IRS Tax Relief

There are tons and tons of separate and different (but no less important) types of business income – and surprise surprise, almost each and every single form of business income is taxable.

Just like the IRS taxes individual income from regular jobs, it also taxes businesses for the amount of money that they collect. Just like any individual can reduce their taxes by using deductions and credits, a small business can too.

Before starting your business decision making engine, first we should be certain that we are all on the same page with what the tax code means with the word “income”. With the exception of a few cases that we’ll discuss below, the IRS doesn’t care if you get your money from someone else paying you a salary or as income from a business you operate, or if you collect interest on investments; if you are making money it is taxable to you as an individual.

In reality, a better question for getting your head around small business taxes is understanding “What is gross income?” The tax code almost always talks in terms of gross income, so it’s important that you do too. Quoted, it reads “Except as otherwise provided gross income means all income from whatever source derived.” That’s just about as broad as it gets, covering everything you’ve already thought about (and leaving room for everything you haven’t thought about).

Goods and services – ‘Gross Income’ doesn’t have to be monetary, it can also be in the form of goods or services received. These must be included in the list of taxable income items because they must be taxed as income.

If you exchange goods or services for the same, the fair market value of the items in question should be used to define it’s income, and included on your tax report to the IRS. Of course we all know a lot of bartering goes on and the IRS doesn’t ever get to know about it, but getting away with it doesn’t make it anymore right. Anything that would be considered ‘of value’ that you personally or your business gets is considered by the IRS to be income, unless it falls specifically within our list of small business tax exclusions. These exclusions are the only way to take that taxable income out of the taxable income pile, so to speak.

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