| Date: | February 23, 2006 / year-entry #70 |
| Tags: | non-computer |
| Orig Link: | https://blogs.msdn.microsoft.com/oldnewthing/20060223-21/?p=32163 |
| Comments: | 12 |
| Summary: | If you're like many people, you signed up for the PayPal class action lawsuit and got around $9 for filing a claim against the Statutory Damage Fund. My read of IRS publication 4345 says that this constitutes taxable income. Note: This is just my personal opinion. Consult with your tax advisor before taking action. As... |
If you're like many people, you signed up for the PayPal class action lawsuit and got around $9 for filing a claim against the Statutory Damage Fund. My read of IRS publication 4345 says that this constitutes taxable income. Note: This is just my personal opinion. Consult with your tax advisor before taking action. As for me, I reported it. Given my previous experience with the IRS, I'm willing to fork over the $3 to avoid getting audited. |
Comments (12)
Comments are closed. |
Are you sure that getting your blog published here for free is not taxable ? ;-)
If only we could move to a FairTax like system…
Please don’t debate FairTax here! I like reading unsullied comments.
I believe income under $10 is not required to be reported. (It’s definitely true for interest and dividends)
Would I just need to be selling some software for $9 per license then, and all that income would be untaxable? :)
I didn’t know there was a personal injury suit against Paypal, I think you’re basing your opinion on a publication that is not applicable to your case.
At the same time I would agree that unless the money is for overcharging you it will be considered taxable income.
Jon: I believe that your bank or broker doesn’t report income under $10 via a statement to you or the IRS, but you’re still supposed to claim it on your taxes.
It’s a refund of your already taxed income for overpayment, not income.
That would be saying that if I bought a pair of shoes for $100, realized they charged me $120 and then got a refund of $20 that it would be income. It is not.
According to my read of form 4345, compensatory damages are not taxed, but punitive damages are.
You have to report *all* income.
One of my favorite IRS quotes:
"Illegal income. Illegal income, such as money from dealing illegal drugs, must be included in your income on Form 1040, line 21, or on Schedule C or Schedule C-EZ (Form 1040) if from your self-employment activity." — IRS Publication 17, Your Federal Income Tax <http://www.irs.gov/publications/p17/ch12.html#d0e32305>
Bribes and Stolen Property must also be reported.
pcooper said:
"One of my favorite IRS quotes: "
You might find that’s in there as a tool to use on criminals, not as any real expectation of them really reporting it.
If they discover such income on a drug dealer or theif, they can prosecute them under tax law as well as criminal.
I just want to know one thing:
How much did the lawyers involved in the settlement get taxed after they got paid?
James