are late fees taxable income
On the most recent bill I received, I received a late fee. I understand that the payment was late, but was surprised to see that tax was also charged on the late fee. I live in Illinois and have checked the state web site. I also check the FCC website. I found no reference to taxes be charged for a late fee. There is no service provided, just a penalty for be late. Be aware of penalties and interest. The concept of increased penalties for repeat offenders is now firmly entrenched in the Income Tax Act. The penalty for filing a return late is 5% of the unpaid taxes plus an additional 1% for each complete month the return is late, up to a maximum of 12 months—a maximum penalty of 17%. Under IRC Section 277, late fees, fines, and penalties from members are membership income because they result from transactions with members. There are differences of opinion, however, about whether they are taxable or nontaxable under IRC Section 528. All amounts paid by the renter to or on. behalf of the owner are taxable. 480. DEDUCTIONS FROM INCOME. The following items may be taken as a. privilege tax return when. they are included in the gross revenue.  City tax collected or factored into. Under IRC Section 277, transfer fees and move in/move out fees are membership income because they result from transactions with members. For the reasons discussed above, there are differences of opinion about whether they are taxable or nontaxable under IRC Section 528. However, if you rent taxable goods and charge a late fee when they are not returned on time, the additional charge is not for the extension of credit. The late fee is part of the charge for the rental of the goods and is part of the taxable receipt subject to sales tax. For example, a fee charged by a home improvement store for returning a rented piece of equipment a day late is a charge for an additional day's rental and is subject to sales tax. For returns of income for the 2012 and subsequent taxation years that are filed after 2012, a “tax preparer” is required to file T1 and T2 returns electronically. For this purpose, a “tax preparer” is defined as a person or partnership who, in the year, is paid to prepare more than 10 T2s or more than 10 T1s. In the authors' opinion, however, late fees, fines, and penalties are exempt function income because they are derived from owners in their capacity as owner-members rather than in some other capacity, such as customers for services. WHAT IS TAXABLE. Please note that Federal Rent Subsidies. are taxable. deduction on your In addition to rent, taxable. income includes any payments made by. the tenant for:  Pet Fees.  Telecommunications. (phone, cable TV and internet service) You may collect the sales tax on only the taxable items if all three of the following rules are met: 1  the taxable and nontaxable items may be purchased separately, 2  the charges for the items are separately stated on your bill or invoice, and. 3  the charges are reasonable in relation to the total charge.
Yes, late fees are taxable income