Your Tax Question - 040

Dear John, I read this booklet that has me a bit confused about what income actually is. It said that it is not legal for the government to charge taxes on the money that I earn from my labor. It makes sense but I am a little apprehensive about it. What is income in the government's eyes? Thanks, Clark.

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Hi Clark,

I am not sure what booklet you are referring to but I remember reading something that wanted me to invest in gold because they claimed that the IRS and the government was up to no good. I remember being impressed with the logic of the argument but I largely forgot about it and did not invest in their gold. That said, let me try to explain what income is in the government's eyes.

Income is simply the increase of wealth in any given tax period be it an increase from labor (earned income) or capital (unearned income). The concept of income is all-inclusive and only those items that Congress has granted grace from are excluded from determining income. For a good explanation of Gross Income for income tax purposes check out the article at Wikipedia.

When you are reading different materials about income taxes, always keep in mind that no matter what someone else explains it is always you who are responsible for your taxes. When the IRS comes knocking and asking for Clark, it will be you who is responsible for all penalties and fines.

Hope this helps,

John

PS. If you need further assistance please email me.