There are certain tax rules which have been laid down by IRS regarding the money you send or receive from your loved ones or the additional amount you receive as part of odd service job such as
- Going with your neighbor’s dog for a morning walk
- Serving yourself as part of house cleaning
Well, IRS expects you to report the money while Tax filing online, since it is considered as an income, irrespective of the fact whether you have got any one of the following forms, during the completion of the year
- W-2 form
- 1099 form
Let’s now know the rules surrounding cash gifts:-
You don’t have to report IRS about cash payments when done between individuals
You don’t have to report those payments in tax filing forms than aren’t gifted to you. For example, if you have done the payment for the services where someone took your dog for a stroll or mowed a lawn etc.
But rules are different when you work as part of a business entity and you happen to pay the service providers. There is a 1099-MISC form if you have paid in excess to $600 in a year. You have to intimate the IRS with a form’s copy.
It is important to be well aware of Cash tax rules be it giving or receiving money, as IRS regulations are bound on all. To be at a safer side, it is important to be well aware of the IRS rules and regulations.
You have to report income, even though if it is in cash
If you have received the money in cash as an income, you need to report it in the federal tax forms. This basically means that any sort of money you have got whether it is helping your neighbor’s dog or house cleaning should be reported to the IRS.
Report the excess gifts but that doesn’t mean you have to do tax payment
In the event, a person receives beyond $15,000 which has been set as a limit by IRS, then form 709 has to be filed as a way to intimate the excess gift. Here, the said person need not pay tax. Your timely knowledge and assistance help you to file taxes diligently. Likewise, know the process, means and ways of how you can be eligible for tax refunds too.
IRS wants you to report payment of $2,100 or more done to household
It all depends on the extent of work in which the person has been dedicated to you. For example, if he/she is part of doing all your house-hold chores and remains throughout the day. This basically determines, the extent of work he/she has been assigned to. If he/she is exclusively working for you, then it will be considered as a household employee. If you are paying $2,100 or beyond that, then the same rule will apply which is regarded with a company and its employee.
The above post will make it easy for you to be aware of the tax-related scenario laid down by the IRS.