How Do You Handle Tax Returns for Individuals with Multiple Income Sources?
Taxes are a considerable concern for all of us, but the matter can be much more complicated if you have multiple income sources. Whether you work multiple jobs, freelance, own a small business on the side, are a gig worker, or have investments, managing your income taxation is key. Our experienced and reputable tax firm in Wayne, Pennsylvania, stands by to help.
Skilled Tax Planning to Protect Your Future
Because different sources of income are often taxed in other ways, tax planning is essential. Failing to address these distinctions adequately can lead to unfortunate tax surprises and interfere with your ability to take advantage of saving opportunities. Your seasoned tax professional will effectively assess your unique circumstances to help minimize your tax burden in the future.
Income Sources and Tax Implications
Income is broken down into two broadly defined categories: earned and unearned. Earned income refers to the money you earn, which can take any of the following forms:
- Wages
- Salaries
- Tips
- Certain disability benefits earned before reaching the minimum retirement age
- Money earned from freelancing
- Unemployment compensation
On the other hand, unearned income refers to money generated from investments, earned interest, dividends, and capital gains.
Understanding Taxation
Earned and unearned income are taxed differently, with variations within each category. Consider the following:
- Earned income is subject to state and federal income taxes at a rate that’s based on your tax bracket.
- Unearned income is taxed according to the specialized rates that apply. Qualified dividends and long-term capital gains are generally taxed at lower rates.
Nontaxable Income Sources
Anything that you earn from employment, from most investments, or business activities is taxable, but other sources of income aren’t taxed, including:
- Inheritances and gifts
- Most healthcare benefits
- Alimony payments – for divorces that were finalized after 2018
- Child support payments
- Interest from specific municipal bonds
Addressing Your Unique Situation
The right tax pro for you will encourage you to take proactive steps that help you manage and minimize the tax rate you experience – over multiple income sources – including:
- Contributing to accounts that come with tax advantages
- Appreciating the tax distinctions between earned and unearned incomes
- Taking advantage of every tax deduction and credit available to you
By working closely with a savvy tax professional, you help to ensure that you will remain timely and compliant, minimize your tax liability, and optimize the financial benefits of your multiple income sources.
Reach Out to Our Respected Tax Firm in Wayne, PA, Today
The knowledgeable tax professionals at Phoenix Tax Consultants in Wayne, PA, have a wealth of experience helping clients with multiple sources of income successfully navigate the tax intricacies they face while maximizing their tax savings. We are at your service, so please don’t put off contacting or calling us at 610-933-3507 for more information about what we can do to help you today.