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divorcelawyergunnisonutah · 2 years ago

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Can Estate Planning Fees Be Deducted By Your Business?

You may deduct legal fees paid to attorneys and fees paid to other professionals for ordinary and necessary expenses of your business, including expenses for helping you start your business. When you are starting a business, keep track of all your costs while you are investigating business possibilities, creating the business, and setting up your organization. You will then need to separate costs for startup vs. organization. Organizational costs include fees for services performed by an attorney to help you organize your business, before the end of your first tax year. These fees are considered capital expenses, not operating costs, and they must be amortized (spread out) over a specific number of years. An example would be an attorney’s fee for helping you filing business registration documents with state and preparing corporation bylaws. Operating costs for startup are those you would be able to deduct if you were operating the business. Startup legal fees could be for helping you review contracts, hire executives, or travel to negotiate purchase of a business Where you include these fees depends on whether they are deducted or capitalized.

In most cases, you will be deducting these fees as part of your normal business activities. Here’s where you would include these deductions on your business tax return: • For sole proprietors and single-member LLCs, show these expenses in the “Expenses” section of Schedule C • For partnerships and multiple-member LLCs, show these expenses in the “Deductions” section of Form 1065 • For corporations, show these expenses in the “Deductions” section of Form 1120. • If you have to amortize startup and organizational costs, you would include them in Other Expenses on your business tax return.

Reporting payments to attorneys is complicated. Starting with the 2021 tax year, payments to attorneys may be reported on one of two forms, depending on the type of payment: Fees paid to an attorney or other legal service provider of $600 or more are reported on Form 1099-NEC (Box 1). These are the payments for legal services, whether they are paid as a retainer or fee. Gross proceeds to an attorney are reported on Form 1099-MISC (Box 10). These are payments made to an attorney that are not for legal services, but, for example, as in a settlement agreement. Report payments to accountants and other professionals if you paid that person or firm $600 or more in deductible fees in a year. Use Form 1099-NEC to report these payments. This form is given to people you pay but who are not employees. You must give the form to the recipient and file the form with the IRS by January 31, after the end of the tax year. Before you complete a 1099-MISC or 1099-NEC form for an attorney or other professional, you must have this person complete a W-9 form. This form lists the recipient’s tax ID number and information about the name and address. Fees paid to attorneys or other professionals for personal advice, personal taxes, personal investments or retirement planning or personal legal services are not deductible business expenses If you have tax preparation fees for both your business and personal taxes, you’ll need to separate the cost between the two portions of your return.

For example, Schedule C for business income is part of your personal tax return if you own a small business. You can deduct the cost for a tax professional to prepare your Schedule C, but not the cost of preparing the rest of your personal tax return. Use your business checking account or business credit card to pay for the business portion and your personal account for the personal portion. If the business and personal work are not so easily separated, you should estimate what percentage of the work is business-related, and pay only that percentage from your business account. The more tax deductions your business can legitimately take, the lower its taxable profit will be. In addition to putting more money into your pocket at the end of the year, the tax code provisions that govern deductions can also yield a personal benefit: a nice car to drive at a smaller cost, or a combination business trip and vacation. It all depends on paying careful attention to IRS rules on just what is and isn’t deductible.

When you’re totaling up your business’s expenses at the end of the year, don’t overlook these important business tax deductions.

Auto Expenses

If you use your car for business, or your business owns its own vehicle, you can deduct some of the costs of keeping it on the road. Mastering the rules of car expense deductions can be tricky, but well worth your while. There are two methods of claiming expenses: • Actual expense method. You keep track of and deduct all of your actual business-related expenses and deduct an amount for depreciation each year. • Standard mileage rate method. You deduct a certain amount (the standard mileage rate) for each mile driven, plus all business-related tolls and parking fees. Check the IRS website for the current standard mileage rate.

As a rule, if you use a newer car primarily for business, the actual expense method provides a larger deduction at tax time. If you use the actual expense method, you can also deduct depreciation on the vehicle. To qualify for the standard mileage rate, you must use it the first year you use a car for your business activity. Moreover, you can’t use the standard mileage rate if you have claimed accelerated depreciation deductions in prior years, or have taken bonus depreciation or a Section 179 deduction for the vehicle. If your auto is used for both business and pleasure, only the business portion produces a tax deduction. That means you must keep track of how often you use the vehicle for business and add it all up at the end of the year. Certainly, if you own just one car or truck, no IRS auditor will let you get away with claiming that 100% of its use is related to your business.

Expenses of Going Into Business

Once you’re running a business, expenses such as advertising, utilities, office supplies, and repairs can be deducted as current business expenses but not before you open your doors for business. The costs of getting a business started are capital expenses, and you may deduct $5,000 the first year you’re in business; any remainder must be deducted in equal amounts over the next 15 years (180 months). If you expect your business to make a profit immediately, you may be able to work around this rule by delaying paying some bills until after you’re in business, or by doing a small amount of business just to officially start. However, if, like many businesses, you will suffer losses during the first few years of operation, you might be better off taking the deduction over five years, so you’ll have some profits to offset.

Books and Legal and Professional Fees

Business books, including those that help you do without legal and tax professionals, are fully deductible as a cost of doing business. Fees that you pay to lawyers, tax professionals, or consultants generally can be deducted in the year incurred. However, if the work clearly relates to future years, they must be deducted over the life of the benefit you get from the lawyer or other professional.

Insurance

You can deduct the premiums you pay for any insurance you buy for your business as a business operating expense. This includes: • medical insurance for your employees • fire, theft, and flood insurance for business property • credit insurance that covers losses from business debt • liability insurance • professional malpractice insurance—for example, medical or legal malpractice insurance • workers’ compensation insurance you are required by state law to provide it to your employees • business interruption insurance • life insurance covering a corporation’s officers and directors if you are not a direct beneficiary under the policy, and • unemployment insurance contributions (either as insurance costs or business taxes, depending on how they are characterized by your state’s laws).

Interest

If you use credit to finance business purchases, the interest and carrying charges are fully tax deductible. The same is true if you take out a personal loan and use the proceeds for your business. However, if your business profit is more than $25 million, you’ll only be able to deduct 30% of your interest expenses. Be sure to keep good records demonstrating that the money was used for your business.

Equipment

Due to changes created by the Tax Cuts and Jobs Act (TCJA), most small businesses are able to deduct 100% of the cost of equipment in a single year. This may be done by using 100% bonus depreciation, expanded Section 179 expensing, and the $2,500 de minimis deduction. These deductions may be used for tangible personal property and computer software, but not real property, which must be depreciated over many years. In addition, under Section 179 of the Internal Revenue Code, you can currently deduct up to an annual threshold amount of the cost of equipment and certain business assets you purchase and place in service that year and use over 50% of the time for your business (not personal use). In addition to the annual limit, there is a phase-out on how much property can be deducted under Section 179 that starts when a business purchases more than $2.5 million in business property in a year. Once this annual investment limit is reached, the amount you can deduct under Section 179 is reduced dollar for dollar by the amount your purchases exceed the $2.5 million limit. Finally, using a provision of the tax law called the de minimis safe harbor, a business may deduct in a single year any tangible personal property that costs $2,500 or less, as stated on the invoice. You must file an election with your tax return to use this deduction.

Charitable Contributions

If your business is a partnership, a limited liability company, or an S corporation (a corporation that has chosen to be taxed like a partnership), your business can make a charitable contribution and pass the deduction through to you, to claim on your individual tax return. If you own a regular (C) corporation, the corporation can deduct the charitable contributions. If you’ve got some old computers or office furniture, giving it to a school or nonprofit organization can yield goodwill plus a tax benefit. However, if the equipment has been fully depreciated (written off), you can’t claim a deduction.

Taxes

Taxes incurred in operating your business are generally deductible. How and when they are deducted depends on the type of tax: • Sales tax on items you buy for your business’s day-to-day operations is deductible as part of the cost of the items; it’s not deducted separately. However, tax on a big business asset, such as a car, must be added to the car’s cost basis. • Excise and fuel taxes are separately deductible expenses. • If your business pays employment taxes, the employer’s share is deductible as a business expense. Self-employment tax is paid by individuals, not their businesses, and so isn’t a business expense. • Federal income tax paid on business income is never deductible. State income tax can be deducted on your federal return as an itemized deduction, not as a business expense. However, the annual personal itemized deduction for state and local taxes is limited to $10,000. • Real estate tax on property used for business is deductible, along with any special local assessments for repairs or maintenance. If the assessment is for an improvement—for example, to build a sidewalk—it isn’t immediately deductible; instead, it is deducted over a period of years.

Education Expenses

You can deduct education expenses if they are related to your current business, trade, or occupation. The expense must be to maintain or improve skills required in your present business. (The cost of education that qualifies you for a new business or trade isn’t deductible.)

Pass-Through Tax Deduction

The Tax Cuts and Jobs Act created a new tax deduction for individuals who earn income through pass-through business. This includes any business that is a: • sole proprietorship (a one-owner business in which the owner personally owns all the business assets) • partnership • S corporation • limited liability company (LLC), or • limited liability partnership (LLP).

Such individuals may deduct an amount up to 20% of their net income from each pass-through business they own. This is in addition to all their other business deductions. The pass-through deduction is a personal deduction pass-through owners can take on their returns whether or not they itemize. However, this deduction is limited for people whose business is providing personal services. This includes people providing services in the fields of health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage services, investing and investment management, trading and dealing in securities or commodities, or any business where the principal asset is the reputation or skill of one or more of its owners (but there is an exception for architects and engineers). A business owner who provides such services is entitled to the 20% pass-through deduction only if his or her taxable income from all sources after deductions is less than $315,000 if married filing jointly, or $157,500 if single. The deduction is phased out if income exceeds the $315,000/$157,500 limits. It disappears entirely for married filing jointly whose income exceeds $415,000 and for singles whose income exceeds $207,500. If you’re not involved in providing services, you can still qualify for a pass-through deduction if your business income exceeds $415,00/$207,500, but it is subject to a special limit: Your deduction can’t exceed (1) 50% of your applicable share of the W-2 employee wages paid by the business, or (2) 25% of the your share of W-2 wages, PLUS 2.5% of the original purchase price of the long-term property used in the production of income—for example, the real property or equipment used in the business.

Easily Overlooked Business Expenses

Here are some additional routine deductions that many business owners miss. Keep your eye out for them. • bank service charges • business association dues • business gifts • business-related magazines and books • casual labor and tips • casualty and theft losses • coffee and beverage service • commissions • consultant fees • credit bureau fees

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getmyvewor · 2 years ago

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Quicken 2015 home and business 1099-m

A 1099 includes any wages you paid in the previous calendar year and must be submitted to the payee by January 31 (if January 31 lands on a weekend, then the deadline is the next business day). If you’re filing a 1099 with QuickBooks, the right 1099 form will be selected for you. It contains all the contractor’s identifying information, including their tax ID number. Before preparing a 1099, collect W-9 forms (the equivalent to Form W-4 for employees). You can also order printed 1099s directly from QuickBooks or buy them at an office supply store. They cannot be downloaded on the IRS website. If you plan on mailing in a 1099, you must order a hard copy. If you use our paid one-time service or sign up for a monthly payroll subscription, we will auto-populate the correct forms and file them with the IRS for you. You can easily E-file your 1099s with QuickBooks. If you’re filing electronically, use the online form. Use a 1099-MISC if you paid at least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest and if you made direct sales of at least $5,000 of consumer products to a buyer for resale anywhere other than a permanent retail establishment. You’ll also need a 1099-MISC for things like crop insurance proceeds, cash payments for fish (or other aquatic life) from anyone engaged in the fishing trade or business, or fishing boat proceeds. If you need to record payments of more than $600 for rent, prizes, attorney fees, or medical and healthcare payments, you should fill out a Form 1099-MISC. Payments to the payee were at least $600 during the year.You made the payment to an individual, a partnership, an estate, or a corporation.The payment was for services in the course of your trade or business.You made the payment to an individual who is not your employee.You must typically report a payment as non-employee compensation if all of the following conditions apply: Other forms of compensation for services.What qualifies as non-employee compensation? Here’s a list of payment types: You should fill out a 1099-NEC to record payments of more than $600 for any non-employee compensation. The form serves 2 purposes-it allows you to report wage information to the IRS and enables your contractor to do their taxes.Ī 1099 is commonly used for non-employee wages, however it serves other purposes. If you paid any part-time workers or freelancers more than $600 during 2021, you’ll need to send them a 1099-NEC. If you only have salaried employees (you never use contractors), stop reading now. But nonemployee compensation-money paid to freelancers, independent contractors, gig workers-will now be reported on Form 1099-NEC. The 1099-MISC is sticking around for other things, like reporting gross proceeds to an attorney, Section 409A deferrals, and nonqualified deferred compensation income. In 2020 the Internal Revenue Service (IRS) reintroduced Form 1099-NEC, which is intended to replace the nonemployee compensation part of Form 1099-MISC. a 1099-MISC? If you’re wondering where to get 1099s or just want to learn more about them, you’ve come to the right place.Ī 1099 tax form is specifically designed for independent contractors. But what about all things tax-related? When do you need to issue a 1099-NEC vs. You’re probably very familiar with your revenue, cost of goods sold, and profit numbers.

#Quicken 2015 home and business 1099-m

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johnnychapman · 3 years ago

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Don’t file the Form when you hire an employee to work and pay them a regular salary and also, payments made as rents, dividends, gross proceeds, etc. For More: https://www.form1099online.com/blog/1099-nec/how-to-minimize-errors-in-filling-out-form-1099-nec/

#IRS Form 1099 NEC #1099 NEC #1099 NEC Form #File 1099 NEC Online

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form1099 · 3 years ago

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E-FILE 1099 NEC 2021-22 GUIDELINES

Have you paid an individual person for the services performed in 2021 tax year? Then did you report the payments to the IRS? You’re required to report the payments made for the services performed in a year to the IRS. Use 1099 NEC Online Form to report the payments made to a non-employee for the services performed in a tax year.

Use 1099 NEC Online filing guidance to report the non-employee compensations. Here we provide you guidance to e-file 1099 NEC, additional information to file 1099 NEC, non-reportable payments of the NEC Tax Form and filing updated 1099 NEC Form.

What are the guidelines to e-file 1099 NEC 2021?

Due to the confusion created by Americans PATH Act 2015, the non-employee compensations are reported through 1099 NEC from 2020. The following are the guidelines followed to e-file 1099 NEC 2020:

Be aware of the change

Firstly, be sure about the payments you are reporting. If you’re reporting non-employee compensation, then don’t choose the old 1099 MISC Box 7. File you’re non-employee compensations through 1099 NEC tax Form which is revived in 2020 tax year.

Also, use 1099 NEC Box 2 to report direct sales of consumer goods on buy/sell or deposit/commission basis.

Report the payments exceed $600

Next, you’re required to report the payments made to independent contractors of $600 or more. If you paid less than $600 in a tax year, avoid the payments. Only report the payments made with a non-employee. Don’t include the personal payments in 1099 NEC form.

Combined federal/state filing requirement

Be sure whether you’re state is included in combined federal/state filing program. If “yes”, then you’re required to file 1099 NEC along with your state.

Ready to file

After checking all the requirements of 1099 NEC, the next step is the file the Form with the IRS. To avoid penalties file your 1099 NEC before the deadline. Submit the respective Form 1099 Online NEC Copies to the recipient and to the IRS within the due date.

Who uses 1099 NEC form?

According to recent situations, 70% of all 1099 MISC Form filing requires 1099 NEC Form. From the 2020 tax year, IRS considered the following payments reported in 1099 NEC Form:

Payments made with a self-employed individual who is not your employee.

If you made payments, then they must be a part of business or trade purpose.

Amount paid to a non-employee must exceed $600

The 1099 NEC Tax Form is used by

Self-employed individual: 1099 NEC tax Form is used by the self-employed individual who received non-employee compensation. They include the payments received as non-employee compensation in information return form.

Payers of non-employee compensation- The payer’s use 1099 NEC Form to report the non-employee compensations paid to an independent contractor in a tax year.

Additional information to file 1099 NEC online 2021

As we know the new 1099 NEC Form affected both the independent contractors and the tax payers in 2020 tax year. The following are the additional information required in filing 1099 NEC online

FATCA filing requirement

If the FATCA filing requirement box is checked in 1099 NEC, then the payer reporting on this Form to satisfy its chapter 4 accounting requirement. This box reports information about financial accounts held by U.S tax payers. The U.s tax payers hold a substantial ownership interest.

Federal tax withheld:

If the tax payer withholds any federal income tax under backup withholding rules, then you need to report the amount in the NEC Tax Form. The tax payers are required to enter the federal tax withheld in the Box 4 of 1099 NEC form. The main reason for 1099 NEC Form fall under backup withholding is TIN of the payee is invalid.

1099 NEC Tax Form non-reportable payments

1099 NEC Tax Form should not be used for the following payments:

Personal payments.

Tax-exempt organizations.

Payments for phone, merchandise or freight or storage.

Employee wages.

Payments to real estate agents.

Gross proceeds paid to an attorney.

Difficulty of care payments which are excludable from the recipient’s gross income.

Fellowship grants.

Can a 1099 NEC Form get an extension?

Due to changes occurred by Americans PATH Act 2015, the IRS cancelled the automatic 30 days extension to file 1099 NEC Form after the due date. The main reason to cancel the extension is fraudulent credit claims and to avoid scammers activities. If you fail to submit 1099 NEC Form with the IRS, heavy penalties may impose. The IRS penalty amounts are high. As the date of filing extends, the penalty amount also increases.

Filing the updated form 1099 NEC

The 1099 NEC Form came in to use from the 2020 tax year. The tax payers were confused when reporting the non-employee compensation by the new Form. as the old 1099 MISC Box 7 is changed from reporting non-employee compensation to direct sales of $5,000 or more. The tax payers are required to file the non-employee compensations in 1099 NEC Form.

The due date to report non-employee payments in the fillable 1099 NEC Form electronically is by January 31st of the tax year.

Have you understood the guidelines to e-file 1099 NEC 2020? Then are you searching to e-file Form 1099? Form 1099 Online provide you service to file 1099 NEC electronically. We’re the IRS authorized e-file providers and also submit the Form easy and securely.

#1099 nec #1099 nec form #new 1099 nec form #1099 misc box 7 #1099 nec tax form #1099 nec online #1099 nec with misc

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arushibhandari · 4 years ago

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Tax Treatment - Tendered Shares (ISOs and NSOs)

Under United States federal income tax rules, the exchange of a company’s shares for cash in a secondary offering such as a tender offer is considered a taxable transaction. In a tender offer, the gain (also known as the spread) from the sale of shares is the difference between the purchase price paid by the seller (shareholder) and the repurchase price of these shares at the time of sale as determined by the buyer who could be the company or an investor.

The most common types of stock options are:

Incentive Stock Options (ISOs, sometimes called Statutory or Qualified Options)

Nonqualified Stock Options (NSOs, NQSOs or sometimes called Nonquals)

Difference between ISOs and NSOs

Tax Treatment when tendering ISOs - If the shareholder has previously exercised ISOs and meets the qualifying disposition rules (held for more than one year after purchase and more than two years after grant date), the gain is considered a long term gain. However, if the shares are exercised and then immediately tendered, this results in a disqualifying disposition (ISOs held for less than one year after purchase and less than two years after grant date) and the gain is considered ordinary income subject to ordinary income tax rates (federal and state) reportable on Form W-2, Wage and Tax Statement with no FICA taxes (Social Security and Medicare) withholding.

If the repurchase is carried out by the option holder through a cashless exercise (same-day sale) where the exercise price is withheld from the sales proceeds and not paid by the option holder separately, the ISOs lose their status and the sales proceeds in excess of the exercise price are treated as ordinary income subject to ordinary income tax rates (federal and state) and FICA tax withholding which is reported on Form W-2, Wage and Tax Statement.

If the tender offer was administered through a brokerage platform, the broker would have reporting obligations for the sale and may issue a 1099-B, Proceeds From Broker and Barter Exchange Transactions to the employee.

Irrespective of whether the ISOs are tendered or not, employees who exercise ISOs in a given year will receive Form 3921 from the employer. The difference between the strike/exercise price and the fair market value on exercise date is an Alternate Minimum Tax Preference Item. These are items which may be included in the calculation of Alternate Minimum Tax (AMT).

Tax Treatment when tendering NSOs - Generally NSOs can be granted to employees, consultants, directors and other service providers.

When the option holder, who is exercising NSOs, is an employee, and if the shares are tendered without holding them for at least 1 year, the sales proceeds in excess of the exercise price are treated as ordinary income and subject to ordinary income tax rates (federal and state) and FICA tax withholding which is reported on Form W-2, Wage and Tax Statement. However, if the exercised shares are held for 1 year before these are tendered the sales proceeds in excess of the exercise price are treated as long term capital gains.

When the option holder is a service provider other than an employee the amounts after deducting the cost of the exercise price from the gross proceeds will be reported on Form 1099-NEC, Nonemployee Compensation. If the tender offer is through a brokerage platform, the broker would have reporting obligations for the sale and may issue a 1099-B, Proceeds From Broker and Barter Exchange Transactions, as well.

In a tender offer how to select which shares to exercise and sell?

Consider an employee that was granted various ISOs at different dates and the tender offer allows the employee to sell 20% of the vested shares for $3.00. In a cashless exercise scenario, which grant should the employee exercise and sell first? For these calculations assume a flat supplemental tax rate of 22%.

Since this is a cashless exercise, the spread/gain from the shares tendered will be taxed at ordinary income tax rates (federal and state) and will also be subject to FICA tax withholding . The grants from which the employee chooses to sell will determine the tax they will pay.

Although the gross proceeds don’t change, the higher exercise price on the newest grants costs more resulting in lower net proceeds. The net proceeds in each iteration are the gross proceeds reduced by the exercise cost and the corresponding tax withholdings.

About The Author

Arushi Bhandari is an MBA and a licensed CPA in the state of California. She has helped several Silicon Valley companies at different stages with their accounting and tax related issues. Her publications eBooks - STARTUP Financing, Equity and Tax and Introduction to Equity Compensation are available on Apple iBookstore, Amazon Kindle and Google Play. She maintains a public blog at www.startuptaxaccounting.com and has guest blogged at different startup platforms such as The Startup Garage and Belmont Acquisitions.

DISCLAIMER: The information provided is intended to educate the readers and a more definite answer should be based on a consultation with a lawyer or CPA. It should not be relied upon as legal advise because the information might be incomplete and answers could change depending upon circumstances and if all facts were known.

#iso #nso #tender #ipo #exercise #cashless #amt #tax

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williamtruax · 4 years ago

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NEW Form 1099-NEC vs Form 1099-MISC: What are the Differences and When are They Due?

Last week we reminded you about the deadlines for 1099s and who should get them. However, a new form was added this year, the 1099-NEC (Non-Employee Compensation), and we wanted to share some additional information about the differences between this and the 1099-MISC.

What is Form 1099-NEC?

Form 1099-NEC is a new tax form the Internal Revenue Service (IRS) introduced this year for reporting payments to non-employees and self-employed individuals. However, the “new” form really isn’t new at all! It was actually last used back in 1986 but the IRS reintroduced it this year to provide business taxpayers with their own form to report payments to independent contractors, starting from tax year 2020.

This means that Form 1099-NEC will replace box 7 on Form 1099-MISC which is where clients used to report non-employee compensation. In short, if you paid more than $600 within the calendar year to a non-employee, you must use Form 1099-NEC to report the payments.

Why the change?

Before 2015, the deadline for filing non-employee compensation forms, such as the 1099-MISC, was the end of February for paper filing and March 31st for electronic filing. Meanwhile, Form W-2, used to report employee compensation, was due on January 31st. This gap between deadlines meant that taxpayers could file taxes and get tax refunds before their non-employee income forms were even reported to the IRS. This, of course, led to taxpayers reporting lower compensation than what they actually earned.

Then in 2015, Congress decided to enact the Protecting Americans from Tax Hikes Act (PATH Act). With the PATH Act, this under-reporting problem was resolved by moving the deadline for filers to report non-employee compensation to January 31st, aligning it with the deadline for Form W-2.

However, other business payments (such as rent) were still stuck on the old deadline of February 28th or March 31st. In turn, this misalignment meant that employers had to issue multiple 1099-MISC forms in different deadlines, making everyone involved - the IRS, taxpayers, business owners, etc. - incredibly confused.

Finally, in 2020, the IRS decided to put a stop to all the confusion and reintroduce Form 1099-NEC for reporting non-employee compensation payments only.

Does Form 1099-MISC still exist?

YES! Form 1099-MISC is the tax form used to report miscellaneous income. It went through a redesign in 2020 to remove non-employee compensation, but it still exists.

The most significant change to Form 1099-MISC is in box 7, which was previously used to report independent contractor payments. In the redesigned version, box 7 is for reporting direct sales of consumer products worth $5,000 or more aimed for resale.

Who needs to file Form 1099-NEC?

If your company paid an independent contractor more than $600 during the year, you will be required to file the new Form 1099-NEC. The reportable payments need to be made in the course of your trade or business. Here are some examples of payments you need to report on the 1099-NEC:

Professional service fees to architects, designers, accountants and software engineers

Fees paid by one professional to another

Commissions to non-employee salespeople that are subject to repayment but haven't been repaid in the course of the year

You do not file this form for employees since they have the dedicated Form W-2 for reporting their salaries. You also don't file the 1099-NEC for independent contractors who are a C Corporation or an S Corporation.

You do need to file Form 1099-NEC for each individual you have withheld federal income tax for under the backup withholding rules, no matter how much you paid them.

So, Who Gets a Form 1099-MISC?

According to the IRS, you use Form 1099-MISC if you paid more than $600 during a calendar year to an individual or company for:

Rent payments (unless you pay them to real estate agents or property managers)

Prizes and awards

Other income payments

Cash from a notional principal contract to an individual, a partnership, or an estate.

Fishing boat proceeds

Medical and health care payments

Crop insurance proceeds

Section 409A deferrals

Non-qualified deferred compensation

Gross proceeds paid to an attorney

Same as with Form 1099-NEC, you are obliged to file Form 1099-MISC for each person you have withheld federal income tax for under the backup withholding rules regardless of the payment amount.

Filing deadline for 1099-NEC & 1099-MISC

The deadline for filing your Form 1099-NEC and Form 1099-MISC to the IRS for the prior year is January 31st. However, since Jan 31st falls on a Sunday in 2021, the deadline moves to the next business day, Feb 1, 2021. The same deadlines apply to delivering a Copy B to the service provider since they will need it for their tax returns.

We’d also like to remind you to check your state filing requirements for 1099 forms. Some states including Florida, Nevada, New York, Texas and Washington ensure the IRS forwards them relevant electronically filed forms. California does not, so you’ll likely need to file copies of your 1099s with them directly.

Penalties

The penalties for failing to submit Forms 1099-NEC and 1099-MISC by the deadline vary and grow depending on how late you are. If you file the forms within the first 30 days after the deadline, the fine will be $50 and increase to $100 if you file before August 1st. However, if you happen to file on or after August 1st, the penalty is $260!

If you can't make it on time, it's best to ask for an extension which you can do by submitting Form 8809.

William D. Truax, E.A. and his friendly team of licensed tax preparers have been helping individuals and businesses with complicated tax forms for over 30 years. He is licensed to represent taxpayers before the IRS and is also a member of the Bar of the United States Tax Court.

If you need assistance determining which 1099 to use or have questions about the new 1099-NEC form, please CONTACT US right away. We’re here to help!

#Taxes #Tax Forms #Tax Return #Small Business #Corporate

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file1099 · 2 years ago

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The IRS has provided the following guidance for handling 1099-K tax reporting errors on your return

The IRS provided advice on how to resolve problems with Form 1099-K for third-party payments when filing taxes.

According to Jim Guarino, managing director at Baker Newman Noyes, if you can't fix 1099-K problems, you must address the form in your return to prevent "matching errors" from the IRS.

There has been a surge of misunderstanding over tax reporting for e-commerce firms like eBay, Etsy, and Poshmark as well as payment programmes like Venmo and PayPal. But this week, the IRS clarified its position in a report.

More than 200 transactions totaling more than $20,000 will still be required in 2022 in order to file Form 1099-K, which informs the IRS of payments made to third parties for business purposes.

When the 2023 threshold decreases below $600 for even a single transaction, that is expected to change for the upcoming tax season.

In the interim, regardless of whether you receive Form 1099-K, you must continue to record company income, the IRS stated in a news release on Thursday. The federal agency states that "all income must be reported, unless it is specifically exempted by law."

Mistakes in 1099-K reporting are a problem.

Although more taxpayers should receive Form 1099-K next season, it's likely that some businesses may have mistakenly sent out the 2022 form for personal transfers to some filers or reported inaccurate amounts.

Here's why it matters: According to Jim Guarino, a certified financial planner and managing director of Baker Newman Noyes in Woburn, Massachusetts, if the IRS receives tax forms and you don't include those on your return, it causes a "matching error" for the organisation.

In essence, he added, the IRS compares the data it receives from third parties to the data on a tax return. If there is a discrepancy in the amounts, a tax notice might be issued.

Fixing 1099-K reporting issues

This week, the IRS updated its instructions on what to do if you received a Form 1099-K by mistake or the amount was off.

The IRS stated that some taxpayers may have received Form 1099-K inadvertently.

The IRS stated that in some other situations, such as for transactions involving friends and family or expense pooling, the form may have been sent incorrectly.

The agency advises getting in touch with the issuer directly to fix 1099-K errors. However, if you are unable to receive a timely update, the IRS advises zeroing out the income on two lines of Schedule 1 and indicating on both lines that "Form 1099-K Received in Error" was received.

· Line 8z of Part I, "Other Income," reads, "(Add Income).

· Line 24z of Part II, "Other Adjustments" (offset Income).

Alternately, the IRS stated in the FAQs page updated this week that you can enter both the gross proceeds and the offsetting negative amount on Line 8z for tax year 2022.

Naturally, giving a suitable and understandable explanation for the offsetting adjustment is also a crucial component of accurately reporting this information, according to Guarino.

If you sold personal belongings at a loss and received Form 1099-K, you can take the same actions, according to the IRS. Both can be listed under the heading "Form 1099-K Personal Item Sold at a Loss".

However, you must fill out Schedule D and Form 8949 to declare profits as a capital gain.

#form 1099 #1099 online filing #form 1099 online #1099 nec form #1099 k #1099 k form #1099 k filing #irs form 1099 k form #irs 1099 k filing #efile 1099 k form #1099 misc form

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ailtrahq · 1 year ago

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Two federal agencies of the United States — the Department of the Treasury and the Internal Revenue Service (IRS) — have released a set of cryptocurrency regulations proposal detailing brokers' reporting requirement.The Office of Advocacy of the U.S. Small Business Administration revealed that the proposal around Crypto regulations for brokers was released on Aug. 29, as it explained:“The proposed rules would require digital asset brokers, including Trading platforms, payment processors, and certain hosted wallet providers, to report gross proceeds for all sales or exchanges of Digital Assets starting on January 1, 2025.”Brokers — referred to as “digital asset middlemen” in the regulatory proposal — will also be subject to providing Information on gains and losses incurred during the sale of Crypto Assets. However, this requirement will kick in on or after Jan. 1, 2026.Gross proceeds and basis reporting by brokers and determination of amount realized and basis for digital asset transactions. Source: Federal RegisterAccording to a related document shared over the Federal Register, the proposed regulations are expected to deliver “higher levels of taxpayer compliance” as the IRS would get greater clarity on the income earned by taxpayers.The Treasury Department and the IRS have invited small businesses in the U.S. to share how the regulations would impact them, which will be supported by a public hearing scheduled for Nov. 7, 2023.Once signed into law, the regulations will require all brokers in the U.S. to file Information returns with the IRS using the new Form 1099-DA and to provide payee statements to Customers.The United States Government Accountability Office (GAO), a Congressional watchdog agency, released a 77-page report highlighting the need for stricter regulations around cryptocurrencies.blockchain technology—like #cryptocurrency—could offer faster, cheaper financial transactions. But recent Price crashes & bankruptcies have raised concerns about gaps in federal regulations that could put Consumers at risk. Our new report & video explore: pic.twitter.com/nxHrk1g5dQ— U.S. GAO (@USGAO) July 24, 2023 The report identified the spot markets for nonsecurity Crypto Assets as the center of a regulatory gap and stated:“By designating a federal regulator to provide comprehensive federal oversight of spot markets for nonsecurity Crypto Assets, Congress could mitigate financial stability Risks and better ensure that users of the platforms receive protections.”On the other hand, traditional Assets in that category enjoy robust regulation, the report noted.

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dhrachth · 7 years ago

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Income Tax Returns

I do my own taxes. It takes about an hour. A lot of my co-workers, who I know don’t have anything more complicated to report than I do, take theirs to an accountant and just waste $60 on something they could easily do themselves if they were less intimidated.

A U.S. federal tax return basically has three parts:

1) Income.

If you’re self employed or have your own business this can involve a lot of records and math. Also if your income is from stock trading or other kinds of investments or you’re getting pension or disability payments, it can be kind of complicated.

However, if all you have is wages, interest, and/or contract payments--things you get W-2s and 1099s for--you just have to add up the numbers in the income boxes on the forms you were sent.

2) Deductions.

These are things you spent your income on that aren’t taxable. So the more deductions you have the less you’ll owe in the end.

You can take the standard deduction--which is a set amount that is listed on the side of the tax form. If you don’t have business expenses, major health issues, or a mortgage, the standard deduction is probably your best option.

Or, if you think you have enough deductible expenses for the year to add up to more than the standard deduction, you can add them up individually by itemizing. This can get kind of complicated, but again the majority of people don’t have to and probably shouldn’t itemize.

Then you subtract your deductions from your income to find your adjusted gross income. You look your adjusted gross income up on the tax table chart and see what federal taxes you owe. Then you proceed to the third step.

3) Payments and Credits.

The payments part is pretty straight forward. Just get the numbers off your W-2s and 1099 and add them up.

Credits are where the government reduces your tax bill for one reason or another. The Earned Income Credit is a big one, it basically gives the working poor a tax break. You can also get credits for things like going to school or investing in a 401(k). There are work sheets for each credit in the instruction book. You might end up doing quite a bit of figuring, but a lot of people can pretty quickly make their way through the list because they don’t qualify for any of them.

And at this point you’re basically finished. If your payments and credits are more than the taxes you owe, you get a refund. If it’s the other way around, you owe the IRS.

Yes, if you have a lot going on in your life, income tax returns can get complicated. But, for a lot of people it is as simple as:

Income off W-2 - standard deduction = taxable amount

Look at a chart.

See if payments on W-2 are more or less than the number on the chart.

#personal taxes #US #adulting

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asfeedin · 5 years ago

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Five Important Warnings As The Paycheck Protection Program Opens Back Up

WASHINGTON, DC – APRIL 07: U.S. President Donald Trump and Treasury Secretary Steven Mnuchin (L) … [+] participate in a video conference with representatives of large banks and credit card companies about more financial assistance for small businesses in the Roosevelt Room at the White House April 07, 2020 in Washington, DC. In addition to the aid provided to small businesses by the $2.2 trillion CARES Act, Treasury Secretary Steven Mnuchin has asked lawmakers for an additional $250 billion for the Paycheck Protection Program, which helps those businesses secure loans from banks. (Photo by Doug Mills-Pool/Getty Images)

Getty Images

After passing new stimulus legislation this week, Congress is set to add $310 billion to the Paycheck Protection Program (PPP). The second round of applications will officially open soon. And whether you’re waiting on an already submitted application or you’re itching to apply, here are five things to remember as you get ready for PPP to open back up.

1) Be prepared

While $310B seems like a lot of money (who am I kidding, it is a lot of money), we saw the last $349B run out within two weeks. And that’s without all of the banks starting on time and many of the FinTech companies not being allowed to participate. So, don’t sleep on this if you really need the money (as a lot of you do), especially if you are self-employed, an independent contractor or a freelancer who got a late start on applying.

You can prepare by determining which lender you’ll be applying to and what you’ll need to provide. Unfortunately requirements differ from lender to lender, but here are some of the most common items lenders require.

For companies with employees:

Tax Form 940 or 943 (Agriculture) from 2019, if filed OR

2019 Payroll processor records including gross salaries and wages similar to those produced by acceptable payroll providers such as ADP, Paycom, SAP, Ceridian, Intuit INTU /Quickbooks, Paylocity, Workday WDAY , Paychex PAYX

2020 Tax form 941 or Payroll processor records for the period between Feb 14-29, 2020

For sole proprietors or self-employed without employees

1040 Schedule C, if filed for 2019 OR

Draft 1040 Schedule C for 2019 if not filed

Income and Expenses (Profit & Loss Statement)

For independent contractors:

Form 1099-MISC for 2019, for services rendered as an independent contractor

2) Watch what you sign

As the most recent funding bill was being negotiated, U.S. Senator Marco Rubio (R-FL) claimed the Small Business Committee which he chairs will use subpoena power to identify anyone who gave a false certification of the loan. He said that businesses applying for a PPP loan must certify that they’ve been harmed by the crisis and need the PPP Loan to operate. Additionally, he claimed any company with revenue to cover operations isn’t eligible.

The problem with these statements is that you don’t have to certify to either of those things. According to the SBA’s final application, you certify that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the applicant.” I’d be hard pressed to name any small business that doesn’t face current economic uncertainty in the face of a global pandemic and a nation that, for the most part, is shut down.

You also certify that the “funds will be used to retain workers and maintain payroll or make mortgage interest payments, lease payments, and utility payments, as specified under the Paycheck Protection Program Rule.” I don’t see how that translates into “any company with revenue to cover operations isn’t eligible.” That has never been stated before this tweet, as evidenced by 71 Publicly Traded Companies getting PPP funding the first round and institutions like Harvard getting stimulus money.

All this shows that CARES Act programs continue to be surrounded by confusion, uncertainty and conflicting information. The SBA provided additional guidance for PPP in an FAQ document just this morning. Answer 17 says that “borrowers and lenders may rely on the laws, rules, and guidance available to them at the time of relevant application.” Additionally, answer 31 still uses the vague certification that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the applicant.” Although it does add “it’s unlikely that any publicly traded company with substantial market value and access to capital markets will be able to make the required certification in good faith.”

In the end, just conduct your due diligence when signing and certifying the loans.

3) Funds from this program may block help from other programs

The confusion deepens when we consider that the government really hasn’t clarified how all of the new CARES Act provisions will relate to one another. The EIDL advances that were promised within three days— originally estimated at $10,000 and since cut to $1,000/employee — are finally coming through. Additionally, this week a lot of state unemployment programs opened up giving access to independent contractors, freelancers and self-employed. But especially for those business owners, we don’t know exactly how these benefits will interact with each other.

Previous guidance stated that EIDL and PPP loans must be used for different expenses in order for the PPP to be forgivable. But since the EIDL and PPP funding is coming at the same time, business owners will have to be careful about double counting expenses for the same funds. This is especially critical when 75% of PPP loan proceeds need to be used for payroll in order to be forgiven.

Also it’s important to remember if you intend to use the Employee Retention Credit, you can’t take the PPP loan at all.

It will take time to straighten out all the conflicting provisions of this program, especially when it comes to loan forgiveness and deducting expenses. Things are likely to get messy. So just do the best you can to retain good records under the latest guidance.

4) You don’t have to go through your bank

Many of you have run into problems applying either because your bank wasn’t up and running yet or your bank wasn’t accepting applications at all. Congress has opened up the application process to FinTech companies as well, so you can use them to apply too. I’ve created a list here. Some companies are queueing up applications for once the funding is officially passed.

Just remember that while you don’t have to apply through your bank, you shouldn’t submit multiple applications. Regulations state very clearly that you can’t have two PPP loans.

5) This likely won’t be the last time this happens

Like the last round, this money will likely go fast. Many experts expect these funds to be exhausted within a week or so. What does that mean? Get your documents in order, and be ready to apply again if you get locked out of this round. You’ll likely need quite a bit of patience, which I know is hard given the current chaos and the desperate need for help. I’ll continue to update you as we get more information.

In case you missed any other insights to the Federal Loan programs you can find them here:

Getting Cash For Your Small Business Through The CARES Act

Frequently Asked Questions On Small Business Loans In Coronavirus Relief CARES Act

How to Calculate Payroll Costs For Your Paycheck Protection Loan

Banks and Fintech Companies Accepting Paycheck Protection Loan Applications From New and Non-Bank Customers

What the self-employed and independent contractors need to know about updated Paycheck Protection Program Regulations

Self-Employed and Struggling? How to Choose Between Unemployment and the Paycheck Protection Program

Full coverage and live updates on the Coronavirus

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Tags: CARES Act, congress, IMPORTANT, independent contractor, opens, Paycheck, Paycheck Protection Program, Program, Protection, SBA, small business, Warnings

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#IFTTT #WordPress #Asfeed.in #asfeed #asfeedin #asfeed blog

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cladeymoore · 5 years ago

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Coinbase resources for 2019 tax returns

Each year, US taxpayers with taxable crypto events are required to report their gains or losses to the IRS. If you’re a US taxpayer who sold, used, or converted crypto in 2019, you may owe taxes on those transactions. We’ve outlined what to expect from Coinbase and the resources available to you. Our goal is to help all crypto traders better understand crypto taxes by providing tax resources for Coinbase customers as well as the broader crypto community.

What may need to be reported?

If you sold crypto, converted one crypto for another, or received crypto from XTZ Staking Rewards, USDC Rewards, Coinbase Earn, or referrals, these are all taxable events that may need to be reported. You can access your Transaction History report from your Coinbase account to see the transactions you made in 2019.

What forms will Coinbase provide?

For 2019 tax reporting, only some segments of Coinbase users receive paperwork from Coinbase during tax season:

Coinbase.com customers will only receive an IRS Form 1099-MISC if they have received a total of $600 in earnings or more from Coinbase Earn, Staking Rewards, and USDC Rewards.

Coinbase Pro and Prime customers who meet a threshold of more than $20,000 in gross proceeds and 200 transactions in 2019 will receive an IRS Form 1099-K; so will customers on those platforms who meet lower thresholds in AR, DC, MA, MS, NJ, and VT (more information here).

Learn more

To learn more about US taxes on cryptocurrencies, check out our 2020 Crypto Tax Guide. For more on Coinbase tax information reporting or our partnerships with TurboTax and CoinTracker, check out our Tax Help Center.

Coinbase customers can get a discount to TurboTax products using this link, and take advantage of CoinTracker for free if they have 200 or fewer transactions here.

Our goal is to be the easiest-to-use cryptocurrency platform by providing the tools and resources that help customers approach tax season with confidence.

Disclaimer: Coinbase does not provide tax advice and this blog should not be viewed as such. For questions relating to your specific situation we strongly recommend speaking with a tax professional.

Coinbase resources for 2019 tax returns was originally published in The Coinbase Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.

from Money 101 https://blog.coinbase.com/coinbase-resources-for-2019-tax-returns-812cff8ec32a?source=rss----c114225aeaf7---4 via http://www.rssmix.com/

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onlinemarketinghelp · 5 years ago

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What Is Schedule D? Here Is an Overview of the Schedule! https://ift.tt/35a61Bc

If you have capital gains or losses, or you had proceeds from the sale of your home, you're going to be using Schedule D for your taxes. But you may have never heard of it before.

For most people, their tax software or accountant will help with this form. But you may have questions about how it works, where to find it, or even what your tax implication may be.

Let's break down exactly what the Schedule D is, and how you should use it.

Quick Navigation

Schedule D Basics

Format of Schedule D

Form 8949

Declaring Losses

Schedule D Basics

Schedule D is used to report income or losses from capital assets. Assets owned by you are considered capital assets. These include your home, car, boat, furniture, and stocks, to name a few. There is a lengthy list of items that are not capital assets, which you can see on page D-2 of the Schedule D instructions.

Schedule D is where you list the total of asset proceeds with their cost bases. The cost bases are derived from specific asset entries on Form 8949, which was new for the year 2011. Schedule D was updated to accommodate Form 8949.

Cost basis can be calculated based on FIFO (first in, first out), average, or something specific you tell your broker. You can do this by sending a letter to your broker, letting them know how you’d like the cost basis calculated.

For example, you want to minimize your gain. You can do that by selling shares with the highest cost basis. FIFO is the IRS “default” method. It also yields the highest taxes. The average cost method is in between the FIFO and specific cost basis methods.

The average cost method is the simplest method for determining the cost basis. You might pay a little more in taxes when using this method but it will also save you time in having to do any tedious calculations. Note that you do not need to calculate a cost basis for assets in a retirement account.

Capital gains are not just about stocks. If you sell your home for more than you paid for it, you’ll have capital gains. When you sell your home, you’ll need to report it on Form 2119 (Sale of Your Home).

If the home is your primary residence, you can take advantage of a 121 exclusion and avoid capital gains. As you might expect, there are some rules that must be met to take advantage of a 121 exclusion. In the five years prior to the sale of the home, you must have lived in it for an aggregate of at least two years. A 121 exclusion allows you to exclude up to $250,000 in gains as an individual and $500,000 for joint filers.

As an example, you bought a house for $200,000 and five years later sold it for $300,000, resulting in a $100,000 gain. You lived in the house for two years during those five years. The $100,000 gain can be excluded from your income.

If you rented the home during those five years, things get more complicated and the exclusion may not apply. Additionally, you must meet the use and ownership test. You’ll want to speak with your accountant for clarification.

Let’s look more closely at the format of Schedule D.

Format of Schedule D

IRS Schedule D (1040) is broken up into three main parts, with each being labeled. The first part is for short-term gains and losses, which are those held for one year or less. The second part is for long-term gains or losses, which are held for more than one year. The final section is the summary.

Short-term gains are taxed at your ordinary income tax rate. Long-term gains are taxed at 0%, 15%, and 20%, depending on your income. A higher income will, of course, result in more taxes. The 0% rate applies to those making $0–$39,375 for single filers and $0–$78,750 for those who are married, filing jointly.

You can learn more about the capital gains tax brackets here >>

Form 8949

As mentioned above, Form 8949 contains individual entries for each capital gain or loss. If you received any 1099s (1099-B or 1099-DIV), your capital gains or losses should already be reported to the IRS. In that case, you do not need to fill out Form 8949.

Form 1099-B comes from your broker. Form 1099-DIV is for dividends from savings accounts, mutual funds, or other sources.

Declaring Losses

You can declare up to $3,000 in losses ($1,500 for married, filing separately) on Schedule D, line 21.

If you have more than $3,000 in losses, the remainder can be carried forward for future years. For example, let’s say your stock trading for the year resulted in $5,000 of losses. $3,000 can be reported on Schedule D and $2,000 can be carried forward. The $2,000 loss will be applied the next year to offset income.

After Schedule D has been completed, its results are transferred to Form 1040. The results of Schedule D will impact adjusted gross income on Form 1040. Just like many of the other related 1040 forms, it’s important to get your cost basis and any losses right so that your income is reduced and you don’t end up paying taxes on phantom income.

Filing Your Taxes

Unless you're filing your taxes by hand, you don't really need to know the intricacies of the Schedule D. Your tax software program, or accountant, will handle the details of filing this form in.

However, it's important to realize that having capital gains and losses will likely push up the costs of doing your taxes - you'll either need a premium tax software or you'll pay your tax preparer more.

Check out our guide to the best tax software for investors here >>

The post What Is Schedule D? Here Is an Overview of the Schedule! appeared first on The College Investor.

from The College Investor

If you have capital gains or losses, or you had proceeds from the sale of your home, you're going to be using Schedule D for your taxes. But you may have never heard of it before.

For most people, their tax software or accountant will help with this form. But you may have questions about how it works, where to find it, or even what your tax implication may be.

Let's break down exactly what the Schedule D is, and how you should use it.

Quick Navigation

Schedule D Basics

Format of Schedule D

Form 8949

Declaring Losses

Schedule D Basics

Let’s look more closely at the format of Schedule D.

Format of Schedule D

You can learn more about the capital gains tax brackets here >>

Form 8949

Form 1099-B comes from your broker. Form 1099-DIV is for dividends from savings accounts, mutual funds, or other sources.

Declaring Losses

You can declare up to $3,000 in losses ($1,500 for married, filing separately) on Schedule D, line 21.

Filing Your Taxes

Unless you're filing your taxes by hand, you don't really need to know the intricacies of the Schedule D. Your tax software program, or accountant, will handle the details of filing this form in.

Check out our guide to the best tax software for investors here >>

The post What Is Schedule D? Here Is an Overview of the Schedule! appeared first on The College Investor.

https://ift.tt/2AIQkCK October 04, 2019 at 10:15AM https://ift.tt/2obZXqU

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elizabethcariasa · 4 years ago

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It's time for post-filing tax record keeping

It's been almost a week since Tax Day 2015. That's why today's Tax Form Tuesday is celebrating Form 1040.

Actually, this week's feature includes not just the actual tax return you recently sent to the Internal Revenue Service, but also the many forms and schedules that accompanied your return, plus all the associated documents you used to complete it.

Yep, we're talking tax record keeping.

There's no federal tax law or IRS regulation detailing a preferred way to keep your tax records. That's because every taxpayer situation is different.

But the one constant is that you do need to hang onto any material that will help you answer any filing follow-up questions the IRS might have.

Again, since everybody's taxes are different, this is a broad look at tax records. And since I tend to err on the side of over-documentation, it is a bit long. So let's get started.

Your 1040: The main record everyone should have and keep forever — more on how long you need to keep tax material later — is your actual form 1040.

Not only is a 1040 a good indicator that you fulfilled your annual tax-filing obligation, but you'll want it handy if the IRS comes to with questions about something on it. You'll also need the form's original information if you later find you need to file an amended return.

1040 forms also come in handy for non-tax reasons, such as applying for a loan. And your return is a great reference and guide for filing future tax returns.

Requesting Old Tax Returns If you don't have all your old 1040s, here are some bonus Tax Forms Tuesday docs you can use to get your prior filings or the information in them from the IRS.

Request a copy of a previous return by sending the IRS Form 4506, Request for a Copy of Tax Return. There is a charge for such copies.

If you don't want to pay, you can opt instead to get a free tax transcript, which is a printout of the key info entered on your return. Getting this is easy to do online at Get Transcript or by calling the IRS toll-free at (800) 908-9946. You also can file Form 4506-T, Request for Transcript of Tax Return, or Form 4506T-EZ, Short Form Request for Individual Tax Return Transcript, to get the information.

With the enactment of the Tax Cuts and Jobs Act (TCJA) that took effect with the 2018 tax year, the Form 1040 was changed. Now it's just one (instead of the previous three) and it has, this year, just three (instead of six) associated schedules. You need to keep a copy of those schedules, too, as well as any other forms you sent to the IRS.

Make a copy, either digital or paper or both, of your full, final 1040 et al that you filed.

Income: Of course, the main reason for filing a 1040 is to report your income. So you also should keep all the records that show what you earned. There are many sources of income, such as wages, dividends and interest and partnership or S corporation distributions.

The type of records you have to prove your income depends on how you got it. Your salary, for example, will be on your W-2. Investment earnings show up on a variety of 1099 forms.

You also might want to hold onto your final pay statement/paycheck stub of the tax year. It could show potentially deductible expenses withheld from your paycheck.

The bottom line is that any document that shows you got paid needs to go into your files.

True, these income records tend to work in the tax collector's favor, showing that you got money from which Uncle Sam is due a part. But these records also can prove that some amounts, such as tax-exempt interest or qualified investment earnings, are not subject to tax or are taxed a lower rates.

Expenses: Any records that show the expenses for which you claim a tax deduction or credit need to be saved. When it comes to deductions, this includes records of such things as medical expenses, charitable contributions, mortgage interest, real estate taxes, state and local income taxes and property losses in a major disaster. Savvy readers have realized that these are expenses usually claimed when you itemize on Schedule A.

There are, however, other deductions — technically known as adjustments to income and still called, by me anyway, above-the-line deductions — that anyone can claim, regardless of whether they use the standard deduction or itemize. These now are on the Form 1040 Schedule 1 and include such things as educators' out-of-pocket expenses, contributions to retirement accounts and insert you paid on a student loan.

The same is true for any credits you claimed. Say you took courses to improve your work skills. You'll want those payment receipts to show that your Lifetime Credit Claim was legit. The same for the records to the caretakers who, before the coronavirus sent all of us home with our families, took care of your youngsters after school until you finished up at work and picked them up. That will substantiate any questions an IRS auditor might have about your child care credit claim.

These proof of payment documents include, but are not limited to, official receipts, financial account statements, credit card statement or canceled checks. Note that while the IRS will welcome these documents, they alone aren't necessarily sufficient to convince an auditor that an item claimed on your return is allowable. So also keep other documents that will help prove that the item is allowable.

Even some official tax correspondence could come in handy, as long as you have it handy.

This year, for example, millions received COVID-19 economic impact payments. That amount is an advance tax credit for the 2020 tax year. Folks who didn't get the full $1,200 credit plus any extra for qualifying minor children might be able to get the rest when they file their returns next year. That's why the follow-up letter indicating you got a certain stimulus amount is a tax document you need to save.

Again, your Form 1040 that you filed away is a good guide as to what expense documentation you need to keep.

Home: Your home could provide some immediate tax claims, such as the previously mentioned real estate tax deduction. But you also need to keep records that will help when you sell.

In most cases, homeowners won't owe tax on the profit from the sale of their primary residence. But if you're close to that no-tax threshold, which is $250,000 for a single home owner or $500,000 for a jointly filing couple, good records will help you determine your home's basis or value. That basis is what you subtract from your sales proceeds to determine if you have a gain or loss on your home sale.

If you used part of your home for business purposes or at some point rented it, then you'll also need thorough home records to figure any related depreciation recapture.

Basis starts with what you paid for your property. It's adjusted over the years by improvements you make to the place. So hang onto to all your home-related work receipts.

Even if you don't have any tax-related home issues in a (or several) tax years, you need to keep your residential records until you sell … and beyond. Remember, the IRS has several years — more on these statutes of limitations coming up — to come back to you with questions about something on your return or not there, such as nontaxable home sale profit.

And if you're lucky enough to have a vacation/second home, keep all the similar material for that property, too.

Investments: While investment information is part of your income records, you need to keep more than an asset's single tax year payout amount. You'll want documentation to help you to determine your basis in an investment, just like that of your home, and whether you have a gain or loss when you sell it.

Investments include stocks, bonds, and mutual funds and in most cases, transactions made throughout a tax year that produce taxable consequences. This includes not just your purchases of the investment vehicles, but also any reinvested dividends and stock splits.

These asset actions will be used in addition to your records showing your purchase price, sales price and commissions to determine how much tax is due, either at ordinary tax rates for short-term sales or lower long-term capital gains on assets held for more than a year.

As with your real property records, hang onto all investment records for as long as you own the assets. And as with your real property records, hold onto them for a while after you sell to ensure you clear the time frame that the IRS has to review your filings of which they are a part.

How long to keep tax records: OK, you've got all this stuff and you've stored it in a filing cabinet or on a thumb drive. Now you want to know how long you must hold onto it, especially those paper files.

The old joke is forever, since technically the IRS can come asking questions any time it suspects a taxpayer committed fraud.

But more realistically for most of us who do our best to get our tax returns right each year, there are some shorter time periods in connection with your tax records. These are the period of limitations set for particular tax circumstances.

These time frames are how long you have to amend your return to claim a credit or refund or how long the IRS has to review your filing and assess additional tax in connection with your return.

If you —

Then you have —

File a return and circumstances 2, 3 and 4 below don't apply to you

3 years

Don't report income that you should and it is more than 25% of the gross income shown on your return

6 years

File a fraudulent return

No Limit

Don't file a return

No Limit

File a claim for credit or refund after you filed your return

The later of 3 years or 2 years after tax was paid

File a claim for a loss from worthless securities or bad debt deduction

7 years

The years noted above generally refer to the time period beginning after the return was filed. Returns filed before the due date are treated as being filed on the due date.

Burden of proof: Record keeping sometimes can seem like a bigger hassle than actual tax filing. I totally get that. As I noted, I tend to err on the side of over-saving. During this coronavirus self-isolation period, I took advantage of the time to finally clear out almost two decades of tax material.

This is what I've been doing in COVID quarantine. Decades of old files purged. A few more filing boxes 📦 to go through, but now I can walk into my office's walk-in closet! pic.twitter.com/YOyKJaGzFC

— Kay Bell (@taxtweet) June 11, 2020

True, much of that was work-related tax documents. But I also cleared out some personal tax files, too. But not too many.

The main reason I'm a borderline hoarder when it comes to taxes is that the burden of proving your tax return is complete and accurate falls on you. You must convince the IRS that all your claims were legitimate.

The best way to do that is to show them proof, either on paper or digitally, of why you took that particular tax break.

You also might find these items of interest:

7 tax record keeping FAQ

The importance of good, and separate, business records

Reconstructing tax & other records after a natural disaster