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Types of Income

Below are different types of income for tax filing purposes. If you are retired to file a tax return, you must report all the taxable income (income subject to tax) you received during the tax year on the IRS tax form 1040.

What does taxable income include?

Taxable income includes:

  1. earned income such as wages and self employment income and

     

  2. unearned income such as interest and dividends, most pension income, income from rental property and unemployment compensation
What is nontaxable income?

Nontaxable income is income that is not subject to tax which includes:

  • child support
  • federal tax refunds
  • interest on municipal bonds (not that tax exempt interest on munis is reported on the form 1040)
  • public assistance payments
  • workers' compensation
  • most life insurance proceeds
  • part or all of social security benefits
Wages, Salaries, and Tips

Wages, Salaries, and tips that are earned as an employee are the most common type of income for taxpayers. Wages and other employee compensation are taxable whether paid in cash or in the form of goods, property or services.

How are wages, salaries and tips reported?

Wages, salaries and tips are reported on the form W-2 (Wages and Tax Statement) which employers are required to send out to taxpayers by January 31. The form W-2 shows reported income for the tax year.

Where and how to report unreported income not on W-2 or 1099?

Unless specifically excluded (not included in gross income by a provision of the tax law) the cash and the value of goods, services, and property received from an employer are taxable and must be reported on line 7 (Wages, Salaries, Tips, etc.) of the tax form 1040.


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