Which form should you use to file your federal income taxes? These days, most people use a computer to prepare and e-file their tax forms. It’s easy, because tax software selects the right form for you. If you file on paper, you’ll need to pick the right form to use.
Before you decide, check out IRS Free File on IRS.gov. It has free tax software or a fillable forms option that allows you to fill in your tax forms using a computer. You can e-file the completed forms for free!
If you still prefer paper and pen, here are some tips on how to choose the best form for your situation.
You can generally use the 1040EZ if:
• Your taxable income is below $100,000;
• Your filing status is single or married filing jointly;
• You are not claiming any dependents; and
• Your interest income is $1,500 or less.
The 1040A may be best for you if:
• Your taxable income is below $100,000;
• You have capital gain distributions;
• You claim certain tax credits; and
• You claim adjustments to income for IRA contributions and student loan interest.
However, reasons you must use the 1040 include:
• Your taxable income is $100,000 or more;
• You claim itemized deductions;
• You are reporting self-employment income; or
• You are reporting income from sale of a property.
Read more about which form to use in IRS Publication 17, Your Federal Income Tax. The quickest way to get tax forms and instructions is to visit IRS.gov and click on the ‘Forms & Pubs’ tab. New tax forms often appear online well before the printed forms are available.
You can also have forms mailed to you by calling the IRS at 800-TAX-FORM (800-829-3676), or you can pick them up at a local IRS office. Some libraries and post offices also have tax forms.
By Donna H. Laubscher, CPA
Every U.S. person has a lifetime exclusion from federal estate and gift taxes. The 2010 Tax Relief Act created the “deceased spousal unused exclusion amount” (DSUEA). (See separate article describing the DSUEA here.) For a surviving spouse, the DSUEA is the lesser of the basic exclusion amount or the basic exclusion amount of the last deceased spouse less the amount of the exclusion used by the last deceased spouse. Thus, the surviving spouse’s “applicable exclusion amount” is that individual’s basic exclusion amount plus the DSUEA, and the word commonly used for this transfer of exclusion amount is “portability”.
For example, if the last deceased spouse used $2 million of their basic exclusion amount of $5 million, the DSUEA is $3 million, and the surviving spouse’s exclusion available is their own $5 million plus the DSUEA of $3 million, totaling $8 million. However, to have the DSUEA available, you must timely file an estate tax return (Form 706) for portability purposes. Exemption amounts available during 2011, 2012 and 2013 are $5,000,000; $5,120,000; and $5,250,000, respectively.
An estate tax return is due nine months after the decedent’s date of death, and can be extended for an additional six months. Previously, if you did not file the estate tax return by the due date, and later realized you wanted to file an estate tax return to transfer the DSUEA to the surviving spouse, you had to request a Private Letter Ruling from the IRS to be able to do so. However, the IRS issued a new Revenue Procedure (Rev. Proc. 2014-18) on 1/27/2014, allowing an extension of time to file until December 31, 2014, for decedents dying on or after January 1, 2011, and on or before December 31, 2013. This is largely due to people having missed the filing deadline and the IRS receiving large numbers of these Private Letter Ruling requests, including many from same-sex couples whose marriages are now recognized for federal tax purposes.
To qualify for this one-time extension of time to file a Form 706, the decedent must be a U.S. citizen with a surviving spouse, not having been required to file an estate tax return (assets valued under the basic exclusion amount as of date of death), and an estate tax return must not have been filed. At the top of the Form 706, it must state “FILED PURSUANT TO REV. PROC. 2014-18 TO ELECT PORTABILITY UNDER Code Sec. 2010(c)(5)(A)”. Note that if the decedent died after December 31, 2013, the extension under Rev. Proc. 2014-18 is not available and a Private Letter Ruling will need to be obtained.
By Julie K. Weissmueller, CPAPosted on March 4 2014 by admin
The estate planning landscape radically changed when the Tax Relief Act of 2010 authorized estates of decedents dying after 2010 to elect to transfer any unused exclusion to the surviving spouse and when the act drastically raised the exclusion amount to $5,000,000.
In the past, with lower lifetime estate exclusion amounts, a common estate plan had the decedent’s assets going to a credit shelter or bypass trust, thereby guaranteeing the use of the decedent’s estate exclusion.
After 2010, the law allowed a transfer, commonly known as portability, of the DSUE (deceased spousal unused exclusion) to the surviving spouse as long as an Estate Form 706 was filed. The surviving spouse could then apply the DSUE amount received from the estate of his/her last deceased spouse against any estate tax liability arising from subsequent lifetime gifts and transfers at death.
In 2013, with new higher income tax rates and the Net Investment Income Tax (NIIT) there are additional reasons to leave assets to the surviving spouse and elect portability instead of doing traditional planning using a credit shelter trust.
When doing estate planning, each person’s situation is unique and many important considerations are not related to taxes. Using the below chart is one way to discuss the two options with our clients.
As laws change and our clients’ needs evolve, taking a second look at old estate plans may lead to an opportunity to help them using new solutions.
By Melinda Nelson, CPAPosted on February 27 2014 by admin
In case you were not watching the coverage of the 2014 Olympic Games in Sochi, Russia, you may not be aware that The Tonight Show moved back to New York City from the left coast. Or, maybe you have been busy refreshing the draft forms page on IRS.gov to see the latest forms that have been released for filing season and have been unable to keep up with pop culture.
So, in case you missed it – the Tonight Show, starring Jimmy Fallon is now originating in New York City. And while NBC may be saying that the show moved for creative reasons, a $20 million tax break probably helped to sweeten the deal.
While other shows may benefit from the credit, the Associated Press has reported that the credit was created to target The Tonight Show. The language in the credit is very specific – It would only benefit a show that had filmed at least five years in another state before moving back to New York, spends at least $30 million in production costs and films in front of a studio audience of at least 200 people. The Tonight Show can cross all of those specifics off their tax break list.
The end result is that The Tonight Show has a new host in a new city and New York is banking on the credit turning into an economic boon to the city.
By Donna H. Laubscher, CPA
Most people are familiar with the various 1099 series forms, such as the 1099-MISC, 1099-B, 1099-INT and the 1099-DIV. In the last two years, however, businesses have been receiving an unfamiliar form: the 1099-K. Fortunately for taxpayers, not much needs to be done with these forms. So, what is a Form 1099-K, and why are businesses receiving them?
Beginning in 2011, legislation passed requiring the reporting of income in the area of payment cards. This type of income includes payments received via credit cards, debit cards and certain electronic transactions. The income is reported on Form 1099-K, Payment Card and Third Party Network Transactions. Like other 1099 series forms, the 1099-K is an information return which reports the gross amount of reportable transactions to the IRS. Informational reporting has increased voluntary compliance as well as IRS collections and assessments, which is the reasoning behind the addition of the 1099-K to the 1099 family.
If you accept credit or debit cards as a form of payment in your business, you will receive a Form 1099-K from your merchant account company reflecting those payments. In some cases, you will also receive a Form 1099-K if you accept payments from a third party settlement organization.
You are not required to separately report Form 1099-K on your tax return. Use the forms in conjunction with your other accounting records to determine your gross income for the calendar year. You won’t need to submit the Form 1099-K to the IRS. Instead, you should keep the information for your records with your other tax documents.
To learn more about third party networks and payment settlement entities, visit the IRS website for Frequently Asked Questions at Payment Card Reporting Requirements.
By Lisa J. Wolford, CPA
When is 1099 reporting required? Reporting is required when businesses make payments of $600 or more in the course of trade or business in a calendar year to a single payee (exclusions may apply).
Generally, payments made for the following will require a Form 1099 (INT, MISC, DIV etc.):
- At least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest
- $600 or more in rents, crop insurance proceeds, payments to an accountant and attorney
- $600 or more for medical health care payments, including the purchase of supplies and payments for lab fees
- Payments totaling $600 or more to individual contract workers for services rendered
- Any fishing boat proceeds
- For more details, visit the IRS web site – click here!
Payment types generally include:
- Attorney, fees and gross proceeds (Due to IRS February 15th)
- Auto reimbursements, nonemployee
- Awards, nonemployee
- Bonuses, nonemployee
- Car expense, nonemployee
- Commissions, nonemployee
- Compensation, nonemployee
- Crop insurance proceeds damages
- Direct sales of consumer products for resale
- Directors’ fees
- Fees, nonemployee (i.e. accountant)
- Fishing boat crew members proceeds
- Fish purchases for cash
- Golden parachute, nonemployee
- Health care services
- Indian gaming profits paid to tribal members
- Medical services
- Mileage, nonemployee
- Nonemployee compensation
- Prizes, nonemployee
- Punitive damages
- Rental expense
- Rental income
- Substitute payments in lieu of dividends or tax-exempt interest
- Vacation allowance, nonemployee
Due date to recipient (unless indicated otherwise): January 31
Due date to IRS (unless indicated otherwise): February 28th
This information is intended to provide you with a reference any time you are making payments to vendors or service providers in connection with your trade or business. Our tax professionals are here to assist you if you have any questions or require assistance to comply with the 1099 reporting requirements.
By Livonia Winkles, EA
Related blogs:Posted on February 20 2014 by admin
Employers who paid FICA tax on severance pay to employees on a 2010 employment tax return should consider filing a protective refund claim by April 15, 2014, to ensure that they receive a refund of the FICA tax that they paid if the Supreme Court ultimately decides in U.S. v. Quality Stores that severance pay should not be subject to FICA tax.
Many employers made severance payments to employees in 2010 during the economic downturn. Severance payments are payments to terminated employees which were not attributable to the rendering of any particular employment service.
To protect any potential refund, employers should file the protective claim on Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund before the statute expires on April 15, 2014.
The Supreme Court has agreed to review a decision by the U.S. Court of Appeals for the Sixth Circuit holding that supplemental unemployment compensation benefit payments (a term which includes severance pay) were not subject to FICA tax. (U.S. v. Quality Stores, (CA 6 09/07/2012)
Court rulings have been split in past years on whether severance pay should or should not be included as wages for FICA tax purposes. On Oct. 1, 2013, the Supreme Court granted certiorari over the Quality Stores case. Thus, the circuit split will be resolved when the Supreme Court rules.
As the Supreme Court is not expected to issue a ruling on this matter until sometime in the summer, a protective claim will protect employers from losing a potential refund if the Court rules favorably and decides that severance pay is not subject to FICA.
Contact your Henry & Horne, LLP professional for additional information.
By Melinda Nelson, CPA
The IRS is singing Michael Jackson’s 1979 hit “Don’t Stop ’til You Get Enough” all the way to U.S. Tax Court as they file documents claiming Michael Jackson’s estate has severely undervalued his image and music catalog on his Federal Estate Tax Return.
The Jackson estate’s executors valued his net worth on his date of death in June 2009 at a little over $7 million, but the IRS claims it was more like $1.125 billion. So, the dilemma is determining his value on death and speculating the present value of his future popularity. The estate’s lowball estimate may be because Jackson’s public image was severely tarnished before he died due to the widely publicized allegations of child molestation.
The vast differences noted in the executors’ values versus the IRS’s values for the same assets are:
According to the IRS, the estate owes an extra $505,000,000 in taxes plus $197,000,000 in penalties. This is going to be an immensely costly and time consuming bit of litigation and in the end it will cost the estate an enormous amount of legal fees and litigation costs.
By Pamela Wheeler, EAPosted on February 18 2014 by admin
It can be so annoying to call anywhere and just want to get some answers, but you need to dial through a number of options, only to be on interminable hold.
It turns out the IRS is no different than when you call your bank or credit card company. The only trick is that we can tell you when the IRS is the busiest.
The Internal Revenue Service’s busiest time of the year is the Presidents’ Day holiday and week. During this time, especially the Tuesday following the holiday, they get many more phone calls than the rest of the year.
To try to avoid some of these delays, you may want to check out IRS.gov – some of the information you may be calling about is there – you may not even need to call the IRS! Just a couple of examples are listed below:
Where’s My Refund?: More than 90 percent of refunds are issued in less than 21 days. IRS representatives will not provide individual refund information over the telephone before then. You can easily track your refund status by using the Where’s My Refund tool. It’s available on IRS.gov. Where’s My Refund? provides the most up-to-date information available.
If you did not get your W-2: Employers are required to send to their employees a Form W-2, Statement of Earnings, by Jan. 31. Allow enough time for the form to be mailed to your address of record. If you do not receive a W-2 by mid-February, your first call should be to the employer, verifying that the employer has your correct address. After exhausting options with employers, you can contact the IRS, and the IRS will send a letter to the employer.
But – you may not want to call the week of Presidents’ Day. Good luck and happy filing season.
By Donna H. Laubscher, CPA
Okay, the Affordable Care Act is not really giving back. They are delaying some requirements. That is as close to giving back as the Treasury Department and the IRS can manage.
In final regulations that were issued on Monday, February 10, 2014, the employer shared responsibility provisions (the employer mandate) have given additional time to both large and small businesses.
Businesses that employ between 50 and 99 full time employees will have until 2016 to comply. Those that claim this exemption in 2015, which is when they were originally going to need to comply, will need to certify that the work force was not reduced below 100 employees in order to put off the employer mandate for an additional year.
Large employers, which are those with 100 or more employees, were also given additional time. The original timing was that health insurance was to be offered to at least 95% of their full time employees, beginning in 2015. That requirement has now been reduced to 70% in 2015 and 95% in 2016.
As before, those employers with 50 or fewer full-time employees are not required to provide health insurance to their employees.
Please note that a full-time employee is not necessarily what you may think of as a full time employee – it is a full time equivalent, which is being defined as any employee working 30+ hours per week – not the more standard 40 hours/week.
Now, let’s talk about you – the individual. The individual mandate that requires health insurance coverage for all people is still in effect – right now in 2014. No reprieve on the individuals.
There are many more exciting things in the final regulations, such as safe harbor examples and clarifications on some terms and employee categories. Click here for the link to read the entire set of regulations and all of the details.
By Donna H. Laubscher, CPA
There is nothing more complex than the world of taxes. We know this and yet we chose careers where we face these issues everyday. We get questions day in and day out about new tax laws, forms and news items and how they affect everyday people and businesses. Well, here at Henry & Horne, LLP we have set out to do what we do best; help everyday people understand what is going on in the world of state, local, federal, estate and international taxation. We will provide these weekly posts and we encourage you to give us feedback on those posts as well as letting us know what else you would like to know more about. Welcome to "Tax Insights." We hope you find this blog informative and worthy of your time.
Before posting a comment on a blog post please be aware that we do not give free tax advice to non-clients by email, comment response, or phone. Thank you!
- Which Tax Form Should You File?
- IRS Allows Extension for Small Estates that Want Portability
- New Estate Planning Dilemma: Portability or a Credit Shelter Trust
- The Tonight Show and Taxes
- Filing Deadline: 2010 FICA Protective Refund Claims for Severance Pay
- Don’t Stop ’til You Get Enough
- Call and Wait is Annoying – You Just Want Answers from the IRS!
- The Affordable Care Act is Giving Back?
- Top 10 Tips about Free Tax Preparation
- A Tip for Restaurant Owners