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Looking for your tax forms? Keep checking the mail: Employers are supposed to provide employees with Forms W-2 and other wage statements by February 1 in 2021. The Protecting Americans from Tax Hikes Act of 2015 (PATH Act) that was enacted on December 18, 2015, made several changes to the way we file taxes. Now, employers file copies of Form W-2, Wage and Tax Statements, and Form W-3, Transmittal of Wage and Tax Statements, with the Social Security Administration by January 31. That is also the date that Forms W-2 are due to employees. However, this year (2021), January 31 falls on a Sunday. By law, that means that forms W-2 are instead due on the next business day, which is Monday, February 1. In addition, some Forms 1099-MISC, Miscellaneous Income, and the newly re-introduced Form 1099-NEC, Nonemployee Compensation (more on that here), are also normally due to taxpayers on January 31,…

Estimated reading time: 5 minutes The Internal Revenue Service (IRS) has released the very-probably-unless-Congress-does-something-soon final version of Form 1040, U.S. Individual Income Tax Return for 2020 (downloads as a PDF). There are several notable changes to the form proposed for the tax year 2020 – the tax return that you’ll file in 2021. Page One Identifying information. There are no real changes to the identification portion of the Form 1040: this is where you list your name, address, Social Security Number (or ITIN) and note your filing status. Virtual currency. As expected, a question about virtual currency remains on the front of the Form 1040. A new cryptocurrency compliance measure for taxpayers was introduced in 2019 in the form of a checkbox on the top of Schedule 1, Additional Income and Adjustments to Income. Schedule 1 is used to report income or adjustments to income that can’t be entered directly on the front page of…

Employers must file Form W-2 and other wage statements by February 1 in 2021 to avoid penalties. The Protecting Americans from Tax Hikes Act of 2015 (PATH Act) that was enacted on December 18, 2015, made several changes to the way we file taxes. Now, employers file copies of Form W-2, Wage and Tax Statements, and Form W-3, Transmittal of Wage and Tax Statements, with the Social Security Administration by January 31. That is also the date the Forms W-2 are due to employees. However, in 2021, January 31 falls on a Sunday. By law, that means that they are instead due on the next business day, which is Monday, February 1. In addition, some Forms 1099-MISC, Miscellaneous Income, and the newly re-introduced Form 1099-NEC, Nonemployee Compensation (more on that here), are also normally due to taxpayers on January 31, but in 2021, they will be due on the next business day,…

The Internal Revenue Service (IRS) has issued final regulations relating to section 1031 like-kind exchanges. 1031 Like-Kind Requirements We call them 1031 like-kind exchanges because the rules are found at section 1031 of the Tax Code (clever, I know). The provision allows you to defer tax on gain if – and it’s a big if – you participate in a qualifying like-kind exchange that meets some pretty specific requirements: The property to be exchanged must have been held for productive use in a trade or business or for investment (and must be exchanged for a property similarly held). Personal residences or vacation homes for personal use won’t qualify.The property doesn’t have to be real estate (though it typically is). It cannot be: stock in trade or other property held primarily for sale; stocks, bonds, or notes; other securities or evidences of indebtedness or interest; interests in a partnership; certificates of…

Last year, the Internal Revenue Service introduced a draft version of a form that we haven’t seen since 1982: Form 1099-NEC, Nonemployee Compensation. Form 1099-NEC is intended to replace the nonemployee compensation part of a form many of us have come to know and love: Form 1099-MISC, Miscellaneous Income. Form 1099-MISC is sticking around for other things, like reporting gross proceeds to an attorney, Section 409A deferrals, and nonqualified deferred compensation income. But nonemployee compensation – money paid to freelancers, independent contractors, gig workers, and others that aren’t employees – will now be reported on Form 1099-NEC. Who Gets A Form 1099-NEC? The IRS says that trades or businesses need to issue Form 1099-NEC if the following four conditions are met: You made the payment to someone who is not your employee.You made the payment for services in the course of your trade or business (including government agencies and nonprofit…

The Internal Revenue Service (IRS) has announced that it will allow the use of E-signatures on certain tax forms that cannot be filed electronically. This is a temporary move intended to reduce in-person contact and lessen the risk to taxpayers and tax professionals during COVID. What does that mean? Well, some forms, like Form 1040, U.S. Individual Income Tax Return, are already set up to allow e-signatures when filed electronically. More than 90% of Form 1040s are filed electronically. But others, like Form 3115, are not: they’re intended to be signed on paper. Forcing tax professionals and taxpayers to sign by paper – and then asking the IRS to process that paper – just isn’t practical right now. As a result, the IRS is taking these temporary steps. “We take the health and safety of the nation’s taxpayers, the tax professional community and our employees very seriously,” said IRS Commissioner…

The Internal Revenue Service (IRS) has released a draft of Form 1040, U.S. Individual Income Tax Return. There are several notable changes to the form proposed for the tax year 2020 – the tax return that you’ll file in 2021. And… postcard-sized, it’s not. Let’s dive right in. Virtual currency. At first blush, the top of the return doesn’t look much different from the 2019 tax return with one rather interesting exception: the virtual currency question’s placement. A new cryptocurrency compliance measure for taxpayers was introduced in 2019 in the form of a checkbox on the top of Schedule 1, Additional Income and Adjustments to Income (downloads as a PDF). Schedule 1 is used to report income or adjustments to income that can’t be entered directly on the front page of form 1040. I noted last year that the IRS has made no secret that it believes that taxpayers are not correctly reporting cryptocurrency transactions. An IRS dive…

After weeks of waiting, tax professionals and taxpayers finally got the word from the Internal Revenue Service (IRS): amended returns can now be electronically filed. In May, the IRS had given notice that later this summer, taxpayers would be able to file Form 1040-X, Amended U.S Individual Income Tax Return electronically. Before this year, you could only amend your tax return by paper. At the best of times, that could mean a six-to-eight week wait for processing. And these are not the best of times. With a backlog of mail and some offices closed due to the pandemic, processing times are extremely lengthy. Taxpayers and tax professionals have – for years – hoped that the IRS would allow for e-filing amended returns. According to the IRS, making the 1040-X an electronically filed form has been the agency’s goal for years. It has also been a continuing recommendation from the Internal Revenue Service Advisory Council…

It’s my annual Taxes from A to Z series! If you’re wondering how to figure basis for cryptocurrency or whether you can claim home office expenses during COVID, you won’t want to miss a single letter. V is for Voluntary Withholding. You already know that if you expect to owe tax at tax time, you should make estimated tax payments. But there’s an additional way that you can pay the government so that you don’t have to write a big check at the end: you can choose to have voluntary withholding from your benefits during the year. This is similar to withholding on your paycheck and means that you should owe less at tax time (or preserve your refund if you’re entitled to one). Why might you owe? You might be receiving unemployment compensation (yes, it’s taxable), Social security benefit along with other income, Social security equivalent Tier 1 railroad retirement benefits, Commodity…

It’s my annual Taxes from A to Z series! If you’re wondering how to figure basis for cryptocurrency or whether you can claim home office expenses during COVID, you won’t want to miss a single letter. U is for Undue Hardship. If you’d read any posts on extensions – like this one – you are aware that filing for an extension is generally an extension of the time to file, and not the time to file. It’s almost the extension mantra. But did you know that there actually is an extension available for payments – but there’s a pretty high bar. First things first. The form is Form 1127, Application for Extension of Time for Payment of Tax Due to Undue Hardship (downloads as a PDF). It’s used to request an extension of time under section 6161 for payment of the tax shown on your return or an amount determined as a deficiency (an amount you…

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