Any income or losses that cannot be classified as passive. Nonpassive income includes any type of active income, such as wages, business income or investment income. Nonpassive losses include losses incurred in the active management of a business. Nonpassive income and losses are usually declarable and deductible in the year incurred. Nonpassive income and losses cannot be offset with passive losses or income. For example, wages or self-employment income cannot be offset by losses from partnerships or other passive activities. Conversely, nonpassive losses cannot be offset by passive income from partnerships or other sources of income in which the taxpayer is not a material participant.
An individual who mainly resides in one region or jurisdiction but has interests in another region. In the region where he or she does not mainly reside, he or she will be classified by government authorities as a non-resident. The classification itself will be determined in each region based on set circumstances such as the amount of time spent within the region during the calendar year. This classification is focused on where the person resides and does not focus on citizenship. For example, many individuals live in one state but have business in another region and derive income from sources within that region. If a non-resident generates taxable income within another region, he or she will have to file a separate tax return within the region compared to residents of that region. In other cases, a non-resident may have to pay more to go to college in a state where he or she does not primarily reside.
A state tax levied against performers whose legal residence is outside of the state where the performance is given. The tax requires that a certain percentage of any gross earnings from the performance be withheld for the state. A non-resident entertainer is an individual, partnership or corporation that entertains people for compensation by performing before a live audience in an area outside their legal residence. The non-resident entertainers' tax is different for each state that uses the tax. Missouri, for example, enforces the tax as 2% of gross earnings for a performance. California, on the other hand, required 7% of gross earnings as of 2010. Each participating state also has special requirements, such as the minimum contract amount above which the tax will apply.
A tax credit that can't reduce the amount of tax owed to less than zero. If the credit were able to reduce the amount of tax owed to less than zero, the taxpayer would be entitled to a payment from the government.Also referred to as a "wastable tax credit." Watch: Tax Deduction Vs. Tax Credit A tax credit is applied to the amount of tax owed by the taxpayer after all deductions are made from his or her taxable income. For example, before credits, if the tax owed to the IRS is $500 and the taxpayer has a tax credit of $200, the total amount owed is $300. If the taxpayer has total non-refundable credits of $600, his or her tax bill will be $0 ($500 tax bill - $600 in non-refundable tax credits). An example of a non-refundable tax credit is the saver's tax credit, which is available to taxpayers who make contributions to retirement savings plans.
1) A distribution from a Roth IRA that occurs before the Roth IRA owner meets certain requirements (see definition for qualified distributions). 2) A distribution from an education savings account that exceeds the amount used for qualified education expenses. Typically, when a distribution is non-qualified, the amount attributable to earnings will be subject to income tax and an early-distribution penalty of 10%.
A system under which a business provides payments to its employees to cover business expenses incurred for meals, travel, transportation, or entertainment, but under which the employee does not have to substantiate the expenses or return advance payments in excess of the amount actually used. By contrast, under an accountable plan, the employee must substantiate what the expense was, how much it was, and that it was incurred while doing business for the company. Any advances not used must be returned to the company. If a business gives an employee $100 to cover the cost of meals while away on a business trip, under a non-accountable plan, the employee could eat inexpensive fast food for every meal and pocket the savings. For this reason, the IRS treats payments made under non-accountable plans as taxable income. Accountable plan expenses are not considered taxable income.
Interest income reported on IRS Form 1099-INT that a taxpayer designates as being the interest income of a different individual. A taxpayer may choose to make a nominee distribution if s/he jointly owns an account with someone who is not his/her spouse and the financial institution where the account is located reports all the interest earned on that account as being earned by only one of the account holders. The taxpayer who received the 1099-INT from the financial institution uses Schedule B, Interest and Ordinary Dividends, to report the entire amount. Below that the taxpayer writes "nominee distribution" and enters the amount of interest that really belongs to the other account holder. By subtracting the nominee distribution, the taxpayer avoids paying tax on interest income that isn't really his/hers. The rightful owner pays the tax instead.
A business incorporated in the state of Nevada, which is known to be business-friendly through its tax and corporate law statutes. Companies that incorporate in Nevada have several distinct advantages, including no state income tax, no franchise taxes, no personal income taxes and no succession taxes. Another unique advantage of Nevada Corporations is that company officers and directors are well-protected against lawsuits arising from lawful business pursuits. Nevada has become a well-utilized tax haven in recent years, drawing a large number of West Coast-based companies in the United States. In addition to public companies that choose to incorporate there, many private companies are attracted to the state because of its strong protection laws against hostile takeovers of a business. A term known as "piercing the corporate veil" refers to the ability of a plaintiff to go after the personal assets of a company owner or director. While piercing the veil is rare in any state, Nevada is well-known for its strict adherence to the protection of personal assets and information.
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