Below are some of the FAQs we are asked most often with our attempt at providing an answer in simple English instead of tax code language. We encourage you to read the sections that interest you but to contact us if you feel the explanation does not directly address your concern.
Click any link below to drop down to the explanation of each of these items:
The alternative minimum tax is a supplemental income tax imposed by the federal government required in addition to baseline income tax for certain individuals, corporations, estates, and trusts that have exemptions or special circumstances allowing for lower payments of standard income tax. The expressed purpose of AMT is to limit taxpayers from reaping too much benefit under the regular income tax law. For purposes of AMT various deductions, exemption, income exclusions and credits for regular income tax purposes are eliminated or reduced in calculating tax under AMT.
Since many of the deductions that previously provided large deductions that caused taxpayers to be subject to AMT are no longer allowed or are limited, starting in 2018, AMT will rarely apply anymore. This predominately relates to deductions for state income taxes, real estate taxes and unreimbursed business expenses. In addition, the phaseout threshholds have increased dramatically, further reducing a taxpayer's requirement to pay AMT.
An individual generally may deduct 20% of qualified business income from a partnership, S corporation, or sole proprietorship, as well as 20% of aggregate qualified Real Estate Investment Trust (REIT) dividends, qualified cooperative dividends, and qualified publicly traded partnership income. The 20% deduction is not allowed in computing Adjusted Gross Income (AGI), but rather is allowed as a deduction reducing taxable income. There are other limitations based on income and if you are in a Specified Services Business in which the entity provides these services: health, law, accounting, financial (including investing, investment management and trading), a professional athlete, or the principal asset is the reputation or skill of the owners/employees, such as performing arts. Engineers and architects, however, are NOT included. This is currently scheduled to expire at the end of 2025.
Rental Real EstateAs part of the rules to determine if you are eligible for the 20% deduction, the IRS wants to be able to see that the rental property is maintained as a separate business. To meet these requirements, you must do the following. If you are not already doing so, we strongly suggest you start now.
A taxpayer is defined as a child for tax filing, if they are either under age 24 as of the end of the tax year and a full time student (must have attended school for 5 months or more during the calendar year); or they are under age 19 as of the end of the tax year. If a child’s income meets ALL of these conditions, the income can simply be reported on Form 8814 of their parent’s return:
If a child’s income meets ANY of these conditions, the income MUST be reported on a separate return for just the child:
Click here to enter some simple amounts into a spreadsheet to determine how to file for them. Otherwise, to keep this simple, you should give your preparer the source documents from a child under the age of 24, at the prior year end, if they have any of the following:
There are many rules about which education credit or deduction to take: the American Opportunity Credit (AOTC) or the Lifetime Learning Credit. There are also various limitations as to your income limit, etc. In general, a married filing joint couple cannot take the credit if their income is greater than $180,000 ($90,000 if single). If a parent cannot take the credit, it MAY be beneficial to have the child take the credit but this can only be done if they are filing a tax return due to the income requirements described in the section above. We will be happy to evaluate each of your these situations at no additional charge.
Estimated taxes are required when your annual withholding from your paychecks/bonuses/stock options/restricted stock vesting will not be equal to or more than the required amounts for federal and state purposes. For most state purposes, the required amount is the lesser of 90% of this year's tax or 100% of last year's tax. For federal purposes, the required amount is the lesser of 90% of this year's tax or 110% of last year's tax. This 110% requirement changes to 100% if your AGI was less than $150,000 in the prior year.
Many clients ask if they "must" pay in estimated taxes. The code does mandate these payments but if you prefer not to make them, you may be subject to penalties. It is up to you. To avoid these penalties, you can either increase your withholding by contacting you HR department or pay in the additional amounts using federal estimated tax coupons or state coupons (click here for federal and Illinois coupons). If paying in with coupons, you must pay the extra taxes either in four equal quarterly payments or in the quarters you earned the extra income. The due dates for each estimate, and the related time frame to evaluate your underwitholding are as follows:
4/15 (for income from 1/1 - 3/31);6/15 (for income from 4/1 - 5/31);9/15 (for income from 6/1 - 8/31);1/15 (for income from 9/1 - 12/31)
If you are taking withdrawals from retirement plans (i.e. IRAs, etc.) you can increase your withholding to reduce the need to pay estimates. In order to calculate the extra amounts to be paid in you must determine the following 3 numbers:
You do not need to know how much you withheld for FICA, Medicare or anything else. "Gross taxable income" is determined AFTER deducting 401k contributions and pre-tax medical deductions possibly allowed by your employer.
We can help you with this calculation but ONLY after you provide us with the 3 amounts indicated in the paragraph above. If you choose to have this evaluated throughout the year, you would have to provide us these amounts for the specific timeframes indicated in the paragraph above as well.
Current year limits can be found in our comprehensive document. If they will be turning 50 during the year, they can put away another $6,000 as part of the "catch up" provision. These same limits apply if your employer also offers a Roth 401k. You can contribute to both types of plans, but combined they cannot be more than these maximums. If your employer allows you to continue to contribute to your 401k, after you contribute these maximum amounts, they are referred to as "after tax" contributions. The IRS allows these "after tax" amounts to be rolled into a Roth IRA upon you leaving the company. These amounts would then grow tax free and there are no RMD requirements. All distributions from a Roth IRA are tax free. If you have questions about these concepts, please contact us as early in the year as possible.
Any person, and their spouse (if any) are allowed to gift any other person up to an IRS determined amount each year, before December 31. See our comprehensive document for the annual limit. There is no limit to the amount of people a donor can give this annual amount to. This amount will NOT be considered taxable income to any recipient and is NOT tax deductible by the donor. No paperwork is required to be filed by either party. In addition, a donor may pay an unlimited amount on behalf of another person directly to a medical provider or an educational institution without these amounts being counted toward the annual limit. These amounts, however, must be paid directly to the provider and should not be a reimbursement to your donee. Gifts to a spouse do not count as a gift either.
If, however, a donor wishes to gift more than the annual amount allowed to any one person, the donor has the right to gift up to an "additional lifetime amount" by filing a Form 706 Gift Tax Return. By doing so, the donor is reducing the amount they can leave at death that would be tax free. See our comprehensive document for the "additional lifetime amounts" which are indexed for inflation. By filing this Gift Tax Return, the gift will still NOT be considered income to any recipient and is NOT tax deductible by the donor. For estate tax purposes, this is also the amount that can be left at death with no estate tax. Most states have different levels of estate taxation. Please contact us to learn more about this calculation in your state.
If you plan on gifting more than the annual limit to any one recipient, contact us to help you in preparation of the Form 706 Gift Tax Return.
A health savings account (HSA) is a tax-advantaged medical savings account available to taxpayers in the United States who are enrolled in a high-deductible health plan (HDHP).
This recap is NOT intended to be all inclusive. If you have a specific question about your own particular situation, please contact GCD to discuss further.
Q: What deductible and out-of-pocket amounts do our health plans have to have for us to qualify (as an HDHP) to open an HSA?A: See our comprehensive document for the annual limits In MOST cases, HSA eligible plans will have no copay or drug card available until the deductible is met. Confirm with your plan administrator before opening an HSA account.
Q: How much can someone put into an HSA during a given tax year?A: See our comprehensive document for the annual amounts. If your employer only funds a portion of these maximum amounts, you are eligible to fund the difference. These amounts can be funded up to April 15th of the subsequent year, to apply to the prior tax year as a deduction. If both you and your spouse are age 55 and older, but NOT enrolled in Medicare, you can fund an additional $1,000. Once you, and your spouse if any, are enrolled in Medicare, you are not allowed to fund an HSA at all (although you can still use any accumulated funds in the account for out of pocket medical costs).
Q: How much can be with withdrawn each year?A: Up to the total amount in your HSA.
Q: How are withdrawals made?A: Amounts are either paid directly from your HSA plan (usually with a debit card) or you can be reimbursed for eligible expenses you may have paid elsewhere.
Q: What can distributions be taken for?A: Amounts can be paid for qualified medical expenses as described in Section 213(d) of the Internal Revenue Service Tax Code. The expenses must be primarily to alleviate or prevent a physical or mental defect or illness, including dental and vision. A list of these expenses is available on the IRS website at http://www.irs.gov/publications/p502/index.html. Over the counter medications cannot be paid with HSA dollars without a doctor's prescription.
Q: How do we setup an HSA?A: An HSA must be opened at a bank that offers them as a service. Check with your local bank or the bank you currently have accounts. We have had success with Inland Bank, and at the time this was published, they charged no fees for their administration.
Q: What tax forms will I get from setting up an HSA?A: The amounts that both you and an employer, if any, fund into your HSA will be reported on Form 5498-SA. The amounts you take out of an HSA will be reported on Form 1099-SA. These will not be taxable if spent on eligible medical expenses, described above.
Q: When does an HSA have to be funded?A:This can be funded up until April 15th of the subsequent year.
The IRS established a new, simplified, safe-harbor method that individual taxpayers can elect to use to determine deductions related to the business use of their home, such as a home office. The safe-harbor method does not change the rules regarding when home-related business deductions are allowed. It only provides a simplified method for calculating deductions—when they are allowed.
Properly calculated and substantiated home office deductions are allowed if part of the home is used regularly and exclusively as a principal place of business or as a place to meet or deal with customers or clients in the ordinary course of business. Employees must pass an additional test to claim deductions—the use of the home office must be for the convenience of the employer. A home office qualifies as the principal place of business if most of the income-earning activities occur there. However, a home office can also be a principal place of business if the taxpayer's administrative or management activities are conducted there, and there is no other fixed location where the taxpayer conducts substantial administrative or management activities.
The safe harbor deduction method allows an eligible taxpayer to claim a deduction of $5 per square foot of space used for qualified business use, limited to 300 square feet, with no questions asked about actual expenses and no required documentation of expenses. As you can see, however, the maximum annual safe-harbor allowance is only $1,500 ($5 x 300). Note: The safe-harbor method is not available to an employee with a home office if he or she receives advances, allowances, or reimbursements for expenses related to the qualified business use of the employee's home under a reimbursement or other expense allowance arrangement with the employer.
Taxpayers who itemize deductions and use the safe-harbor method to calculate their home-related business deduction for the tax year in question can deduct on Schedule A any allowable expenses related to the home that are deductible without regard to business use of the home. In other words, choosing to use the safe-harbor method has no impact on the taxpayer's ability to deduct qualified residence interest, property taxes, or casualty losses.
A taxpayer who uses the safe-harbor method for the tax year in question cannot write off any depreciation for the part of the home that is used as a home office for that year. The allowable depreciation deduction for that part of the home for that year is deemed to be zero. The taxpayer can switch back to the actual-expense method for a later year and resume deducting depreciation.
A taxpayer who uses the safe-harbor method for only part of the tax year in question (for example in a newly started business or seasonal business) or a taxpayer whose square footage of business use changes during the year must calculate the average monthly square footage amount, based on no more than 300 square feet for any month of business use.
The safe-harbor method is not for everyone. However for those of you with only modest home-related business deductions, the safe-harbor method may be attractive because it eliminates the need to keep records of actual expenses. Please contact us with any questions.
There are different rules depending on if the decedent passed away after December 31, 2019 or before January 1, 2020. Below are the rules for those that passed away AFTER December 31, 2019 for both traditional IRAs and Roth IRAs (unless there is a separate indication below):
For beneficiaries for a decedent that passed away prior to January 1, 2020, the laws were different. Contact us for those details as well as expanded details on any of the issues above.
Only interest paid on loans that were used to purchase investments (i.e. stocks, bond, real estate for rent or held for investment) is deductible as investment interest as an itemized deduction. These are NOT the same as mortgages to buy properties, where the property is collateral. If the non-mortgage loans were used to purchase anything personal (i.e. a primary or secondary home, car, college education, etc.) this would not be deductible at all.
IRA contributions can either be deductible or non-deductible. This depends on your income and whether or not you, or your spouse if any, are covered by a retirement plan at work. If neither you NOR your spouse are covered by a retirement plan at work, you can both put away the maximum amount, provided your total taxable compensation is at least the total amount you are putting away.
IRA and Roth IRA maximum contribution limits if under age 50 at end of the tax year can be found in our comprehensive document. If a spouse does not work, they can fund their own IRA up to these limits as well, provided the working spouse earns income in excess of the amounts being funded into BOTH IRAs.
This recap is NOT intended to be all inclusive. If you have a specific question about your own particular situation, contact us to discuss further.
See our comprehensive document for the income limits allowed that determine how much can be funded, based on whether you are in a covered retirement plan at work.
If you do not qualify for any tax deductible IRA, you have 2 other options to fund for retirement:
See our comprehensive document for the income limits to determine how much of the maximum contribution limits, indicated above, you can fund into a Roth IRA:
Below is a table to determine how IRA distributions will be taxed for federal purposes. Each state has different rules on determining taxability:
Distributions from traditional or non-deductible IRAs are subject to a 10% penalty if taken before age 59½. Below are a list of some common exceptions to avoid this penalty. Be sure to contact us to discuss these BEFORE taking any distribution where you think an exception applies.
Distributions from Roth IRAs are allowed as follows:
Income withdrawn within the first 5 years after the account has been opened has varying rules, depending on your age at the time of distribution. Be sure to contact us to discuss these BEFORE taking any distribution where you think an exception applies.
Note: there is a "backdoor" method for making a contribution to a Roth IRA, even if your income levels are too high. But in order to do this, the person doing this must NOT have ANY other IRA (traditional, not Roth) accounts. If this is the case, you can make a "non deductible" IRA contribution and then convert it to a Roth shortly thereafter. This must be reported properly on Form 8606, so please contact BEFORE you attempt any such transaction.
Here is a recap of the important aspects which may affect you:
Direct trustee to trustee rolloversThese are exempt from the one IRA rollover per year rule. You can still do an unlimited number of these whether they are 401k or IRA accounts.
Rollovers that are not direct trustee to trustee rolloversThis typically happens if you take a distribution and put it back in less than 60 days. This can now only be done once a year. Even if a you have multiple IRA accounts, you can only do this once per year. This new ruling directly contradicted longstanding IRS guidance (in Publication 590 and Prop. Reg. 1.408-4(b)(4)(ii)). If you are married, each person can do this once per year.
60 day periodAs a reminder the 60 rollover period is calendar days, not business days and generally speaking, if the 60th day falls on a weekend the IRS has ruled the following Monday was NOT satisfactory in some cases. Therefore, if it comes down to a weekend, have the rollover deposited on the Friday before the 60th day.
Many of our clients question whether they “should be taking the standard deduction” instead of “itemizing their deductions”. The simple answer is that you would always want to itemize if your Total Itemized Deductions are GREATER than your Standard Deduction. We hope this graphic below helps you to calculate this:
Mortgage interest limits: Deductible up to $750,000 ($375,000 if married filing separately) of mortgage debt, including home equity loans and lines of credit for new loans taken after 12/15/17. Home equity proceeds must be used to buy, build, or improve the home. The loan limitation remains at $1.1 million/$550,000 if the debt began prior to 12/16/17.
Note: this is a simplified summary of the federal deductions. Be sure to contact GCD Advisors for more details about itemized deductions in general.
An LLC is a type of taxable business entity. Other entity types include C corporation, S corporation, partnership and sole proprietor. The context of this question ONLY relates to either the purchase of a rental property (or conversion of an existing property to rental) OR starting a small business (usually a service business with no employees other than yourself).
The main reason to create an LLC, is to protect your other assets from any liability you may incur within these operations. Examples for a rental property may include an injury on your property, foreclosure of the property, etc. Examples in a small business may include product liability from a faulty product sold, non payment of a business expense, negligence by you regarding a consulting opinion, etc. In many cases, however, some of these risks can be covered with business insurance. You should first ask your insurance agent if they feel they can cover you for all such risks.
If they cannot cover you for such risks OR you would like additional protection, forming an LLC is relatively easy. It involves forming the LLC in the resident state and obtaining a federal ID number (referred to as an FEIN). The total cost for this is usually less than $500 initially and $150 per year for the LLC state renewal. This is a service that GCD can take care of for you, if you wish.
If you do create an LLC, you must do all of your banking and business strictly in the name of the LLC, not to be commingled with any other personal bank accounts. You will need the FEIN to open such a special bank account. Whether you form an LLC or not, all income collected and paid expenses must be reported on Schedule C or E of your federal tax return, and will then flow through to your state return as well (if you earn the income in a state that has personal income tax). A separate tax return is not required unless there is more than one owner (unlike C or S corporations which require a separate tax return no matter what). Expenses are to include anything you spend to produce the income and pay for. Aside from obvious inventory, supplies and direct costs, you can deduct a portion of your automobile expenses, based on the business ratio, or at the then current IRS standard mileage rate.
If you have any further questions about the application of an LLC to your business or rental property or would like to discuss any of the other taxable entities mentioned above, please contact us. Either way, we strongly recommend that you NOT form any type of entity without further discussions with us or any tax advisor.
These are the allowable deductions for meals and entertainment. Be sure to record these separately for your business, rental property or self-employed business.
Meals with clients, even if while entertaining - in or from a restaurant
Meals with clients, even if while entertaining - NOT in or from a restaurant
Meals provided to employees for the benefit of the employee (i.e. company parties)
If you buy/own a property to rent out, you are required to include all income and expenses on Schedule E of your tax return. The income is based on all cash received, including any deposits. The expenses can include, but are not limited to: mortgage interest (not principal), real estate taxes, insurance, repairs, supplies, travel costs you incur to maintain the property, management fees paid to an outside organization, assessments, etc. In addition, you are allowed to depreciate the property (after subtracting an allocation for land - normally 10% - 20%) over the IRS prescribed “useful” life of the property. This would be either 27.5 years (if a residential property) or 39 years (if a commercial property) and turns out to be about 2.5% - 3% of the cost after subtracting the land value. Be sure to keep track of all your income and expenses in a format that will be easiest to give to us when we prepare your return. Click here for a simple file to use to aggregate your income and expenses.
Any net income generated after netting all such properties, will be taxed as ordinary income. If however, there is a net loss on all properties, you can not deduct any losses in the current year unless you actively participate in managing the property. If you do, you may be able to deduct some or all of the loss if your modified Adjusted Gross Income (AGI) is less than $150,000. If your AGI is greater than $150,000 or you do not actively participate, you will have to carry forward the loss to a future year either in which there is net income or you sell the property. In that year, you will be able to offset any future gains by any suspended losses not previously deducted over the years. There are 3 additional exceptions which would allow for immediate deduction of losses:
Be sure to contact us before you purchase any rental properties to be sure we are addressing any possible issues and you understand all economic issues.
For accounts owned by you, not an inherited IRA, an RMD is required by December 31st in the year you turn the required age BEFORE the end of that year. This required age has changed since 2019 a few times and as of the law in place on January 1, 2023, if you were age 72 or more by 12/31/22, you should have already started your RMDs. If you were under age 71, no RMDs are required until you turn 73.
The RMD is based on the value of all your tax deferred accounts that you held as of December 31 of the prior year. Tax deferred accounts include IRAs, 401ks and annuities. It does not include a pension plan that is already paying out annual amounts. You can, however, elect to defer the first distribution until April 1st of the year following the year you turn the required age. But if you do so, then you must take 2 RMDs - the one based on the value from December 31 of the year prior to you turning the required age AND the value as of December 31 of the year prior to the April 1st. Click here for IRS Table III Uniform Lifetime Worksheet to determine what amount to divide your values by in order to arrive at the required distribution (i.e. if you are age 70, you divide your values by 27.4, yielding a distribution percentage of 3.65%).
If all of your tax deferred accounts are with one institution, contact them for the calculated amount. If you have multiple accounts, you must withdraw the percentage based on the TOTAL values but you do not necessarily have to withdraw from all accounts. If you prefer, you CAN just take the total RMD out of one account.
If you have multiple accounts and would like our help in determining the RMD, you must provide us with your birthdate and the value and account number of each account as of December 31 of the prior year. Be sure NOT to provide us with the current value, as this should be different and can yield an incorrect calculation. If you are the beneficiary of an inherited IRA, contact us for additional information. The information above does NOT apply.
One-participant plans can be for sole proprietors (including Single Member LLCs) and S-corporations with only one person getting a W-2 (the owner). They allow small business owners to have an inexpensively administered plan with great contribution/deduction amounts. A one-participant 401(k) plan is sometimes called a:
The one-participant 401(k) plan isn't a new type of 401(k) plan. It's a traditional 401(k) plan covering a business owner with no employees, or that person and his or her spouse. These plans have the same rules and requirements as any other 401(k) plan. The business owner wears two hats in a 401(k) plan: employee and employer. Contributions can be made to the plan in both capacities. The owner can contribute both:
A business owner who is also employed by another company and participating in its 401(k) plan should bear in mind that their limits on elective deferrals are by person, not by plan. They must consider the limit for all elective deferrals they make during a year.
A one-participant 401(k) plan is generally required to file an annual report on Form 5500-SF if it has $250,000 or more in assets at the end of the year. A one-participant plan with fewer assets may be exempt from the annual filing requirement.
In general, a plan document is needed to substantiate the plan and the proper provisions of the plan. In some cases, a brokerage firm MAY be able to provide you with this document but if not, we have found an inexpensive place to get these documents prepared at www.myubiquity.com/plans/singlek. We are not affiliated with this company in any way but found them to be very good.
Traditional IRAs can be converted to Roth IRAs. The conversion tax hit may be a small price to pay for future tax savings. After the conversion, all the income and gains that accumulate in your Roth IRA, and all withdrawals, will be totally free of any federal taxes-assuming you meet the tax-free withdrawal rules. In contrast, future withdrawals from a traditional IRA could be hit with tax rates that are much higher than today's rates.
Of course, conversion is not a no-brainer. You have to be satisfied that paying the up-front conversion tax bill makes sense in your circumstances. Taxes on the income from conversions are taxable in the year of the conversion. Be sure to contact us to learn more about this calculation BEFORE you do anything.
The sale of your primary residence should be reported on your tax return, even though, in most cases, there will be no tax due. The gross proceeds from your sale may or may not have been reported to you on a Form 1099. Either way, the transaction should be recorded on your return.
If you lived in your house for 2 out of the last 5 years, you can exclude a gain up to $500,000 ($250,000 if not married). To determine this gain, provide us with only the items below. These can be approximate amounts and do not have to be exact. Save any receipts for any future inquiry from a governmental agency, although not likely.
If you sold your home for less than you originally paid, plus any additional improvements, you incurred a loss. This too should be reported on your return even though you will not be able to deduct the loss. Losses are not allowed for the sale of personal assets, not used in any trade or business. If your circumstance does not follow these exact parameters (i.e. you moved due to a job change or used the house as a rental property), please contact us for a further evaluation.
These are plans that allow you to save for college with tax free growth, provided the money is used for college expenses. In general, most states have their own sponsored plans for their current residents to get some kind of tax savings for funding into these accounts. For Illinois residents, individuals can deduct up to $10,000 per tax year, on their Illinois tax return only (not federal) for contributions to an Illinois sponsored plan. Currently, these plans are Bright Start and Bright Directions. Joint filers can deduct up to $20,000. Distributions from these plans must be used for approved college expenses. Go to https://thecollegeinvestor.com/18450/qualified-expenses-529-plan/ to learn what qualifies and what does not. The TCJA liberalizes these laws to allow for federal tax free distributions up to $10,000 per year to cover tuition at a public, private or religious elementary or secondary school (K-12). This chage is permanent for qualifying withdrawals after 12/31/17. However, since 529 plans are operated under state laws, some state may not adopt this change. In general, payments for these expenses are on the honor system, until questioned. Therefore, we recommend you retain receipts for all such expenses. You can either pay a provider (i.e. landlord) directly from the plan assets or reimburse the payer after the fact. If you have any questions, please contact us.
With all the electronic fraud happening these days, we take the security of our client’s personal information very seriously. To address that, we strongly recommend (but not require) that our clients provide us with a federal AND state Identity Protection Personal Identification Number (IP PIN). Once you obtain these, we must then enter them into our tax software to allow us to electronically file your personal tax returns. This will also protect you from having anybody else ever file a tax return on your behalf, which otherwise, only requires a social security number. To do this, you must provide us with the IP PIN for your state AND a separate one for the federal return, when you send us your tax documents in February. We suggest you upload these to us for additional security.
Illinois Taxpayers OnlyClick here to enter your SS#, driver’s license number (or AGI from last year) to get your PIN. For other states, check your Department of Revenue website.
IRS (all taxpayers)Many of you have already obtained this in the past. You must obtain a new one every year though to then provide to us. For those of you that have not provided one in the past and wish to do so, click here to go to the IRS site to apply for a PIN in January
In general, income must be reported in the state the income is earned in, NOT the state where you live. The exception is if you earn income in a nearby state that has a reciprocal agreement. An example would be Illinois and Wisconsin. If you live in Wisconsin and work in Illinois, your employer would withhold Wisconsin taxes only and you would NOT have to file in Illinois. In addition, most states have a minimum amount that must be earned, to even be required to be reported. Check the various state’s websites for the current deminimus threshold for each state.
Remember these rules when adult children move away and start working in other states or college children work internships in other states. Be sure to consult with us if you are running a business and income is billed to customers that are not in your home state since different rules apply for different states and the type of income collected (i.e. services, goods, etc.). These rules are NOT the same rules that apply to how you might be required to collect sales tax. This section is only about INCOME tax.