What are all these tax forms I receive for?

K1, Form 5498 and Form 1099 Muni

Barnett Becky Crop

Becky L. Barnett, EA, MBA

So many tax forms, so many questions. Unless you look at these forms all day every day, you may consider them confusing? Overwhelming? Or maybe you just want to throw them to the side and let someone else deal with them. So, what exactly do these forms mean? What are they trying to tell you?

Form K1

A K1 is a tax document that reports business activity from a flow through entity. These entities could be a partnership, S Corporation or a trust. The K1 transfers the tax liability from the entity to the individuals who have a vested interest in that entity.

Form K1 is a complex document in that it reports many different types of income. Some examples are:

  • Box 1: Ordinary income
  • Box 2: Net rental real estate income
  • Box 4: Guaranteed payments
  • Box 5 – Box 10: Investment income earned

These are just a few of the income and expense items reported on the Form K1. The numbers reported will transfer to various parts of your tax return. It is important to understand the amounts on Form K1. Contact your Henry+Horne tax professional if you are uncertain.

Don’t miss this breakdown of more of the tax forms you receive

This form is known to be one of the last forms received by the taxpayer, as it can be somewhat complex. It is important to know that a K1 is a matching document, so the IRS will know what is reported on the form. Do not ignore this form.

Form 5498

Form 5498 reports the annual retirement contributions made to your account as well as the type of retirement account you have. Because this form is not required to be filed until May 31, it is often received after you have filed your return. The reason for this is to give taxpayers time to make contributions through April 15 of the current year.

Form 5498 not only tells you the contributions you made to your retirement account, but it will also give you the fair market value of the account.

The interesting thing about Form 5498 is that it is purely informational. Taxpayers do not need to be in possession of this form (and often are not because of the due date) when they file their returns. However, make certain any amounts you claim for IRA contributions match the contribution number expected on the form to avoid any potential issues with the IRS.

Form 1099 – investments

There are many different types of Form 1099. These forms are considered informational by the IRS but will report various types of income you will receive through the year. When you have investments, the income generated by them can be reported on multiple Form 1099s.

Interest earned is reported on a Form 1099 INT. This form will report periodic interest payments earned on investments. These payments are typically taxable to you. This form will report:

  • Interest earned: Box 1
  • Penalties on early withdrawals: Box 2
  • Interest earned on U.S. bonds or notes: Box 3
  • Federal income tax withheld: Box 4

These are only a few of the many types of interest reported on this form.

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If you have portfolio income (stock investments, mutual funds) you will receive a Form 1099 DIV. This form will report any distributions received during the year on these investments. Amounts reported by this form include:

  • Ordinary dividends: Box 1a
  • Qualified dividends: Box 1b
  • Total capital gain distributions: Box 2a

Again, these are only a few of the many dividend types reported on this form.

Brokers are required to issue a Form 1099-B for any barter exchanges during the year. This form will report gains associated with the sale or trade of securities. A 1099-B will contain information such as the gross proceeds of the sale, purchase date and price, sale date and price and gains or losses associated with the sale.

Remember to consult your Henry+Horne tax professional if you have any questions or concerns about these forms, as we love to help!

Becky L. Barnett, EA, MBA, specializes in preparing tax returns for partnerships, corporations, trusts and individuals. She can be reached at (480) 839-4900 or BeckyB@hhcpa.com.