Investing in stocks with gross income (not yet taxed) cash from contract work?
You should get a 1099-MISC for the $5000 you got.  And your broker should send you a 1099-B for the $5500 sale of Google stock. These are two totally separate things as far as the US IRS is concerned. 1) You made $5000 in wages. You will pay income tax on this as well as FICA and other state and local taxes. 2) You will report that you paid $5000 for stock, and sold it for $5500 without holding it for one year. Since this was short term, you will pay tax on the $500 in income you made. These numbers will go on different parts of your tax form.  Essentially in your case, you'll have to pay regular income tax rates on the whole $5500, but that's only because short term capital gains are treated as income.  There's always the possibility that could change (unlikely).  It also helps to think of them separately because if you held the stock for a year, you would pay different tax on that $500.  Regardless, you report them in different ways on your taxes. In most jurisdictions, you want to split the transactions. Why? Because you want to report capital gains on your investment income, and this will almost always be taxed at a lower rate than employment income. See Wikipedia's article for more information about capital gains. In Canada, you pay tax on 50% of your realized capital gains. There are also ways to shelter your gains from tax; in Canada, TFSA, in the US, I believe these are 'roth' accounts. I actually think you have to split the transactions, at least in Canada and the U.S., though I'm not absolutely sure. Regardless, you want to do so if you plan on making money with your investments. If you plan on making a loss, please contact me as I'm happy to accept the money you are planning on throwing away. You need to report the income from any work as income, regardless of if you invest it, spend it, or put it in your mattress (ignoring tax advantaged accounts like 401ks).  You then also need to report any realized gains or losses from non-tax advantaged accounts, as well as any dividends received.  Gains and losses are realized when you actually sell, and is the difference between the price you bought for, and the price you sold for.  Gains are taxed at the capital gains rate, either short-term or long-term depending on how long you owned the stock.   The tax system is complex, and these are just the general rules.  There are lots of complications and special situations, some things are different depending on how much you make, etc.  The IRS has all of the forms and rules online.  You might also consider having a professional do you taxes the first time, just to ensure that they are done correctly.  You can then use that as an example in future years.
"While @JB's ""yes"" is correct, a few more points to consider: There is no tax penalty for withdrawing any time from a taxable investment, that is, one not using specific tax protections like 401k/IRA or ESA or HSA. But you do pay tax on any income or gain distributions you receive from a taxable investment in a fund (except interest on tax-exempt aka ""municipal"" bonds),  and any net capital gains you realize when selling (or technically redeeming for non-ETF funds). Just like you do for dividends and interest and gains on non-fund taxable investments. Many funds have a sales charge or ""load"" which means you will very likely lose money if you sell quickly typically within at least several months and usually a year or more, and even some no-load funds, to discourage rapid trading that makes their management more difficult (and costly), have a ""contingent sales charge"" if you sell after less than a stated period like 3 months or 6 months.  For funds that largely or entirely invest in equities or longer term bonds, the share value/price is practically certain to fluctuate up and down, and if you sell during a ""down"" period you will lose money; if ""liquid"" means you want to take out money anytime without waiting for the market to move, you might want funds focussing on short-term bonds, especially government bonds, and ""money market"" funds which hold only very short bonds (usually duration under 90 days), which have much more stable prices (but lower returns over the longer term)." To try to answer the three explicit questions: Every share of stock is treated proportionately: each share is assigned the same dollar amount of investment (1/176th part of the contribution in the example), and has the same discount amount (15% of $20 or $25, depending on when you sell, usually). So if you immediately sell 120 shares at $25, you have taxable income on the gain for those shares (120*($25-$17)). Either selling immediately or holding for the long term period (12-18 mo) can be advantageous, just in different ways.   Selling immediately avoids a risk of a decline in the price of the stock, and allows you to invest elsewhere and earn income on the proceeds for the next 12-18 months that you would not otherwise have had.  The downside is that all of your gain ($25-$17 per share) is taxed as ordinary income.   Holding for the full period is advantageous in that only the discount (15% of $20 or $25) will be taxed as ordinary income and the rest of the gain (sell price minus $20 or $25) will be taxed at long-term capital gain tax rates, which generally are lower than ordinary rates (all taxes are due in the year you do sell).  The catch is you will sell at different price, higher or lower, and thus have a risk of loss (or gain). You will never be (Federally) double taxed in any scenario.  The $3000 you put in will not be taxed after all is sold, as it is a return of your capital investment.  All money you receive in excess of the $3000 will be taxed, in all scenarios, just potentially at different rates, ordinary or capital gain.  (All this ignores AMT considerations, which you likely are not subject to.) i cannot directly tell from the provided information if it is already included in Net A/R but if there is a balance sheet you can check yourself if the Total Cash Flow matches the difference between cash position year 0&amp;1 and see if it is net or still to be included. For the employee, this is an identical tax situation to an at-the-money option purchase. They're buying an asset with a specific cost basis. For the company, you are just issuing shares from treasury as authorized... debit cash, credit additional paid-in-capital and equity. There is no tax consequence for this money received. Cash flow is needed for expansion, either to increase manufacturing capacity or to expand the workforce. Other times companies use it to purchase other companies. Microsoft and Google have both used their cash or stocks to purchase companies. Examples by Google include YouTube, Keyhole (Google Earth), and now part of Motorola to expand into Phones. If you are investing for the future, you don't want a lot of dividends. They do bring tax issues. That is not a big problem if you are investing in an IRA or 401K. It is an issue if the non-tax-defered mutual fund distributes those dividends via the 1099, forcing you to address it on your taxes each year. Some investors do like dividends, but they are looking for their investments to generate cash. Who would require it? Would it be an SEC requirement? Even more government paperwork for companies. "Presumably it means they're paying with normal money rather than paying with stock. Shareholders will receive money rather than any shares of AMZN when the deal goes through.   ""Cash"" doesn't necessarily mean ""currency"" a la bills and coins. When you have money in your brokerage that isn't tied up in a security, for example, you're holding ""cash"" even though you don't physically have ""currency""." I like C. Ross and MrChrister's advice to not be heavily weighted in one stock over the long run, especially the stock of your employer.  I'll add this: One thing you really ought to find out – and this is where your tax advisor is likely able to help – is whether your company's stock options plan use qualified incentive stock options (ISO) or non-qualified stock options (NQO or NSO).  See Wikipedia - Incentive stock option for details. From my understanding, only if your plan is a qualified (or statutory) ISO and you hold the shares for at least 1 year of the date of exercise and 2 years from the date of the option grant could your gain be considered a long-term capital gain. As opposed to: if your options are non-qualified, then your gain may be considered ordinary income no matter how long you wait – in which case there's no tax benefit to waiting to cash out. In terms of hedging the risk if you do choose to hold long, here are some ideas: Sell just enough stock at exercise (i.e. taking some tax hit up front) to at least recover your principal, so your original money is no longer at risk, or If your company has publicly listed options – which is unlikely, if they are very small – then you could purchase put options to insure against losses in your stock.  Try a symbol lookup at the CBOE. Note: Hedging with put options is an advanced strategy and I suggest you learn more and seek advice from a pro if you want to consider this route.  You'll also need to find out if there are restrictions on trading your employer's public stock or options – many companies have restrictions or black-out periods on employee trading, especially for people who have inside knowledge. "I am not a lawyer, but I can't think of a reason this is illegal (something that would be illegal would be to ""trade with yourself"" across the accounts to try to manipulate stock or option prices). I don't think you're ""funneling,"" you're doing ""asset location"" which is a standard tax planning strategy. http://news.morningstar.com/articlenet/article.aspx?id=154126&t1=1303874170 discusses asset location. I'd be more concerned about whether it makes sense." "This kind of investment is called ""sweat equity"".  It is sometimes taken into account by lenders and other investors.  Such investors look at the alleged value of the input labor with a very skeptical eye, but they often appreciate that the entrepreneur has ""skin in the game"". The sort of analysis described by the original poster is useful for estimating ""economic profit"" -- how much better off was the entrepreneur than if he had done something else with his time.  But this sort of analysis is not applicable for tax purposes for most small businesses in the United States. It is usually not in the entrepreneur's interest to use this method of accounting for tax purposes, for three reasons: It requires setting up the business in such a way that it can pay him wages or salaries for his time.  The business might not have enough cash resources to do so.  Furthermore, setting up the business in this way requires legal and accounting expertise, which is expensive. If the entrepreneur does set up the business like this, the wages and salaries will be subject to tax.  Wage and salary tax rates are often much higher than capital gains tax rates, especially when one considers taxes like Social Security taxes, Medicare taxes, and Business & Occupation taxes. If the entrepreneur does set up the business like this, the taxes on the wages and salaries would be due long before the hoped-for sale of the company.  The sale of the company might never happen.  This results in a time-value-of-money penalty, an optionality penalty, and a risk penalty." I received a $2,000 bonus... Gross Income is income from whatever source derived, including (but not limited to) “compensation for services, including fees, commissions, fringe benefits, and similar items.”  Adjusted Gross Income is defined as gross income minus adjustments to income.  My question is, must I still report this money on my tax return and if so, how? Yes, and it would be on line 21 of your 1040 with supporting documentation. Are these legal fees deductible as an expense, and where would I list them? Yes, you would aggregate your deductible expenses and place these on your Schedule A. Instructions here. Good Luck. Edit: As Ben Miller pointed out in the comments, the deduction would be placed in either line 23 or 28 depending on the nature of the attorney (investment related or not). The company match is not earnings. My company deposits 5% of my income into my 401(k) and it appears nowhere except on the paperwork for the 401(k).  To be clear, it doesn't appear on any paystub or W2. There is Free employer money on both sides of the tax fence for some employees.   On the pretax side, your employer may provide you a match.  If so, invest the maximum to get 100% of the match.   On the after tax side, many companies offers a 15% discount on ESPP plans and a one year hold.  My wife has such an employer.  The one year hold is fine because it allows us to be taxed at Long Term Capital gains if the stock goes up which is lower than our current income bracket.  After creating a seasoned pool of stocks that we could sell after the one year hold, we are then able to sell the same number of stocks purchased each month.  This provides a 17.6% guaranteed gain on a monthly basis.  How much would you purchase if you had a guaranteed 17.6% return.  Our answer is 15% (our maximum allowed). The other trick is that while the employer is collecting the money, you will purchase the stock at the lowest day of the period.  You will usually sell for even more than the purchase price unless the day purchased was the lowest day of month.   The trick is to reinvest the money in tax free investments to balance out the pretax investing.  Never leave the money in the plan.  That is too much risk. If you buy puts, there are no guaranteed proceeds though.  If you short against the box, you've got immediate proceeds with a nice capital loss if it doesn't work out.  Conversely, you could write a covered call, take the contract proceeds, and write off the long position losses.  Nobody ever factors tax consequences into the equation here. You can actually hold cash in your account as long as the manager has reason to believe it is awaiting investment. As for your question, some near cash equivalents are: It's difficult to go into more detail about which investments are eligible due to the variety of risk characteristics, but you can certainly find investment opportunities in the assets mentioned above. A good money manager can advise you better since he'll have an idea of their risk characteristics as well as tax status. Not that easy!. There’s millions of lines of code and so much logic added over the years. Programmers would add a comment line and insert the code. No one had time to cleanup or rewrite of remodularize functionality. They just piled on it !. Y2K happened and it corrected and renamed whole bunch of date fields and code to work for rollover year.