What Income Is Nontaxable?

Generally, you are taxed on income that is available to you regardless of whether it is actually in your possession, but there are some situations when certain types of income are partially taxed or not taxed at all.

Here are some examples of items that are NOT included in your income:

• Adoption expense reimbursements for qualifying expenses
• Funding of your Health Savings Account (HSA) with a one-time direct transfer from your qualified individual retirement plan (Roth IRA or IRA, but not an ongoing SEP IRA or SIMPLE IRA), an Archer MSA, health reimbursement account (HRA), or health flexible spending account (FSA), but not from an ongoing SIMPLE IRA and SEP IRA
• Child support payments
• Gifts, bequests, and inheritances
• Workers' compensation benefits
• Meals and lodging for the convenience of your employer
• Compensatory damages awarded for physical injury or physical sickness
• Welfare benefits
• Cash rebates from a dealer or manufacturer

Here are examples of items that may or may not be included in your income:

• Life Insurance. If you surrender a life insurance policy for cash, you must include in income any proceeds that are more than the cost of the life insurance policy. Life insurance proceeds paid to you because of the death of the insured person are not taxable unless the policy was turned over to you for a price.
• Scholarship or Fellowship Grant. If you are a candidate for a degree, you can exclude amounts you receive as a qualified scholarship or fellowship. Amounts used for room and board do not qualify.
• Non-cash Income. Taxable income may be in a form other than cash. One example of this is bartering, which is an exchange of property or services. The fair market value of goods and services exchanged is fully taxable and must be included as income on Form 1040 of both parties.

Please contact us if you'd like more information concerning the taxability and nontaxability of income items.

Gift Taxes

In 2011, if you give any one person gifts such as cash or property valued at more than $13,000, you must report the total gifts to the Internal Revenue Service. You may have to pay tax on the gifts, but the person who receives your gift does not have to report the gift to the IRS or pay gift or income tax on its value.
Gifts include both cash and property, including the use of property, without expecting to receive something of equal value in return. For example, if you sell something at less than its value or make an interest-free or reduced-interest loan, you may be making a gift.
There is a lifetime maximum of $1 million and there are some exceptions to the tax rules on gifts. The following gifts do not count against the annual limit of $13,000 in 2011:

·        Tuition or medical expenses that you pay directly to an educational or medical institution for someone's benefit

·        Gifts to your spouse

·        Gifts to a political organization

·        Gifts to qualifying charities (also deductible on your tax forms for the value of the gifts made)

If you are married, both you and your spouse can give separate gifts of up to the annual limit of $13,000 each or a total of $26,000 in 2011 to the same person without making it a taxable gift.
If you're confused about gift taxes or need more information,we can help clear up the confusion. Contact our office today.

Protect Your Business With The Right Insurance

Starting a business is expensive and the capital that you've poured into your company can disappear in an instant if a major weather event damages your offices or one of your products injures someone.
Having the right kind of insurance is critical to your business and multiple insurance policies should be in place before you even open your doors for business. And, they should be reviewed every year or when a business change occurs such as stocking new products or moving to a new location.

Commercial Business Insurance

Commercial Property Insurance policies are either all-inclusive or risk specific and protect your office and its contents from damage caused by natural disasters, fires, or vandalism.
Product Liability Insurance is necessary if you manufacture or sell products. Product Liability Insurance safeguards you if a product defect causes injury to someone.
For protection against lawsuits related to negligence claims, you need to consider both General Liability Insurance and Professional Liability Insurance as well.
Other types of insurance your business might need include:

• Coverage that protects Directors and Officers from personal liability
• Key Executive Life Insurance
• Business Interruption (covers lost profits and expenses)
• Commercial Vehicle Insurance
• Website Insurance (protects you from legal claims)

Employer-Related Insurance

Workers' Compensation Insurance (administered by individual states) and Unemployment Insurance (under certain conditions) are mandatory in the United States. Some states require employers to provide other types of insurance. For example, if any of your employees are located in California, Hawaii, New Jersey, New York, Puerto Rico, or Rhode Island you will be required to provide Disability Insurance. Disability Insurance is a benefit provided to employees who are unable to work because of illness or injury.
Employers are not required to provide Life, Medical, and Dental Insurance for employees.

Don't under-insure, but don't over-insure either.

Some Tips:

• Assess your liability risk honestly and thoroughly.
• Ask your lawyer for advice.
• Get quotes from several companies.
• Talk to your insurer about how you can minimize risk and premiums.

Your insurance company will be your ally if you encounter legal problems because of an accident or injury that happens to someone on your property, to an employee doing business for you, or if a service you provide causes harm to someone.
Avoid lawsuits by making sure you have the right insurance for your business.