Tag: taxable income

Posted on by Jan Roberg

5 Things You Probably Didn’t Know About Santa’s Tax Return

 

5 Things You Didn't Know About Santa's Tax Return

 

What about Santa’s taxes?     Here’s a few things I bet you haven’t thought about before.

1.  Given that Santa travels about 75 and a half million miles a year (mostly on December 24th) his mileage deduction (at 54.5 cents per mile in 2018) is $41,147,500.

 

2.  Reindeer are depreciated over a period of 7 years.

 

3.  North Pole elves are considered employees and receive W-2s.   Elves outside of the North Pole are considered contract labor and receive 1099s.   (There are people who work as “elves” outside the North Pole that work for other organizations–like at the mall, who receive W2s, but they are not real elves and are not employed by Santa himself.)

 

4.  Because the elves live at the North Pole for the convenience of their employer, and since living at the North Pole is a condition of employment, elf lodging is not taxable to the elves.

 

5.  Santa doesn’t actually make any money from his toy distribution operation.  Most of Santa’s income comes from royalties from his guest appearances in movies, books, and television commercials.

 

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Footnotes:

1.  Santa’s distance traveled:  The Physics of Santa,  http://www.daclarke.org/Humour/santa.html

 

2.  Reindeer depreciation:  IRS publication 225 Farmer’s Tax Guide

 

3.  Elves are employees:  Common Law Rules of employment, http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Independent-Contractor-Self-Employed-or-Employee

 

4.  Elf housing:  IRS publication 15B  Employer’s Tax Guide to Fringe Benefits

 

5.  Santa’s income from royalties:   https://en.wikipedia.org/wiki/Royalty_payment

Posted on by Jan Roberg

Is it Taxable?

Is it taxable?
Click here for more Late Show.

 Have you ever watched the David Letterman show when he does the “Will it float?” routine?  They pick some ridiculous item and drop it into a huge tub of water to see if it will float.  It’s probably the singularly most stupid thing on television, but I can’t turn it off.  I don’t think they do it anymore, but I loved it when they used to have it.   As a child, my best friend and I would fill up the sink and test all sorts of stuff to see if it would float or not.  I guess Dave was just doing the same thing (on a much bigger scale!) 

Anyway, that’s how I feel about taxable versus non-taxable income.  Will it float?  Do I gotta pay taxes on the money or not?  For me, most of the time, I already know the answer, it’s what I do for a living.  But there’s always some new challenge, something I haven’t seen before.  Figuing out if various types of income are taxable or not is my personal little “Will it Float?” contest.  And let’s face it; I always like to find money that you don’t have to pay taxes on.

Here’s a list of some of the things you do not have to pay taxes on:

  • Child support payments
  • Gifts, bequests and inheritances—you may have heard of estate taxes, but if Uncle Joe dies and leaves you cash money, you don’t pay tax on that.  If Uncle Joe dies and leaves you his IRA, those distributions are taxable, it’s different from just being left cash.
  • Workers’ compensation benefits
  • Meals and lodging for the convenience of your employer – let’s say your boss sends you to Chicago for a business trip and you put the trip on your credit card.  Your boss reimburses you for your hotel stay and your food, you don’t pay tax on that.
  • Compensatory Damages awarded in a lawsuit.  Compensatory damages are to “make you whole.”  Let’s say you sued your neighbor because he ran over you with his car.  If the damages awarded to you are to cover your hospital costs, that would be compensatory damages and they wouldn’t be taxed.  If you sued for lost wages because you couldn’t work, that would be a different type of damages and that part of your lawsuit award would be taxed.  I’ve worked on tax returns dealing with lawsuits that awarded several different types of income from damages.  We’d have to split them into the correct categories for tax purposes.
  • Welfare benefits are not taxed.
  • Cash rebates from a dealer or manufacturer.
  • Adoption expense reimbursements for qualifying expenses are not taxed either.

Some things are kind of iffy, they’re taxed in some cases and not in others.  Here are some examples of “maybe yes, and maybe no.”

  • Life insurance- if somebody dies and you are paid death benefits, that’s not taxable.  If you surrender a life insurance policy for case, any proceeds that are more than what you paid for the policy will be taxable.
  • Scholarship or Fellowship Grants- If you are a degree candidate, then you can exclude from your taxable income amounts that you receive as a qualified scholarship.  If you get one of those super scholarships where they pay for your room and board, that doesn’t qualify as tax free and you will be taxed on that part.

Most other items count as taxable:  wages, salaries, tips, unemployment, self employment, pensions, interest, stock sales, etc.

There’s an IRS publication that goes into complete detail of what is and isn’t taxable.  It’s 43 pages long and it goes into some serious detail over what is and isn’t taxable.  For example:  did you know that death payments for astronauts dying in the line of duty after 2002 are not taxable?  That one was new to me, I just learned it now trying to pick up the link to the website.  The alphabetical list of types of income and whether it’s taxable or not begins on page 31.  http://www.irs.gov/pub/irs-pdf/p525.pdf

When in doubt, it’s probably taxable.  There’s actually a line in the tax code that says, if something isn’t specifically listed in the tax code as being not taxed, then it is taxable.  (They don’t actually phrase it that way, to be honest, if you read the actual paragraph you may not even know what they’re saying.  I took some liberties with the language, but the meaning is head on.  If you discover a new type of income, and there’s no mention of it anywhere, then by default the IRS taxes it.