement. We are an "S" corporation and account on an accrual basis (products completed).

1) Must we pay taxes on these compensatory dollars?

2) Are there any pitfalls to avoid in the wording of our final settlement agreement in order to avoid taxes?

Answer: Yes, this settlement is taxable income. If you had business expenses, claim on your tax return.

Settlement for injury is not taxable. If it is for lost wages or interest, it is taxable. Read about settlement taxes http://taxipay.blogspot.com/2008/08/us-income-tax-topics-1.html

Deadline to protest property taxes looming

Property owners in Sandoval County have until Friday to protest their property taxes evaluation.

MeltDown #475 EMERGENCY ECONOMIC STABILIZATION

Question: foreign income, has to be declared? is it taxable here in US?

I have brought to the states money, via bank transfer; this money is to support my family, the amount is around 5 times the income my wife and I have done here in US in this 2009; this income is derived from savings and business derived profits, and, of course, it has paid income tax locally in my country. The question is, do I have to report this money to the IRS? should I consider it taxable income? and, what are the risks of not reporting it, if it's mandatory to do it? I'll appreciate any knowledgeable advice

Answer: On your return, you MUST report your world wide income. If you paid taxes in the foreign country, you will claim credit for taxes paid in the foreign country by filing Form 1116 or can file form 2555 Foreign Earned Income Exclusion. Even if you have a filing requirement, the chances are you will not pay any U.S. tax or pay very little U.S. tax.

Another filing requirement is Form TD F 90-22.1.

Business, financial representatives cautiously optimistic about economy

WASHINGTON COUNTY At long last, Washington Countys economy appears to have turned a big corner in a healthy direction.

AMERICA IN CRISIS: MANY PROBLEMS, YES...BUT, SOME SIMPLE SOLUTIONS

Grant PUD firm on Crescent Bar

CRESCENT BAR — Crescent Bar Island leaseholders Wednesday announced a proposal to increase their lease payments and expand public recreation on the Columbia River island in exchange for new 40-year leases. But Grant County PUD commissioners, who’ve already approved the islanders’ ouster by June 2012, are standing firm.

Emeritus Newsbrief Unemployment Extension, Flu, credit reports, November 3 2009

Question: Can the taxable income from investment interests &dividens be offset by capital loss?If yes, any limitations?

Answer: You can use up to $3000 of capital loss per year to offset other income after the loss is netted against any capital gain. Any remaining capital loss will carry forward to the next year.

The Bank-Loan Rush is Coming

Protection from rising rates won't be cheap once the crowds arrive.

MeltDown #664 EMERGENCY ECONOMIC STABILIZATION

Question: How does somebody end up owing the IRS money?? ?

I know its from owing tax money, obviously! But I have a part time job and taxes are deducted from my pay check automatically. In the movies and on tv shows or in those annoying infomercials, I hear people say they owe the IRS tens of thousands of dollars! how does somebody get to owe that much, or any at all?!?!

Answer: Usually it is caused by the sale of a big asset...a business...a stock portfolio...and the gains made are taxable and the people choose not to pay the tax. Other times...people take income without having taxes withheld..and the IRS knows about it. You should be fine if you have withholdings, and your main source of income is from wages

Corrections and clarifications

The following corrections and clarifications have been published by USA TODAY.

Multiple Places IRS Cutting Edge Tv Show MTV