Who Gets Taxed When I Assign My Salary Income To Another Person?For income tax purposes, income is not taxed to the person who received the income, but the person who earned the income or who owns the property from which the income was generated. So, if you have arranged with your employer to pay all of your salary to your parents, you will still be liable for the taxes on your salary, even though you did not receive it. Who Gets Taxed When I Assign To Another Person My Dividend Income From A Stock That I Own?Income is taxed to the person who owns the income-producing property. Thus, if you own the property that generated the income, you will be liable for the taxes on the resulting income. This concept applies also to rental income from rental properties. In order to avoid paying taxes on the income, you must give away the underlying income-producing property. You will not be taxed on the income once you have surrendered you control over the income-producing property. Is An Agent Taxed On The Income He/She Received For A Principal? When an agent (e.g. a salesman) receives income from a customer for merchandise he/she sold, the income is generally not taxable to the agent but to the principal (e.g. the company that hired the salesman). Even though the income may appear to have been earned by the agent (e.g. the salesman doing the marketing & the selling), the resulting income is still taxed to the principal since the agent is simply collecting income for the principal. The agent will receive his/her income in the form of a salary. Is There Any Other Way To Avoid Getting Taxed On Income That I Will Earn? A taxpayer may also sell for adequate consideration (i.e. money) the anticipated income that he/she will earn in the future. However, this is not a complete avoidance of tax on the income since you will be taxed on the excess of the sales price of that anticipated income over your cost of acquiring that anticipated income, which is usually zero if you did not purchase it from someone else. Yet it is possible to reduce the total income tax that you have to pay since anticipated income often is sold at a discounted price. Furthermore, selling of anticipated income will not turn what would be ordinary income into capital gains income. A taxpayer will generally not enjoy the preferential capital gains rate on the anticipated income that he/she sells. Do I Need an Attorney to Help Me with My Tax Problems? Tax laws are complex and ever-changing. Although there are various tax preparation softwares on the market that may help you with your tax problems, they cannot provide the same level of service that an experienced and knowledgeable tax attorney can. If you are unsure about what constitutes your income or you need someone to represent you before the IRS, a tax attorney can help you. |
