Monday, February 10, 2020

Individual income tax. USA Indiana state laws Research Paper

Individual income tax. USA Indiana state laws - Research Paper Example The taxpayer participates in racecar driving on mini circuit. The car is hers and she is her own mechanic. She lost money during the first two competition years. Taxpayers often receive gifts support the products of racing. The question is whether how the deductions will apply to the swimming pool, the gift, the office, the losses she experienced in racing. It also extends to the treatment that the taxation to the gifts which they receive. Summary of Issues The issue in this scenario is the application of taxation and deductions on incomes according to the Indiana taxation law. It seeks to identify the provision of the taxation law in determining what constitutes taxable income and valid deductions. This is in recognition of the fact that not all assets and incomes are taxable and not all expenses are considered as valid for deduction. The taxation law on income taxes in Indiana recognizes Taxable benefits as any income that is earned from professions or daily business occupation. Th is is an important information in the preparation of income tax returns. The incomes and benefits in this issue include: The salary of the taxpayer Gifts from Racing The issues or the items to be considered for deductions include: Loss of Money in competition Installation of Swimming Pool Repair of the Car Office Space Used For Work Summary of Conclusion Taxable income The salary of the Taxpayer The Federal Tax laws consider all salaries from employment are automatically valid for taxation. The second major form of income is from businesses or other professional occupations that earn regular income. Gifts from Racing The gifts from racing are a form of regular income that the taxpayer has to declare in the return and include in the taxable income. Taxation applies to the gift. The law states that any citizen, who earns money from lottery or gifts, will add them to the taxable income. The racing gift is therefore a taxable income in the Indiana tax return. The US Federal return refer s to them as other income. Deductions Loss of Money in competition According to the Law in Indians, any lost income will be considered as exemption from taxation, if indeed the government investigators have evidences that she lost the money. The investigation proceeds to confirm the status of the losses such that whenever the taxpayer recovers the lost funds, then she will have to include the lost money to the taxable income and pay the full tax. If the amount was a form of assistance or support for any issue, then it will be a legible deduction on the Indiana tax return. In the IT-40 Schedule for the Federal tax return, any form of state tax that is recovered has to be reported in a separate column. There is another column for the deduction recovery for every itemized deduction in IT-40PRN. You may be able to deduct up to $3,000 of the rent paid on your Indiana home. Installation of Swimming Pool The swimming pool was a necessity and the doctor recommended it. This is an added resp onsibility to support the life of the taxpayer. It has to be deducted from the income tax just like the long-term commitments such as insurance and mortgage. Repair of the Car Because the taxpayer repairs his own car, it does not affect the taxation scale. There is no financial implication or economic influence. Office Space Used For Work The use of office for work, the responsibility and the taxation fall on the taxpayer. She will also require to link with the employer and

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