Is a taxpayer required to include in gross income payments the taxpayer receives for lost business income, lost wages, or lost profits?
Yes. The law requires that a taxpayer include in gross income payments the taxpayer receives for lost business income, lost wages, or lost profits. For information on whether estimated tax payments may be required, see Publication 505, Tax Withholding and Estimated Tax. A self-employed individual who receives a payment that represents compensation for lost income of the individual’s trade or business should include the amount of the payment in net earnings from self-employment for purposes of the self-employment tax. For more information about reporting self-employment income and paying self-employment tax, see Publication 334, Tax Guide for Small Business (For Individuals Who Use Schedule C or C-EZ). Generally, a payment to an individual to compensate for lost wages will not be wages for purposes of the social security tax and Medicare tax because it is not an actual payment for employment within the meaning of the law. These payments will also generally not be subject to income tax w
Related Questions
- Are payments that are made to an individual for lost business income, lost wages, or lost profits required to be reported to the IRS by the person making the payment?
- Is a taxpayer required to include in gross income payments the taxpayer receives for property damage or destruction?
- Would tenant payments for rents be limited to 30 percent of gross income under the block grant?
