 Income tax 2023-2024, other adjustments to income, get ready and some coffee so we can avoid the government forcing us to move into a shack with income tax preparation 2023-2024. Most of this information can be found in the Instructions for Schedule 1 section of the Form 1040 Instructions Taxure 2023 which you can find on the IRS website at IRS dot gov irs dot gov looking at the income tax formula we're focused online to adjustment to income remember in the first half of the income tax formula is basically a funny income statement most income statements having income minus expenses resulting in net income here having income minus various deductions resulting in taxable income deductions for taxes being good therefore we're always looking to see if we can get more of them noting the major differences between the above the line deductions or adjustments to income and the below the line deductions which are the greater of standard deduction or itemized deductions one of those being that if you qualify for an adjustment to income you don't typically have to clear the hurdle of the standard deduction to get the benefit from it looking at the first page of the form 1040 we're on line number 10 adjustments to income from schedule one line 26 here's the schedule one part number two adjustment to income we're looking at 24 here other adjustments which are going to be the items that possibly are not as prominent therefore under the category of other adjustments but still listing out many of those items and then if they don't fall into this category we have the good old Z down below for the other adjustments where you can list the type and amount so let's go over a few of those now that might fit into the other category line 24 a jury duty pay enter your jury duty pay if you gave pay to your employer because your employer paid your salary while you served on the jury so in other words if you have to go to jury duty then you you have a situation where you might have to remove yourself from work to go to jury duty and the employer might say still pay you for that time since it's mandatory jury duty and in that case they might say hey look any money that you got from jury duty I want you to give it to me because if or the employer is going to say that because they're paying you a salary which is already higher than the jury duty so in that case what are you going to do because the jury duty pay first a word from our sponsor yeah actually we're sponsoring ourselves on this one because apparently the merchandisers they don't want to be seen with us but but that's okay whatever because our merchandise is better than their stupid stuff anyways like this CPA thinking cap for example CPA thinking CAP you see what we did with like with the letters it and this CPA thinking cap is not just for CPAs either anyone can and should have at least one possibly multiple CPA thinking caps why because based on our scientific survey of five people all of whom directly profit from the sale of these CPA thinking caps wearing this CPA thinking cap without a doubt according to the survey increases accounting productivity tenfold yeah at least yeah apparently the hat actually channels like accounting energy from the quantum field ether directly into your head allowing you to navigate spreadsheets faster it's kind of like how in like the matrix when neo learns kung fu or at least that's what the scientific survey saying so get one because the scientific survey participants could really use some extra cash if you would like a commercial free experience consider subscribing to our website at accounting instruction calm or accounting instruction dot think of it calm might be reported to the IRS and so you're gonna have to report it somewhere on the return so possibly you can put the income on the income line item but then negate it for the for the adjusted gross income calculation by also having it reduced so that you can still show the proper amount which will match up to what the IRS has but remove it in that case so line 24 B enter the deductible expenses related to income reported online 8 I from the rental of personal property you engaged in for profit but we're not in the business of renting such property so now you have a situation that if you sold personal property for profit then the question is where where would you you know report that income so if it's a personal property we're not talking about real estate property in other words the types of business income will typically be a schedule C so if it was a type of business you would think it would be on the schedule C if it was rental real estate then it might be on the schedule E if it's not part of a normal business profit then again and then if it was a capital gain situation of a sale of a capital gain it might ultimately have to be reported on the schedule D in which case you could have different kind of tax consequences are related to it so one of the questions that come up here is one is it something that's going to have to be included in income or can it be exempt from income if it's included in income then the question is going to be two where do I put the calculation on the forms in order to know where to put it on the forms you also want to think about the different tax consequences that might be applied to it so you can properly place it in other words if you were going to have a schedule C type of income generally the normal income from the schedule C is an income statement income minus expenses and the net income rolls into the first page of the form 1040 but we also saw that the schedule C could subject people to self-employment tax and you also have that business deduction related to it and so on and so forth so one of the questions is is the income something that should be subject to self-employment tax or not if so maybe it should be like on the schedule C if it's not subject to self-employment tax another question would be is it something that's a capital gain type of activity or something that should be taxed at ordinary income rates remembering that the capital gain income usually for sole proprietors or for individuals comes from the sale of stock is like the most common thing if it's long-term capital gain could actually have more favorable tax rates other than ordinary income and not be subject to of course self-employment tax in that case or is it something that should be taxed at ordinary income rates and and and and but and not capital gain rates and not be subject to the self-employment tax so when you're thinking about this other category those are some of the questions that come up also if you're talking about something that you sold you have the question of what's going to be the amount of income because instead of just the gross proceeds that you received it's going to be the proceeds minus the adjusted basis or in essence cost to figure the actual income given the general rule that's the general rule for an income tax meaning you shouldn't be taxed on the gross but in theory in general you should be taxed on the net what did you have to expand the expenditures that you had to make in order to generate the income you would think would be deductible with regards to something that you are selling the cost of it is going to be part of the basically expense you would think so once again enter the deductible expenses related to income reported online 8 I from rental of personal property you engaged for profit but we're not in the business of renting such property okay line 24 C enter the non-taxable amount of the value of Olympic and Paralympic medals and US OC prize money reported online 8 M so we talked a little bit about this when we talked about the income side of things and we said that basically the IRS is going to say that everything that you receive is going to be some kind of income unless there's an exception and that typically includes things like prizes but then they put a special kind of exception in there for Olympic and Paralympic medals and US OC prize money so now you have a situation well if you got that prize money once again it could be reported to the IRS possibly and therefore you're going to need to record it possibly an income but if the IRS wants to make it so there's not a tax consequence maybe online 24 C we can enter the non-taxable amount which means that it has been recorded an income but then we're going to net it out and the adjustment to pull it back out again now this isn't something that you're going to basically commonly see but conceptually you get basically the idea and you might have an Olympian champion client right and obviously as an American I feel like you shouldn't be taxing people in the Olympics if they won prize money you should tax them if they lose we don't tax the word you tax to lose it with it where where's the incentive structure it's always upside down with these taxes I tell you anyways line 27 Z use line 27 Z to report any adjustments not reported elsewhere list the type and amount of the adjustment so you can see in this other category we're seeing things that are basically less common here of course that's why they're under the other but they still listed them out the most common ones under the other and then if you have some deductions that don't fit into any of those categories possibly put it into line 24 Z and then giving them some indication of what that is for form 1099 K loss reporting if you sold a personal item at a loss and you did not report the loss on form 8 9 4 9 enter the amount of the sales proceeds from form 1099 K online 24 Z that you reported online 8 Z so in the entry space next to line 24 Z right form 1099 K personal item sold at a loss and also enter the amount of the sale proceeds so for example you bought a couch for $1000 and sold it through a third party vendor for $700 which was reported on your form 1099 K so you can see kind of the problem that is happening here one that being that now you made a sale it was for and you got proceeds the sale was a 1099 but then it got reported on a 1099 K for you now it wasn't actually you sold it for a loss and therefore given our normal kind of income concept what should be taxable well if it was for a loss I shouldn't have to pay taxes on it would be the general the general idea right so then the question the questions that come up again is well now I got a 1099 I'm gonna have to report the income somewhere or else the IRS is gonna say you got a 1099 that you didn't report somewhere where am I gonna put it well if it was for a lot the question the same questions would come up well if it was a business thing you would think the 1099 will be reported on a schedule C but if it wasn't your normal business you wouldn't think it would be on the schedule C if it was a cap was subject to capital gains then you would think that it would be on the schedule D which you which could be good if you had gains or even a because or even a loss possibly because then you might be able to take it against other income but if not then the question is you at least need to be able to report it so that you can show the IRS here's the income and here's the basically situation it was a loss which means I shouldn't be paying taxes on the gross amount of the income alright so online 27 Z you would enter 700 and in the entry space next to line 27 Z you would enter form 1099 K personal item sold at a loss C instructions for line 8 Z alright tip if you sold more than one personal item at a loss or received more than one form 1099 K for personal items you sold at a loss and you entered the total amount of sales proceeds online 8 Z you should also enter the total amounts of sale proceeds on line 24 Z so correct form 1099 K so if you received a form 1099 K that shows a that shows payments you didn't receive or is otherwise incorrect and you can't get it corrected enter the amount on line 24 Z that you reported on line 8 Z in the entry space next to line 24 Z right incorrect form 1099 K and also enter the amount that was incorrectly reported to you so similar kind of issue you got a 1099 K and you shouldn't have got a 1099 K now this they're getting better at this but you can see what the IRS is trying to do this strategy of the IRS is to go after the issuer the one that gets a deduction just like we see with W2 income they go after the one that that's paying the money because they get the deduction and they say you have to tell us you have to rat out to us with the form W2 that doesn't just go to the taxpayer but to the IRS the income that has been received if you want that deduction same thing with the 1099 that's the general strategy do you want to deduct that amount you have to tell us who you paid so that we can go after them for the income however with some of these gig works in particular these this the the platforms are actually not really paying contractors in those cases they're really platforms that are bringing two people together they're kind of like a silk road you know that are allowing people to trade allowing people to come together in a way that hasn't happened before so that so the question then is well the IRS wants to wants to be able to have someone give them a 1099 and it's hard to go after these little businesses that are being brought together in the silk road of these platforms these gig platforms so they want to go after the platform itself or the payment intermediary the credit card companies the pay pals of the world's and so forth and sometimes there's overlap so you might get to 1099s for the same income or something like that so as the government tries to strangle put their stranglehold over the economy and and put a bunch of potholes in the new silk road of the of the of the internets to make trading more difficult then then you could see what happens so you could end up with two 1099s in which case you have to put the income somewhere otherwise the IRS will say that you didn't report your income and then be able to report the loss as well so you imagine the income you report on other income of schedule one likely and then the loss you're also going to report or the decrease you might report in the other adjustment so that the net amount nets out but you still have something on the return trying to tell the IRS here's what happened so for example if you received a form 1099k that incorrectly shows $800 of payment to you you would enter $800 online 24z and in the entry space next to 24c you would write incorrect form 1099k $800 see the instructions for line 8z