Work earned income,
Definition of Work earned income:
All of the taxable income and wages that an individual generates and is most commonly used and referenced when preparing an individuals tax return. Importance of Work Earned Income
Work earned income includes a broad range of income types including wages, commissions, bonuses received, tips, and any income earned by someone who is self-employed. For self-employed individuals, this refers to the net income calculated, after factoring in eligible business expenses. Earned income is a broader tax term that also includes not only work earned income but also amounts received for disability benefits before retirement or union strike benefits.
As work earned income includes amounts received that may not be tracked carefully during the year, such as commissions and tips, it can be a difficult number for some tax filers to determine at the end of the year. As a result, most accountants and tax preparers will recommend people set up a process during the year to track these amounts and save themselves from a year-end headache.
Two unique areas where individuals may need special guidance in determining work earned income are for ministers and members of religious orders as well as those deemed to be statutory employees. There are specific guidelines for individuals that fall into these categories, so some research or consultation with a tax expert may be necessary. Work Earned Income and the Earned Income Tax Credit
The determination of work earned income and earned income is important, as when you have earned income you may be eligible for the Earned Income Tax Credit (EITC), a tax credit available for people in the low to moderate range. If an individual does not generate earned income, then they will not be able to use this tax credit. The EITC also requires individuals to not have investment income exceeding $3,400, preventing individuals with significant investments from using a credit that is meant for low and moderate income taxpayers.
There are also family considerations that impact the determination of an individuals eligibility for the EITC. The more children an individual has, the more they can earn before they would be considered to earn too much to be eligible for the credit. Additionally, when filing with a spouse, the amount that can be earned before losing eligibility increases further. Reviewing eligibility for the EITC each year is important as the ability to claim the credit will vary from year to year, and not being eligible one year doesnt necessarily mean an individual cant use the credit the next year.
How to use Work earned income in a sentence?
- Susie was having trouble figuring out her work earned income and had to obtain a list of the commissions she was paid.
- Joes accountant calculated his work earned income to assess his eligibility for the Earned Income Tax Credit.
- Mike is refiling his taxes because the IRS determined his work earned income was incorrect and rejected his Earned Income Tax Credit.
Meaning of Work earned income & Work earned income Definition