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Daily Archives: March 26, 2025

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Gross Income

Posted on March 26, 2025 - 8:13 am by

Whether you are an individual or running a business, it is essential to understand the gross income. Many professionals often get confused between gross income and net income. 

 

What is Gross Income? 

Gross income is the income one has earned before taking out the taxes, expenses, and other deductions. Gross income is different for individuals and businesses. For individuals, the total income he or she earns from all sources, including cash, wages, rental income, interest income, and dividends, comprises gross income. It’s also called gross pay if the individual is on paycheck. 

For businesses, gross income refers to the total revenue minus COGS (cost of goods sold). The revenue sources of the businesses consist of selling goods and services, capital gains from investments, intellectual properties, income from rental property, etc. Businesses often use gross income (instead of net income) to better gauge the product-specific performance of the business. 

  

How to Calculate Gross Income: 

The calculation of gross income for both entities (individual and business) are more or less similar.  

Gross Income of Individuals:  

As the gross income of individuals is the total income before deducting the tax, the incomes such as salary, dividend, interest, payment, rental payments, alimony, tips, and capital gains. Hence the individual gross income = (salary/wages + rental income + investment income + other income). Suppose Donal’s salary is $200,000; he earns $30,000 in rental income and $15,000 as interest. Therefore, his gross income is $2,45,000. 

Gross Income of Business: 

The calculation of the business gross income is derived by the formula Gross Income=Gross Revenue−COGS. Here COGS stands for the cost of goods sold. Let’s assume gross income is $500,000 and COGS is $200,000, then gross income is $300,000. 

Gross Income vs. Net Income: 

The following table describes the difference between gross income and net income: 

 

Factor Gross Income Net Income
Definition Income before any tax deductions Income after any tax deductions
Purpose Use for tax calculations, loan eligibility Actual take-home pay or profit

 

January 31 Filing Deadline

Posted on March 26, 2025 - 7:41 am by

What is the January 31 Filing Deadline?

The official deadline set by the Internal Revenue Service occurs on January 31 each year.

The official deadline of January 31 marks the absolute submission due date for tax forms W-2s and 1099s sent between employers and their workers and contractors. The Internal Revenue Service through the January 31 deadline requires both businesses and individuals to properly document their tax information for the entire year while following federal tax requirements.  

W-2 & 1099 Forms

W2: Employers need W-2 Forms to report wages together with tips and any form of employee compensation they provide as part of their documentation. Employers use W-2 statements to disclose details about all withheld taxes regarding federal, state and other tax deductions throughout the year.  

1099 Forms: Businesses utilize 1099 Forms to notify the IRS about all payment transactions they make to independent workers and other service providers who are not their employees. Businesses use the 1099-NEC form for non-employee compensation reporting and the other varieties of 1099 forms exist for various income types (e.g. 1099-MISC or 1099-DIV).

Why is January 31 Important?

Businesses must deliver W-2 and 1099 forms to their employees and contractors by January 31 to fulfill their reporting obligations because this deadline enables recipients to obtain necessary tax information for filing their individual returns before April 15. Following this date remains crucial because it avoids taxpayer delays and prevents noncompliance with Internal Revenue Service reporting regulations. There are significant penalties under IRS regulations regarding late distribution of these forms. 

Filing Requirements

W2: Every employer must submit W-2 forms to the Social Security Administration under a deadline of January 31. Individuals who use electronic submission retain the same deadline.  

1099 Filings: All businesses need to issue both 1099 forms to payment recipients and the Internal Revenue Service at the deadline which occurs on January 31. The filing with the IRS functions through electronic transmission or traditional paper methods based on the number of submitted forms.

Penalties for Missing the Deadline

The failure to meet the January 31 deadline results in IRS penalties. The amount of penalties starts at $50 and goes up to $280 based on how late the forms are submitted. The IRS will enforce further penalties unless the non-filing action stemmed from involuntary mistakes or when forms remain unsubmitted.

How Tax1099.com Can Help

Tax1099.com helps organizations file W-2 and 1099 forms together with distributing them so businesses can meet their January 31 filing deadline requirements. Users can submit e-files through the platform to both the IRS and distribute secure copies to their recipients. Businesses that use Tax1099.com remove the burden of manual filing along with avoiding major penalties which occur when tax reports are filed late.

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