Friday, September 19, 2008

US Taxation series -2

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Income-wages


There are three main categories of income:

Active income :
Income for which services have been performed.
E.G. Wages, commissions and income from businesses.

Passive income :
Income from business activities in which a taxpayer does not materially participate.
E.G. Rental Real Estate

Portfolio Income:

Income from investments.
E.G.
Dividends, interest ,royalties capital gains.

Earned Income –

Compensation for personal services rendered.
Wages, salary, Tips, Professional fess also includes Scholarships.


Unearned Income –

Basically investment type income.
Interest, Dividend , Capital gains, Pensions, Annuities


Wages mean employee compensation and it includes

fringe benefits.
bonuses.
retirement plan contributions.
stock options.

Wages are reported on Form W2, which is provided by the employer.


FORM W2