However, capital gain rates are lower than the tax rates imposed on ordinary income, such
as employment wages and interest.
The income you report can only come
from employment wages, taxable scholarships and grants, Alaska Permanent Fund dividends, total interest earnings of $ 1,500 or less, and unemployment compensation.
The IRS takes discharge of indebtedness income every bit as seriously as it
does employment wages, and it will expect you to do your part as a U.S. citizen and pay taxes on it.
If you are unable to pay for the damages and other expenses above and beyond you auto insurance limits, a court deciding the case may order that your
future employment wages be garnished until your total debt is paid off.
In order to use the 1040A, the taxable income you report must be less than $ 100,000 and must only come
from employment wages, interest and dividends, capital gain distributions, taxable scholarships and grants, unemployment compensation, Alaska Permanent Fund dividends, pensions, annuities and IRAs.
While you may no longer have young children who are depending on
your employment wages when you are in your 60s, there is a good chance that you could have a spouse or partner who may be relying on some or all of your pension or other retirement income for his or her living expenses.