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Supplementary tax forms

In this section, we’ll explore the various tax forms that cover a wide range of circumstances but don’t fit neatly into the categories of tax forms discussed in earlier articles.

 

Form 4562, Depreciation and Amortization

This form is used by individuals, businesses, and corporations to report depreciation and amortization deductions.

Depreciation and amortization are tax deduction methods used to account for the cost of long-term business assets. Depreciation is for tangible assets like buildings, machinery, equipment, furniture, and vehicles, while amortization is for intangible assets such as patents, copyrights, and business start-up costs.

  • Part I - Election to Expense Certain Property Under Section 179: Section 179 of the Internal Revenue Code allows businesses to deduct the full purchase price of qualifying equipment and software purchased during the tax year.
  • Part II - Special Depreciation Allowance and Other Depreciation: Claim special depreciation allowance for qualified property, as well as depreciation on any property placed in service during the current year.
  • Part III - MACRS Depreciation: MACRS (Modified Accelerated Cost Recovery System) is the primary method of depreciation used for federal income tax purposes. List property that you started depreciating in earlier years, or that doesn’t qualify for the special depreciation allowance.
  • Part IV - Summary: Reports the totals from the previous parts and carries these totals to other relevant forms, such as Schedule C or Form 1040.
  • Part V - Listed Property: "Listed property"  includes certain types of vehicles and equipment used for both business and personal purposes. There are special rules and limits for depreciating these items.

 

Form 8829, Expenses for Business Use of Home

This form is used if you are self-employed and use part of your home for your business. It calculates the expenses related to the business use of your home and potentially deducts these costs from your business income.

  • Part I — Part of Your Home Used for Business: This section calculates the percentage of your home used for your business. This is typically done by comparing the square footage of the area used exclusively for business to the total square footage of your home.
  • Part II — I Figure Your Allowable Deduction: This includes both direct expenses (expenses that apply only to the business part of your home, like painting the office area) and indirect expenses (expenses for the entire home, which need to be allocated based on the percentage calculated in Part I). Here you list any direct expenses — these are costs that relate only to the part of your home you use for your business, like painting or repairs in that area.
  • Part III — Depreciation of Your Home: Calculate the amount of depreciation you can claim for the business use of your home, which effectively represents the wear and tear on your home from using it for business. It's based on the cost or other basis of your home, the recovery period set by law, and the percentage of your home used for business.
  • Part IV — Carryover of Unallowed Expenses to 20XX: This section is for expenses not allowed this year, but which may be carried over into the next tax year. This is because the deduction for your home office is limited to the net income from your business. If your deduction is limited, you can carry over the unused portion to the next tax year.

 

Form 8889, Health Savings Accounts

An HSA is a type of savings account that allows you to contribute pre-tax dollars to pay for eligible medical expenses. This form is used to report contributions, distributions, and any earnings from your HSA.

  • Part I - HSA Contributions and Deduction: Contributions you've made to your HSA, calculations of your maximum allowable deduction, any employer contributions, and qualified HSA funding distributions are reported here. And calculations to your HSA deduction.

  • Part II - HSA Distributions: Distributions, or the money you took out of the HSA during the year, and where we'll specify whether the distribution was used for eligible medical expenses. If they weren't used for such expenses, they might be taxable.

  • Part III - Income and Additional Tax for Failure To Maintain HDHP Coverage: This applies if you failed to maintain eligibility (having a high deductible health plan coverage) for the HSA. In this case, you may owe income tax and a 10% additional tax on the amount that was used to determine a Part I deduction.

 

Form 8949, Sales and Other Dispositions of Capital Assets

This form is used to report details of your capital asset transactions. A capital asset can be almost anything you own for personal or investment use, such as stocks, bonds, jewelry, coin collections, and real estate.

  • Part I - Short-Term Transactions: Capital assets you held for 1 year or less. So, if you bought and sold a stock within a single year, it would go here.

  • Part II - Long-Term Transactions: Capital assets you held for more than 1 year. If you sold your house after living in it for several years, it would go here.

The information then carries over to Schedule D of your Form 1040, impacting your total tax liability.

 

Auto Expense Worksheet, Vehicle Business Expense Tracking

This form is for your records only. It shows the business-related expenses, mileage, and property tax calculations associated with your business-use vehicle. We’ll provide this information along with your tax return if you use your car for business purposes.

  • Profession/Business: Description of the business.
  • Description: Vehicle type.

  • Date: Date placed in service.

  • Total miles your vehicle was used: Total business miles, commuting miles, other miles driven, and total miles driven during the year.

  • Business use percentage: Business percentage for the year can be calculated by dividing the business miles driven by the total miles driven and then multiplying by 100 to get a percentage.

  • Expenses: Car expenses are listed by category with the total and the business use percentage.

  • Expense Total Amount: Business percentage total amount.

  • Standard mileage rate calculations: Business miles driven, parking fees, tolls, interest, personal property tax, and the total standard mile rate deduction.

  • How it is reported: Depreciation deduction, auto expense, personal property taxes, and Schedule A, Line 5c.

This is helpful for small business owners, independent contractors, and employees who use a personal vehicle for business purposes to see the totals for your tax-deductible vehicle expenses.

 

Form 8995, Qualified Business Income (QBI)

Form 8995 is a tax form used to calculate and claim the Qualified Business Income (QBI) deduction. This deduction is available to eligible taxpayers who have qualified business income from pass-through entities or certain sole proprietorships.

Here are some key points about Form 8995:

  • Purpose of the deduction: The Qualified Business Income (QBI) deduction is a tax benefit introduced as part of the Tax Cuts and Jobs Act (TCJA) of 2017. It allows eligible taxpayers to deduct a portion of their qualified business income from sole proprietorships, partnerships, and S corporations.
  • Eligibility: To be eligible for the QBI deduction, you must have qualified business income. However, certain types of businesses, such as specified service trades or businesses (SSTBs), may have limitations on how much they can deduct.
  • Simplified computation: Form 8995 is a simplified version of the QBI deduction calculation. It is used for taxpayers with income below certain thresholds and whose businesses don’t fall into the category of specified service trades or businesses.
  • Reporting: When you file your return with us, you don't have to worry about this form. We'll take the income and information you report on your return to determine if you qualify for the deduction. If you do, we'll automatically add it to your return.

 

Form 8606, Nondeductible IRAs

This form is used to track nondeductible contributions you made to your Individual Retirement Account (IRA).

Here's a bit of context first — IRAs are accounts where you can save money for retirement with tax advantages. There are two main types: traditional and Roth.

  • Traditional IRA — You often can deduct your contributions (meaning they lower your taxable income now), and you pay taxes later when you take money out in retirement. 
  • Roth IRA — Works the opposite way, you don't get a tax break when you put money in, but when you take money out during retirement, it's tax-free.

Now, what happens if you make a contribution to your traditional IRA but, based on your income and whether you have a retirement plan at work, you're not allowed to deduct it on your taxes? If you (or your spouse, if filing jointly) are covered by a retirement plan at work and your income exceeds certain levels set by the IRS, your contribution to a traditional IRA may not be fully deductible. That's where Form 8606 comes in. It helps you keep track of these nondeductible contributions.

Why is this important? Well, since you've already paid taxes on these nondeductible contributions, you shouldn't have to pay taxes on them again when you retire and start withdrawing money from your IRA. Form 8606 helps ensure you don't.

  • Part I: This is where nondeductible contributions to your traditional IRA for the current tax year are reported and the total basis (i.e., the amount you've already paid taxes on) in your traditional IRAs. 

  • Part II: Reports any conversions you made that year from traditional, SEP, or SIMPLE IRAs to Roth IRAS.

  • Part III: Distributions From Roth IRAs

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Form 8283, Noncash Charitable Contributions

This form is necessary if you've donated something other than cash (like a car, a piece of furniture, or a stock) to a charity and the value is more than $500. The IRS uses this form to verify the details of your noncash donation and the deduction you're claiming on your taxes.

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Section A — Donated Property of $5,000 or Less and Publicly Traded Securities: Claimed items (or groups of similar items) with a total deduction of $5,000 or less.

Section B — Donated Property Over $5,000 (Except Publicly Traded Securities, Vehicles, Intellectual Property or Inventory Reportable in Section A: Claimed items with a total deduction of more than $5,000. This section requires additional information and may also require a qualified appraisal and signature of an authorized official of the receiving charity.

  • Part I: Information on Donated Property

  • Part II: Partial Interests and Restricted Use Property (Other Than Qualified Conservation Contributions) — This is specifically used to report noncash charitable contributions where the donor only gave a partial interest in the property or where the property's use is restricted in some way, aside from qualified conservation contributions.

  • Part III: Taxpayer (Donor) Statement

  • Part IV: Declaration of Appraiser 
  • Declaration of Appraiser

 

Form 4137, Social Security Tax on Tips

This form is used if you’re an employee who received cash tips that total $20 or more in a month and didn’t report them to your employers.

Tip income is subject to Social Security and Medicare taxes. You’re supposed to report your monthly tip income to your employers. However, if for some reason you didn’t report it to your employers, you’d be responsible for reporting this income to the IRS using this form.

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  • Line 1: Lists your employers (if more than one) and the total amount of tips received from each, as well as how much of those tips you reported to each employer. You'll need to know each employer's identification number.

  • Line 2: Sum of all the tips you received in 20XX.

  • Line 3: Sum of all the tips you reported to your employers in 20XX.

  • Line 4: Calculations of the amount in Line 3 from the amount in Line 2. This is the amount of unreported tips that you must report as income on your tax return.

  • Line 5: List any tips that you didn't report to your employer because they were less than $20 in a single calendar month.

  • Line 6: Calculations of the amount in Line 5 from the amount in Line 4 to calculate the amount of unreported tips that are subject to Medicare tax.

  • Line 7: Shows the maximum amount of wages (including tips) that are subject to social security tax.

  • Line 8: Total amount of your wages and tips that were already subject to social security tax (this information is found on your W-2 form).

  • Line 9: Calculations of the amount in Line 8 from the amount in Line 7.

  • Line 10: The smaller amount between Line 6 and Line 9. This is the amount of unreported tips that are subject to social security tax.

  • Line 11: Calculation of the amount in Line 10 by the social security tax rate to calculate the additional social security tax you owe.

  • Line 12: Calculation of the amount in Line 6 by the Medicare tax rate to calculate the additional Medicare tax you owe.

  • Line 13: Total of the amounts in Line 11 and Line 12. This is the total additional tax that you owe and should be included in your tax return.

The total tax calculated on Form 4137 is then reported on your Form 1040 (or whichever form you use to file your income tax return). This will increase your total tax liability for the year.

 

Form 2555, Foreign Earned Income

This form is used to claim the Foreign Earned Income Exclusion, which can exclude a certain amount of foreign income from being taxed in the US.

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  • Part I - General Information: About yourself and your foreign tax home, including the details of your physical presence in or bona fide residence in a foreign country

  • Part II - Taxpayers Qualifying Under Bona Fide Residence Test: This part is where we determine whether you qualify for the foreign earned income exclusion under the bona fide residence test, which requires you to be a bona fide resident of a foreign country for an uninterrupted period that includes an entire tax year.

  • Part III - Taxpayers Qualifying Under Physical Presence Test: This part is for determining qualification under the physical presence test, which requires you to be physically present in a foreign country or countries for at least 330 full days during a 12-month period.

  • Part IV - All Taxpayers: This part lists all your foreign-earned income, including wages, salaries, bonuses, noncash income, allowances, and reimbursements.

  • Part V - Foreign Housing Exclusion or Deduction: Calculate the amount of your housing exclusion or deduction if you qualify.

  • Part VI - Claiming the Foreign Earned Income Exclusion: Calculates and claims the foreign earned income exclusion. 

  • Part VII - Taxpayers Claiming the Foreign Earned Income Exclusion: Calculates the total exclusions claimed and the portion of deductions that can be allocated to the excluded income. 

  • Taxpayers Claiming the Housing Deduction: Completed if you are eligible to claim the housing deduction.

Form 2555 involves tests for qualifying, income and housing details, and calculations for the exclusion. The calculated amounts are reported on your Form 1040.

 

Form 8959, Additional Medicare Tax

This form is used to calculate and report the Additional Medicare Tax owed by certain individuals. This is an extra tax imposed on earned income above a certain threshold to help fund Medicare.

Here are some key points about Form 8959:

  • Purpose of the tax: The Additional Medicare Tax was introduced as part of the Affordable Care Act (ACA) and is aimed at higher-income individuals.
  • Income thresholds: For most individuals, the Additional Medicare Tax applies if your wages, self-employment income, or railroad retirement (Tier 1) compensation exceed $200,000 for single filers or $250,000 for married couples filing jointly. Different thresholds may apply if you are married and filing separately.
  • Tax calculation: The tax rate for the Additional Medicare Tax is 0.9% of the earned income above the threshold. Form 8959 is used to calculate your Additional Medicare Tax liability based on your total wages, self-employment income, and other compensation subject to Medicare tax.
  • Reporting requirements: Form 8959 is used to report the Additional Medicare Tax on your individual income tax return (Form 1040). If you’re an employee, the Additional Medicare Tax may have been withheld from your wages by your employer. You would report the withheld amount on Form 8959 and reconcile it with the total tax liability on your tax return.
  • Employer responsibility: Employers are responsible for withholding the Additional Medicare Tax from wages and compensation that exceed the applicable threshold. However, your employer's withholding may not fully cover your tax liability, especially if you have multiple jobs or other sources of income. In such cases, you may need to make additional estimated tax payments or adjust your withholding.

 

Form 8867, Paid Preparer's Due Diligence Checklist

This is a document used by our tax team when they're filing your return. Basically, this form serves as a checklist to ensure that our tax experts has done their "due diligence" — in determining whether you are eligible to claim:

  1. Earned Income Tax Credit (EITC)
  2. American Opportunity Tax Credit (AOTC)
  3. Child Tax Credit (CTC), Additional Child Tax Credit (ACTC), and Credit for Other Dependents (ODC)
  4. Head of Household (HOH) filing status

The form is divided into different sections, each dealing with a specific credit or filing status:

  • Part I — Due Diligence Requirements
  • Part II — Due Diligence Questions for Returns Claiming EIC
  • Part III — Due Diligence Questions for Returns Claiming CTC/ACTC/ODC
  • Part IV — Due Diligence Questions for Returns Claiming AOTC
  • Part V — Due Diligence Questions for Claiming HOH
  • Part VI — Eligibility Certification

 

Form 1040-ES, Estimated Tax for Individuals

This form is used to calculate and pay your estimated tax, which is also commonly referred to as quarterly tax. You pay this on income that is not subject to withholding, including income from self-employment, interest, dividends, rents, and alimony.

Breaking down the boxes:

1. Estimated Tax Worksheet: Estimation of the amount of income you expect to receive for the year. You'll also take into account deductions, credits, and taxes you've already paid.

  • Line 1: Expected adjusted gross income (that's total income minus certain adjustments) for the year.
  • Line 2: Expected deductions, like the standard deduction or itemized deductions.
  • Line 3-5: Simple subtraction and addition operations to adjust income.
  • Line 6-8: Involves figuring out your tax using the tax rate schedules.
  • Line 9-14: Credits, self-employment tax, and other taxes.
  • Line 15-16a: Helps figure out if you owe any estimated tax, and how much.

2. Record of Estimated Tax Payments: The amounts you pay each quarter, and the dates you pay them. This can help you track your payments and make sure you're paying enough throughout the year.

3. Payment Vouchers (1-4): These are slips that you'll detach and send in with your payment if you're paying by check or money order. Each voucher corresponds to one of the four due dates for estimated tax payments. You'll fill in your name, address, Social Security number, and the amount you're paying.

Remember, the key to Form 1040-ES is estimation. The numbers you're working with are your best guess for what the year will look like, financially. This is why it's crucial to review and potentially adjust your estimated tax payments throughout the year as your income or deductions change.

 

Form 4868, Federal Tax Extension

This is the form you use to request an extension for filing your taxes. It gives you an additional six months to submit your tax return to the IRS. Form 4868 is not included with your tax return. It's a separate form that you file to get an extension.

Here are some important points about Form 4868:

  • Extended filing deadline: The regular due date for individual tax returns is typically April 15th (or the next business day if April 15th falls on a weekend or holiday). By submitting Form 4868, you can extend the filing deadline to October 15th.
  • Filing requirements: To request an extension using Form 4868, you need to provide your personal information, including your name, address, Social Security number (or taxpayer identification number), and an estimate of your total tax liability for the tax year.
  • Automatic extension: The extension granted is automatic, meaning that as long as you submit the form by the original due date of your tax return, you will automatically receive the additional six months to file. It’s good to note that the extension only applies to the filing deadline, not the payment deadline. Any taxes owed are still due by the original deadline if you want to avoid potential penalties and interest.
  • E-filing: We don’t file this form on its own, but we can file this on your behalf as long as you’ve submitted your return for review. You can learn more about the process here. You can also head over to this IRS link to find more information on the extension and how to file electronically.

 

Form 8879, IRS e-file Signature Authorization

This form is used to authorize and confirm the electronic filing of your federal income tax return. When you file your tax return electronically, the IRS requires your consent and authentication to ensure the accuracy and validity of your submission.

Here are some important things to remember:

  • Electronic filing: Form 8879 is specifically used for electronically filed tax returns. If you choose to e-file your tax return, you’ll need to sign and submit Form 8879 to authorize the electronic transmission of your return to the IRS. This will be one of the very last things you do when filing with us. We take the stress out of having you fill out the entire form — you’ll just e-sign within the filing flow, and we'll include your Form 8879 form along with your return when it's submitted to the IRS.
  • Reviewing your return: Before signing Form 8879, it's crucial to carefully review your tax return to ensure that all the information is accurate and complete. Confirm that your personal details, income, deductions, and credits are correctly reported.
  • Retaining records: After signing Form 8879 and submitting it to your tax preparer or e-filing service, it is important to keep a copy of the form and all supporting documentation for your records. This includes copies of your tax return and any relevant documents used to prepare your return.

 

Form 1045, Application for Tentative Refund

This form is for individuals, estates, and trusts with certain types of losses that could qualify them for a tax refund. It’s divided into several schedules, supplementary parts of the form used to calculate the amount of your refund. It's not filed with your regular tax return. Instead, you submit it separately.

  • Personal Information: Name, address, and social security number or employer identification number.

  • Reason for Filing: Here, we indicate why you're applying for a refund, such as a net operating loss (NOL), unused general business credit, or a loss due to section 1256 contracts.

  • Tax Years Involved: Specifies the tax years for which you're claiming the refund.

  • Various Questions: These questions are about specific tax situations that might apply to you, such as if you've filed a petition in Tax Court or if any part of the decrease in tax is due to a reportable transaction.

  • Computation of Decrease in Tax: This part is for calculating how much your tax liability decreased as a result of the reasons you listed above.

  • Signature and Paid Preparer Info: This is where you sign the form, and if you paid someone to prepare the form, they also need to sign here.

  • Schedule A - Net Operating Loss (NOL): If deductions for the year are more than income for the year, you may have a net operating loss (NOL). An NOL can be used to lower your tax in another year.

  • Schedule B - NOL Carryover: Typically, NOLs that originate in tax years after 2020 can only be transported forward to subsequent years. However, there's an exception for specific farming losses, which can be carried back two years.

Form 1045 offers a “tentative” refund because the IRS still needs to approve it. The IRS usually will review the form within 90 days of receipt. Afterwards, it can accept the claim and issue a refund, or deny it.

 

STEX, State Tax Extension

If you want an extension on your state return, refer to your state department of revenue. They’ll have information on the extensions they offer, as well as instructions on how to apply for them. This is not something we are currently able to assist with in the app.

 

STEX2, State Tax Extension (Variant)

Should a major disaster be declared in your area by federal or state authorities, both the IRS and your state may offer an extension for individuals and businesses to file or make their tax payments. Generally, state authorities align with the extended deadlines set forth by the IRS for filing and paying taxes. Please check with your state's department of revenue to get information on any state extensions they may have announced.