Understanding Tax Returns

• What are tax deductions?

  Tax deductions lower the amount of income you’re taxed on — leading to a smaller tax bill!

   

  Types of deductions

  • Business: Ordinary and necessary work-related purchases

  💡 Ordinary and necessary - ‘Ordinary' means it's common in your field. 'Necessary' 
  means it's 'helpful and appropriate' for doing your work —  it doesn't necessarily 
  have to be indispensable.

  • Educational:
  • Student loan interest
  • Teacher educational expenses  
  • Healthcare:
  • Medical or dental expenses more than 7.5% of your AGI
  • Health savings account (HSA)
  • Investment:
  • Sale of home
  • Individual retirement arrangements (IRAs)
  • Capital losses
  • Bad debt
  • Opportunity zones
  • Debt forgiven on my residence due to foreclosure, repossession, abandonment or because of a loan modification or short sale
  • Personal:
    • Deductible non-business taxes
    • Personal property tax
    • Real estate tax
    • Sales tax
    • Charitable contributions
    • Gambling loss
    • Miscellaneous expenses
    • Interest expense
    • Home mortgage interest
    • Moving expenses
  • Standard deduction
  • Itemized deductions

  Want to learn more about what a tax deduction is? Take a look at our blog article. 

• What are tax breaks?

  Tax breaks or credits reduce the amount of tax you owe — or increase your tax refund — dollar for dollar. Certain credits may give you a refund even if you don't owe any tax.

   

  Types of credits

  • Family and Dependent Credits:
    • Child Tax Credit
    • Dependent Care Credit
    • Adoption Credit
  • Income and Savings Credits:
    • Earned Income Tax Credit
    • Saver's Credit (Retirement Savings Contributions Credit)
    • Foreign Tax Credit
    • Excess Social Security and RRTA tax withheld
    • Credit for Tax on Undistributed Capital Gain
    • Credit for Prior Year Minimum Tax
  • Homeowner Credits
  • Electric Vehicle Credits
  • Healthcare Credits:
    • Premium Tax Credit
  • Education Credits:
    • American Opportunity Credit and Lifetime Learning Credit

  You can learn more about deductions and credits in this article.

• Have a question about your specific tax situation?

  Understanding taxes can be quite a challenge. However, our goal at Keeper is to simplify this process for individuals who aren't tax experts. We've developed this resource specifically for this purpose — to offer you free access to our knowledgeable tax accountants.

  Feel free to submit your tax-related queries here — selected questions may get published.

• Income tax forms

  In this article, we’ll explore the various types of income tax forms and their specific purposes. Each form is designed to address different sources of income that might be relevant to you. You can conveniently upload these forms into the app when you file your taxes with us.

   

  1099-NEC, Nonemployee Compensation

  This reports nonemployee compensation, which is paid to independent contractors and vendors. Any payments of $600 or more made through ACT, EFT, direct deposit, cash, and checks of $600 will be reported here.

  You can expect to receive this form if you worked as a freelancer or contractor and were paid more than $600 by a single company or individual. Examples of this include driving for DoorDash or Uber.

  ​​Breaking down the boxes:

  • Box 1: The total amount a business or person paid you during the year.
  • Box 4: Federal income tax withheld — Most of the time this box will be empty, as usually clients don't withhold taxes for contractors, freelancers, or self-employed people. You're responsible for setting aside money for taxes yourself.
  • Box 5: State tax withheld
  • Box 6: State/Payer's state no.
  • Box 7: State income
  • Boxes on the left side of the form: These boxes are where the payer's and your (the recipient's) names, addresses, and taxpayer ID numbers go.

   

  1099-MISC, Miscellaneous Information

  This reports miscellaneous income. Examples of when you'll receive a 1099-MISC are if you've received at least $600 in rent, prizes, or awards.

  ​​Breaking down the boxes:

  • Box 1: Rents — Where income from rental properties is reported.
  • Box 2: Royalties — Earned royalties go here.
  • Box 3: Other income — Prizes, awards, or other types of income.
  • Box 4: Federal income tax withheld — Federal taxes were already taken out are listed here.
  • Box 5: Fishing boat proceeds — Income from fishing activities are reported here.
  • Box 6: Medical and health care payments — Payments made to you for providing health care or medical services go here.
  • Box 7: Payer made direct sales of $5,000 or more — For companies reporting sales of consumer products to a buyer for resale anywhere other than a permanent retail establishment.
  • Box 8: Substitute payments in lieu of dividends or interest — Typically for brokerage firms who pay their clients in lieu of dividends or tax-exempt interest.
  • Box 9: Crop insurance proceeds — Income received from crop insurance go here.
  • Box 10: Gross proceeds paid to an attorney — Relates to legal settlements.
  • Box 11: Fish purchased for resale.
  • Box 12: Section 409A deferrals.
  • Box 14: Excess golden parachute payments.
  • Box 15: Nonqualified deferred compensation.
  • Box 16: State tax withheld.
  • Boxes 17-18: These boxes will show state tax-specific information.

   

  1099-K, Payment Card and Third Party Network Transactions

  This form reports payments made through credit cards and apps such as Venmo, PayPal, and Shopify. Companies like Uber and Lyft also issue 1099-K’s.

  For 2023 and prior years, third-party payment platforms like PayPal are only required to send out Form 1099-K to taxpayers who receive over $20,000 and have over 200 transactions.

  For tax year 2024, the IRS plans for a threshold of $5,000 to phase in reporting requirements.

  Because of this, you should consider using separate accounts for business and personal to make it easier to track what transactions are for business and what are personal.

  Breaking down the boxes:

  • Box 1a: Gross payment volume for all payment transactions.
  • Box 1b: Card-not-present transactions.
  • Box 2: Merchant category code.
  • Box 3: Number of payment transactions.
  • Box 4: Federal income tax withheld.
  • Boxes 5a-5l: Gross payments by month.
  • Boxes 6-7: These boxes will show state tax-specific information.
  • Box 8: State income tax withheld.
  • PSE’s name and telephone number: Who you contact if you notice a mistake on your 1099-K.

   

  W-2, Wage and Tax Statement

  This reports employee payments, including noncash payments of $600 or more for the year, for services performed (even if the employee is related to the employer). It shows the amounts withheld for income, Social Security, and Medicare tax withheld.

  Breaking down the boxes:

  • Box a: Your Social Security number.
  • Box b: Employer Identification Number (EIN) — Employer's unique tax ID number.
  • Box c: Employer's name, address, and ZIP code.
  • Box d: Control number — May be empty. If it's not, it's a code that your company uses to identify your W-2 in their records.
  • Box e and f: Your name and address.
  • Box 1: Wages, tips, other compensation — The total amount of wages, tips, and other compensation.
  • Box 2: Federal income tax withheld — How much federal income tax was taken out of your paychecks.
  • Box 3: Social Security wages — How much of your pay was subject to Social Security taxes (usually up to a certain limit).
  • Box 4: Social Security tax withheld — How much you actually paid in Social Security taxes.
  • Box 5: Medicare wages and tips — How much of your pay was subject to Medicare taxes. There's no wage limit for Medicare tax.
  • Box 6: Medicare tax withheld — How much you actually paid in Medicare taxes.
  • Box 7: Social Security tips — Reported tip income to your employer goes here.
  • Box 8: Allocated tips — Tip income that your employer assigned to you (this is not common for most jobs).
  • Box 10: Dependent care benefits — Benefits like childcare provided by your employer.
  • Box 11: Nonqualified plans — Amounts distributed to you from your employer’s nonqualified deferred compensation plan or nongovernmental section 457 pension plan.
  • Box 12: Deferred compensation and other compensation — Various form codes go here.
  • Box 13: Checkboxes for statutory employee, retirement plan, and third-party sick pay.
  • Box 14: Other — Catch-all box for other things your employer wants to report, like union dues or health insurance premiums.
  • Box 15-20: State and local tax information — Covers how much you made and how much tax was withheld for your state and local taxes.

   

  1099-INT, Interest Income

  This reports more than $10 in interest from a financial institution, like a brokerage, mutual fund, or bank. 

  Breaking down the boxes:

  • Box 1: Taxable interest not included in box 3 is reported here. Might include interest from a bank account or a certificate of deposit.
  • Box 2: Early withdrawal penalty. If you withdraw money from a time-based deposit before it matures, you might have to pay a penalty, which is deductible.
  • Box 3: Interest on U.S. Savings Bonds and Treasury obligations, which might be exempt from state or local taxes.
  • Box 4: Federal tax withheld at source, also known as backup withholding. If you didn't provide your Social Security number to the payer, or if you're subject to backup withholding, the payer may withhold taxes from your interest income at a flat rate.
  • Box 5: Investment expenses (for instances where you own a share of a taxable bond trust and would receive a prorated share of the investment expenses of the trust).
  • Box 6: Foreign tax paid.
  • Box 7: Foreign country or U.S. territory where tax was paid.
  • Box 8: Tax-exempt interest — This might include interest from a municipal bond.
  • Box 9: Specified private activity bond interest — These bonds are used by municipalities to attract private investment for projects that have some public benefit.
  • Box 10: Market discount on bonds.
  • Box 11: Bond premium.
  • Box 12: Bond premium on Treasury obligations.
  • Box 13: Bond premium on tax-exempt bond.
  • Box 14: Tax-exempt and tax credit bond CUSIP number.
  • Box 15: State
  • Box 16: State identification number.
  • Box 17: State tax withheld.

   

  1099-DIV, Dividends and Distributions

  This reports dividends from investments if you've made more than $10. Heads up: Dividends on your account at a credit union don't count. (They’re technically reported as interest instead.)

  Breaking down the boxes:

  • Box 1a: Total ordinary dividends — Total of all the ordinary dividends received.
  • Box 1b: Qualified dividends — Dividends that meet certain requirements to be taxed at a lower rate.
  • Box 2a: Total capital gain distributions — Total amount of capital gains distributions, which come from profits on the sale of securities within the fund.
  • Box 2b: Unrecaptured section 1250 gain — A type of gain that relates specifically to depreciable real estate.
  • Box 2c: Section 1202 gain — Represents a capital gain from certain small business stocks.
  • Box 2d: Collectibles (28%) gain — Gain from the sale of collectibles, which is taxed at a maximum rate of 28%.
  • Box 3: Nondividend distributions — Distributions that are not paid out of the earnings and profits of a corporation or a mutual fund.
  • Box 4: Federal income tax withheld — Backup withholding that was taken out of your dividend payments.
  • Box 5: Section 199A dividends — Specific type of qualified dividend that originate from real estate investment trusts (REITs) or publicly traded partnerships (PTPs).
  • Box 6: Investment expenses — Your share of expenses from an investment company, and they are usually deductible.
  • Box 7: Foreign tax paid — Any tax paid to a foreign country on foreign investments.
  • Box 8: Foreign country or U.S. possession — Where the foreign country or U.S. possession where the foreign tax was paid is identified.
  • Boxes 9-10: Cash and noncash liquidation distributions — Amounts received during liquidations.
  • Box 11: Checkbox for FATCA filing requirement.
  • Boxes 12-13: Exempt-interest dividends and specified private activity bond interest dividends — Relate to certain types of exempt-interest dividends.
  • Boxes 14-16: These boxes show state tax-specific information.

   

  1099-B, Proceeds from Broker and Barter Exchange Transactions

  This is issued by brokers or barter exchanges to people who have sold assets during a given tax year. When you sell something for more than it cost you to acquire it, the IRS calls the profit your “capital gain,” and you must pay tax on this amount. The 1099-B form is essentially a record of your sales or trades of certain assets, like stocks, bonds, or commodities. It doesn't directly state your capital gains. Instead, it provides the necessary information for you to calculate them.

  It's also important to note that some brokerages provide composite forms that combine your various types of income into one document for simpler reporting. This can include your income from interest (1099-INT), dividends (1099-DIV), and sales or trades of assets (1099-B).

  Breaking down the boxes:

  • Box 1a: Description of property.
  • Box 1b: Date you acquired the security.
  • Box 1c: Date you sold or disposed of the security.
  • Box 1d: Proceeds or the money you got when you sold the security.
  • Box 1e: Cost or other basis, often what you paid for the security. Might be adjusted for various reasons.
  • Box 1f: Accrued market discount — The amount of discount that has built up over time if you purchased the bond for less than its face value (the amount it will be worth at maturity).
  • Box 1g: Wash sale loss disallowed — Shows the amount of nondeductible loss in a wash sale transaction.
  • Box 2: Checkboxes for short-term gain or loss, long-term gain or loss, and ordinary.
  • Box 3: Indicate whether the proceeds reported are from the sale of collectibles or a Qualified Opportunity Fund (QOF).
  • Box 4: Federal income tax withheld — Money your broker already sent to the IRS.
  • Boxes 5-7: Checked if certain situations apply.
  • Boxes 8-10: Show the realized and unrealized profit or (loss) on open and closed contracts for certain dates.
  • Box 11: Shows the aggregate profit or loss on regulated futures or foreign currency contracts (Boxes 8, 9, and 10 are all used to figure this amount).
  • Box 12: Indicates whether the basis of the security has been reported to the IRS.
  • Box 13: Bartering — Shows the cash you received, the fair market value (FMV) of any property or services you received, and the FMV of any trade credits or scrip credited to your account by a barter exchange
  • Boxes 14-16: State tax withholding information.

   

  W2-G, Certain Gambling Winnings

  This reports gambling winnings and any federal income tax withheld from those winnings.

  Breaking down the boxes:

  • Box 1: Reportable winnings — The value of the prize you won.
  • Box 2: This box shows the specific date on which the gambling or lottery winnings were won.
  • Box 3: Type of wager — Indicates the type of gambling or lottery winnings associated with the amount reported
  • Box 4: Federal income tax withheld — If taxes have been taken out.
  • Box 6: Shows the race (or game) applicable to the winning ticket.
  • Box 7: Indicates the amount of additional winnings from identical wagers.
  • Box 8 or 10: Shows the cashier and/or window number making the winning payment.
  • Box 9: Your TIN/SSN
  • Boxes 11-12: Your identification numbers from two forms of ID.
  • Boxes 13-18: State and local tax information.

   

  1099-G, Certain Government Payments

  This reports payments from the government, whether it comes from the local, state, or federal level. Expect one if you've received assistance from the government, like unemployment benefits.

  Breaking down the boxes:

  • Box 1: Unemployment compensation — Money received from the government because you were unemployed.
  • Box 2: State or local income tax refunds, credits, or offsets — A refund of state or local income taxes last year will show up here.
  • Box 3: Box 2 Amount is for tax year — Indicates the tax year the refund, credit, or offset applies to.
  • Box 4: Federal income tax withheld — If any federal tax was already taken out of your payments.
  • Box 5: RTAA payments — Reports payments under the Reemployment Trade Adjustment Assistance (RTAA) program.
  • Box 6: Taxable grants — If you received a taxable grant from a government agency.
  • Box 7: Agriculture payments — Payments from the Department of Agriculture.
  • Box 8: Trade or business Income (Checkbox) — If checked, Box 6 or 7 amounts are considered to be trade or business income.
  • Box 9: Market gain — Reports market gain associated with Commodity Credit Corporation (CCC) loans.
  • Box 10: State tax withheld — State tax was taken out of payments.
  • Box 11: State identification no. — Shows payer's state identification number.
  • Box 12: State distribution — Report the amount of the state tax refund.

   

  1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.

  This reports distributions from a retirement plan or profit-sharing plan, including an IRA, pension, or annuity. It's possible to get one of these even if you're not yet retired — for instance, if you took out a loan from your 401(k) and didn't repay it. This form shows how much you were paid during the year (and how much was withheld for taxes).

  Breaking down the boxes:

  • Box 1: Gross distribution — Total amount you were paid during the year.
  • Box 2a: Taxable amount — How much of the distribution is subject to tax. If this box is blank, it's up to you to determine the taxable amount based on IRS rules.
  • Box 2b: Indicates whether the distribution is Taxable Amount Not Determined and/or if it is a Total Distribution.
  • Box 3: This box shows any capital gain portion of the distribution that is included in the total amount reported in Box 2a.
  • Box 4: Federal income tax withheld — How much tax was already taken out of the distributions.
  • Box 5: Employee contributions/Designated Roth contributions or Insurance premiums — This shows the employee’s investment in the contract (after-tax contributions).
  • Box 6: Net unrealized appreciation in employer's securities — Shows the Net Unrealized Appreciation (NUA) that you need to consider when calculating the tax treatment of your distribution.
  • Box 7: Distribution code(s) — Represents the type of distribution you received.
  • Box 8: Other — This box is used for any distribution that doesn't fit into the other specific categories provided on the form.
  • Box 9a: Your percentage of the total distribution.
  • Box 9b: Used to compute the taxable part of the distribution — For a life annuity from a qualified plan or from a section 403(b) plan (with after-tax contributions), an amount may be shown for the employee’s total investment in the contract.
  • Box 10: Amount allocable to IRR within 5 years.
  • Box 11: First year of designated Roth contribution.
  • Box 12: Checkbox for FATCA filing requirement.
  • Box 13: Date of payment.
  • Box 14: State tax withheld — This shows if any state tax was taken out.
  • Boxes 15-19: State and local information are for informational purposes only.

   

  SSA-1099, Social Security Benefit Statement

  This form reports the total amount of benefits you received from Social Security in the previous year.

  Breaking down the boxes:

  • Box 1: Name — Beneficiary's name or entity designated to receive the benefits or proceeds from a financial arrangement or contract.
  • Box 2: Beneficiary’s Social Security number
  • Box 3: Benefits paid in 20XX — The total amount of Social Security benefits received in the previous year.
  • Box 4: Benefits repaid to SSA in 20XX — If you had to pay back some benefits to the SSA.
  • Box 5: Net benefits for 20XX — This is Box 3 minus Box 4. It's the net amount of benefits you received after any repayments.
  • Box 6: Voluntary federal income tax withheld — If you chose to have federal income tax withheld from your Social Security benefit.
  • Box 7: Address — Your mailing address.
  • Box 8: Claim number — If you need to contact the SSA regarding issues with your Social Security benefits, you might need to provide this claim number.

  You can request a copy of your SSA-1099 directly on the Social Security Administration website.

   

• Miscellaneous tax forms

  In this section, you'll find a list of additional tax forms you can upload, apart from your income tax forms, during the filing process.

   

  Form 1095, Health Insurance Coverage

  Form 1095 is actually composed of three different forms that report information regarding your health insurance information. You may receive a 1095-A, 1095-B, or 1095-C.

  📝 When filing your taxes with us, you only need to report or upload the information from your Form 1095-A. There’s no need to include your 1095-B or 1095-C, as these forms are used for record-keeping purposes only.

  • Form 1095-A: Issued to individuals who enrolled in a qualified health plan through the Marketplace. It provides information about the coverage, premium amounts, and any advance premium tax credits received. You can upload this form or enter the information manually in the 'Drop-off Forms' section under the File Taxes tab.
  • Form 1095-B: Typically sent by health insurance providers, including insurance companies, government-sponsored programs, and self-insured employers. It reports information about the health insurance plan, including the months of coverage. Form 1095-B is used to verify that you and your dependents had the minimum coverage. You don’t need to report it on your return.
  • Form 1095-C: This form is provided by an employer. It reports information about the health insurance coverage offered to employees, including the months of coverage and any applicable employer contributions. This form is intended for your records and does not need to be reported when you file your return.

   

  Form 1098, Mortgage Interest Statement

  If you have a mortgage on your home, your lender or mortgage servicer will provide you with this form. You can upload this form or enter the information manually in the 'Drop-off Forms' section under the File Taxes tab.

   

  Form 1098 E, Student Loan Interest Statement

  If you made payments on a qualified student loan, the lender or loan servicer will provide you with this form. The student loan interest you paid may be eligible for a deduction on your federal income tax return, subject to certain income limitations. You can upload this form or enter the information manually in the 'Drop-off Forms' section under the File Taxes tab.

   

  Form 1098-T, Tuition Statement

  Form 1098-T provides information on the amounts paid for tuition, scholarships or grants received, and other educational expenses. It’s used to determine if the taxpayer is eligible for education-related tax credits or deductions, such as the American Opportunity Credit or Lifetime Learning Credit. You can upload this form or enter the information manually in the 'Drop-off Forms' section under the File Taxes tab.

  To learn more we have a blog about this — Tax breaks for college tuition.

• Understanding the 1099-K and the updated IRS guidelines

  Do you accept credit card payments for your work? What about payments through apps like PayPal or Venmo? If you answered yes, you might receive a Form 1099-K. 

  This form is a tax document used to report income received through payment cards and third-party network transactions. This includes credit card payments, debit card payments, and any other form of payment made with a credit card. Third-party network transactions involve online payment platforms like PayPal and Venmo.

  1099-K forms are essential for individuals and businesses at tax time, as they provide a detailed record of their income received through electronic payment methods, AND they are also used by the IRS to ensure accurate tax reporting so it's important to report any 1099-K forms you receive when you file.

  For freelancers and independent contractors, you’ll refer to any 1099-Ks you receive when you file your taxes. If you’re using the Keeper app to file, you can simply upload the form and we’ll do the rest.

  For 2023 and prior years, third-party payment platforms like PayPal are only required to send out Forms 1099-K to taxpayers who receive over $20,000 and have over 200 transactions.

  For tax year 2024, the IRS plans for a threshold of $5,000 to phase in reporting requirements.

  The form typically reports gross income, which includes the total amount of payments processed through payment card transactions or third-party network transactions. This includes not only the income you received but also any refunds, returns, or chargebacks. If you had a significant number of returns or chargebacks during the tax year, it might explain why the reported income is higher than what you received. The gross amount of income reported on the 1099-K form also does not reflect business deductions, and this is where Keeper can help save on your tax bill. 

  When you earn income reported on a 1099-K, you may be eligible for certain deductions to reduce your taxable income. Here are some common deductions that self-employed individuals and independent contractors often take for income reported on 1099-K forms:

  • Business Expenses: This includes costs for supplies, equipment, advertising, business-related travel, and more. 
  • Home Office Deduction: If you use a portion of your home exclusively for business purposes, you may be eligible for a home office deduction. This can include a portion of your rent, mortgage interest, utilities, and maintenance costs.
  • Vehicle Expenses: If you use your vehicle for business purposes, you can claim deductions for mileage or actual expenses related to the use of your vehicle.
  • Health Insurance Premiums: Self-employed individuals may be eligible to deduct the cost of health insurance premiums paid for themselves, their spouses, and dependents.
  • Retirement Contributions: Contributions to self-employed retirement plans, such as a Simplified Employee Pension (SEP) IRA or a Solo 401(k), are deductible.
  • Self-Employment Tax Deduction: Self-employed individuals can deduct the employer portion of self-employment taxes, which includes Social Security and Medicare taxes.
  • Education and Training Costs: Expenses related to courses, workshops, or training that are directly related to your business and help improve your skills may be deductible.
  • Meals and Entertainment: You can typically deduct 50% of the cost of meals directly related to your business activities.
  • Legal and Professional Fees: Fees paid to accountants, lawyers, and other professionals for business-related services are deductible.
  • Depreciation: You can deduct the depreciation of business assets over time.
  • Software and Technology Expenses: Costs for software, computer equipment, and other technology used in your business can be deductible.
  • Advertising and Marketing Expenses: Money spent on advertising, marketing, and promotional activities can be deductible.

  It's important to keep thorough records of all your expenses, and Keeper can help ensure that you claim all the deductions you're eligible for and comply with IRS rules and regulations.

  When filing with Keeper, select all your deductions in the Keeper app under the Deductions tab and upload or enter your 1099-K form in the Freelance Income section of the tax filing menu, and Keeper will take care of the rest.

   

  Additional Resources: 

  • 1099-K Form Help 
  • What if I didn’t receive my 1099-K? 
  • Uber 1099-K
  • Venmo 1099-K 
  • PayPal 1099-K
  • What is a 1099-K? 

• EF Selection, Electronic Filing Selection

  The Electronic Filing Selection, often abbreviated as EF Selection, allows you to electronically file forms, schedules, and attachments along with your tax return.

  We'll file your tax return electronically, which is a quick and secure method for submitting tax information to the IRS and state tax agencies. However, not all tax forms may be eligible for electronic filing due to various reasons such as certain IRS restrictions.

  In these cases, we'll let you know if we're unable to electronically file your return. Generally, if this happens we can provide a copy of your tax return with paper filing instructions so you can mail it in yourself. We're here to make the process of filing your tax returns simpler, faster, and more accurate.

• Form 1040, U.S. Individual Income Tax Return

  This form is used to file your annual income tax return and includes several lines where certain types of income are reported, as well as adjustments (also known as above-the-line deductions) to your income.

  • Filing Status: The form starts checking your filing status Single, Married filing jointly, Married filing separately, Head of Household, or Qualifying surviving spouse.
  • Personal Information: Name, Social Security number, address.
  • Digital Assets: Declared if you received, sold, or disposed of any digital assets in 20XX.
  • Standard Deduction: Checked if anyone can claim you or your spouse as a dependent and if you are blind or were born before January 2, 1958.
  • Dependents: Here, list your dependents, their social security numbers, their relationship to you, and whether they qualify for certain tax credits.
  • Income: Reporting your income from various sources including wages, interest, dividends, IRA distributions, pensions, social security benefits, and other income.
  • Adjustments to Income: Lists adjustments to your income (from Schedule 1), which might lower your tax liability.
  • Standard Deduction or Itemized Deductions: Reports if you took the standard deduction or itemize your deductions.
  • Qualified Business Income Deduction: If you have income from a business, you may be eligible for this deduction.
  • Tax and Credits: This part is for computing your tax, claiming credits, and determining your total tax.
  • Payments: This is where you report the amount of federal income tax that has been withheld, any estimated tax payments you made, and any refundable credits you're claiming.
  • Refund or Amount You Owe: Based on your total tax and total payments, you either have an overpayment (which may be refunded to you or applied to next year's estimated tax) or you owe additional tax.
  • Third Party Designee: If you want to allow another person to discuss this return with the IRS, you can designate them in this section.
  • Signature: You and your spouse (if filing jointly) need to sign and date the form, declare your occupation, and provide contact information.
  • Paid Preparer Use Only: If a paid preparer completed the form, they provide their information in this section.

  Along with Form 1040, there may be additional schedules and forms with your tax return, depending on your individual financial circumstances.

• Schedule tax forms

  In this article, we’ll take a closer look at the different Schedule tax forms you may encounter on your tax return. We’ll explain the purpose of each form and how it fits into the overall tax filing process.

  There's no need for you to complete these forms yourself when filing with us. Our team of tax experts will handle all the necessary paperwork for you, using the information you've provided during the filing process.

   

  Schedule 1, Additional Income and Adjustments to Income

  This Schedule is an additional form that captures sources of income or deductions that aren't reported on your main 1040 tax form.

  Additional Income: This part is where you report types of income not covered on the main Form 1040. Here are some common examples:

  • Alimony: If you received alimony payments you report that here. Note that, for divorce or separation agreements made or changed after 2018, alimony isn't deductible by the payer or taxable for the recipient.
  • Business income: If you're self-employed or run a small business, the profit from that is reported here. This usually comes from a Schedule C .
  • Rental real estate, royalties, partnerships, S corporations, trusts, etc.: Income from any of these sources is reported here. You'll typically fill out a Schedule E for these.
  • Unemployment compensation: If you received unemployment benefits, you report them here.

  Adjustments to Income: These are also known as above-the-line deductions, which are deductions that you can take to reduce your overall taxable income. Some examples include:

  • Educator expenses: If you're a teacher and you've spent your own money on classroom supplies, you might be able to deduct some of those expenses.
  • Health Savings Account deduction: If you contribute to a Health Savings Account (HSA), you may be able to deduct these contributions.
  • Self-employment tax: If you're self-employed, you can deduct half of the Social Security and Medicare taxes you paid here.
  • Student loan interest deduction: You can deduct the interest you paid on student loans during the year, up to $2,500.

  After completing the relevant sections of Schedule 1, the additional income is added to the income reported on Form 1040, and then adjustments to income are subtracted. The result is the adjusted gross income (AGI), which is reported on Form 1040.

   

  Schedule 2, Additional Taxes

  This schedule is used to report additional taxes owed that aren't covered on the main Form 1040.

  • Alternative minimum tax (AMT): A separate tax calculation designed to ensure that higher-income earners still pay a minimum amount of tax, especially if they have many deductions or tax credits that would otherwise lower their tax bill significantly.
  • Excess advance premium tax credit repayment: Applies if you receive health coverage through a Health Insurance Marketplace. If you received more Advance Premium Tax Credit than you qualify for based on your final yearly income, you might need to pay back the excess.
  • Self-employment tax: Social Security and Medicare tax for people who work for themselves. Normally, these taxes are split between employers and employees, but if you're self-employed, you're responsible for both portions.
  • Household employment taxes: If you paid a household employee (like a nanny or a housekeeper) more than a certain amount, you might owe this "Nanny tax."
  • Additional tax on IRAs, other qualified retirement plans, etc.: If you took an early distribution from a retirement plan or IRA, or if you didn't take a required minimum distribution, you might owe additional tax.
  • Net investment income tax: High-income taxpayers may be subject to an additional 3.8% tax on some or all of their net investment income.
  • Additional Medicare Tax: An additional 0.9% tax that applies to individuals with an income above a certain threshold.
  • Other taxes: Here, you can report taxes from Forms 8959, 8960, and other sources.

  It is important to remember that not every section of Schedule 2 needs to be filled out—only those that apply to the individual's situation. After completing the relevant sections, all additional taxes should be totaled and included on the main Form 1040.

   

  Schedule 3, Additional Credits and Payments

  This Schedule is used to report certain tax credits and payments that aren't included in the main Form 1040.

  Part I: Nonrefundable Credits: These credits can reduce the amount of tax you owe to zero, but won’t provide a refund if they're worth more than your total tax liability.. Common nonrefundable credits on Schedule 3 include:

  • Foreign tax credit: If you paid taxes to a foreign country.
  • Credit for child and dependent care expenses: If you paid someone to care for your child or another dependent while you worked or looked for work.
  • Education credits: There are two education credits (the American Opportunity Credit and the Lifetime Learning Credit) which may be available if you, your spouse, or your dependents attended post-secondary school.
  • Retirement savings contributions credit (saver's Credit): For lower-income taxpayers who contribute to a retirement plan.

  Part II: Other payments and refundable credits: These credits are called “refundable” because if they reduce your tax liability below zero, you can receive the balance as a refund. They include:

  • Health coverage tax credit: Helps eligible individuals and families pay for certain types of health insurance coverage.
  • Excess Social Security and tier 1 RRTA tax withheld: If you had multiple employers and they collectively withheld too much Social Security tax or Railroad Retirement Tax Act (RRTA) tax, you can claim the excess here.
  • Credits from Form 2439, 8885, or other forms: Credits reported on these forms would be entered here.

  After completing the relevant sections of Schedule 3, the credits and payments will be totaled and the amount will be included on Form 1040.

   

  Schedule A, Itemized Deductions

  This form allows you to detail specific expenses you incurred throughout the year that you want to deduct from your taxable income. It's an alternative to taking the standard deduction, which is a flat dollar amount that all taxpayers can deduct, regardless of their expenses.

  You would typically choose to itemize your deductions on Schedule A if the total amount of your itemized deductions is greater than the standard deduction for your filing status.

  • Medical and dental expenses: Deductible out-of-pocket medical and dental expenses that exceed 7.5% of your adjusted gross income (AGI). These expenses might include fees paid to doctors, dentists, surgeons, psychologists, and nontraditional medical practitioners; inpatient hospital care or residential nursing home care; and premiums for health insurance, to name a few.
  • State and local taxes: Deductible state, local income taxes, or sales taxes (but not both), plus property taxes. There's a limit to how much of these taxes you can deduct.
  • Interest you paid: Deductible mortgage interest paid on a loan secured by your main home or a second home. You may also be able to deduct investment interest expenses.
  • Gifts to charity: Donations to eligible charities. These can be cash but can also include property or even mileage driven for charitable service.
  • Casualty and theft losses: Property losses due to a theft or a federally declared disaster can be deducted here.

   

  Schedule B, Interest and Ordinary Dividends

  This form is used to list the interest and dividend income a taxpayer received during the tax year.

  • Interest: Lists the total interest income you received for the year. This might include interest from savings accounts, certificates of deposit (CDs), bonds, or any other type of investment. If you received more than $1,500 in total interest for the year, you're required to fill out this part of Schedule B. You need to list each payer (like a bank or corporation) separately, plus the amount they paid you.
  • Ordinary Dividends: Payments you receive from owning stocks or mutual funds. Just like with interest, if you received more than $1,500 in dividends during the year, you're required to fill out this section of Schedule B. You need to list each payer and the amount they paid you.

  After listing and summing up all interest and dividends, the totals are carried over to Form 1040.

  Remember, it's important to report all of your interest and dividend income, even if it's less than $1,500. Also, keep in mind that some interest and dividends can be tax-exempt or taxed at special rates.

   

  Schedule C, Profit or Loss From Business 

  This form is used by self-employed individuals (i.e., freelancers, gig workers, or individuals who own their own businesses) to report income or loss from their business operations.

  • Part I - Income: All the money your business made during the tax year. This includes both cash and non-cash income.
  • Part II - Expenses: Lists the costs of doing business. These are all subtracted from your income.
  • Part III - Cost of goods sold: Calculate the cost of all goods sold during the year, which is also subtracted from your income. This involves listing your inventory at the beginning of the year, new purchases, and your inventory at the end of the year.
  • Part IV - Information on your vehicle: If you're claiming vehicle expenses, you'll need to provide information about your vehicle and its business use here.
  • Part V - Other expenses: Any business expenses that didn't fit into the categories in Part II.

  Once all the relevant sections of Schedule C are completed, the net profit or loss (calculated by subtracting expenses and the cost of goods sold from income) is reported on Form 1040.

  When filing with us, the deductions you’ve been tracking in the app will be automatically incorporated into this form along with your self-employed income.

   

  Schedule D, Capital Gains and Losses

  This schedule is used to report gains and losses from the sale or exchange of capital assets. Capital assets include things like stocks, bonds, and real estate.

  If you sell a capital asset and make money because the selling price is higher than what you paid for it, you have a capital gain. If you sell a capital asset and lose money (the selling price is lower than what you paid for it), you have a capital loss.

  • Part I - Short-term capital gains and losses: Lists capital assets that you held for one year or less. This might include stocks or bonds you bought and sold within a single year. Short-term capital gains are taxed as ordinary income, so the rate can be quite high depending on your income.
  • Part II - Long-term capital gains and losses: Lists capital assets that you held for more than one year before selling. Long-term capital gains are usually taxed at a lower rate than short-term gains.
  • Part III - Summary: Combines your short-term and long-term gains and losses to calculate your net gain or loss. If you have a net capital loss, you can use it to offset other income you earned during the year, up to a certain limit.

  Once Schedule D is completed, the net result is transferred to Form 1040. This result can either increase the taxable income (if there was a net gain) or decrease it (if there was a net loss).

   

  Schedule E, Supplemental Income and Loss

  This schedule is used for reporting income or loss from rental real estate, royalties, partnerships, S corporations, estates, trusts, and residual interests in Real Estate Mortgage Investment Conduits (REMICs). These are forms of “‘passive income,”’ meaning income from business activities in which you don’t materially participate.

  📝 If you have any income that needs to be reported on Schedule E, we can include it for you through our Premium subscription.

  • Part I - Income or loss from rental real estate and royalties: If you rent out property like a house, a condo, or an apartment, or if you receive royalties, you report that income here. You also get to deduct associated expenses, such as mortgage interest, property tax, operating expenses, depreciation, and repairs.
  • Part II - Income or loss from partnerships and S corporations: If you're a partner in a business partnership or a shareholder in an S corporation, you'll receive a Schedule K-1 that shows your share of the business's income or loss. Report that in this section.
  • Part III - Income or loss from estates and trusts: Beneficiaries of an estate or trust might receive a Schedule K-1 that reports their share of the income or loss. Report that here.
  • Part IV - Income or loss from real estate mortgage investment conduits (REMICs): "Residual interest holder" in a REMIC report income or loss from that interest here.
  • Part V - Summary: Summarizes the income or losses reported in the earlier sections. This summarized amount is then reported on your Form 1040.
  • Page 2: Used when you have income or loss from multiple rental properties, partnerships, S corporations, estates, trusts, or REMICs. Each property or entity is reported in a separate column.

   

  Schedule F, Profit or Loss From Farming

  This form is used to report the income and expenses from farming business.

  📝 If you have farming income, we can support filing this through our Premium subscription.

  • Part I - Farm income – cash method: If you use the cash method of accounting (reporting income in the year you receive it and deducting expenses in the year you pay them), you report your farming income here. This could include money from selling livestock, produce, grains, and other products, or payments from agricultural programs.
  • Part II - Farm expenses: Deducts the costs of running your farm, such as feed, fertilizer, labor, veterinary expenses, and depreciation on farm equipment. These are subtracted from your income.
  • Part III - Farm income – accrual method: If you use the accrual method of accounting (reporting income in the year you earn it and deducting expenses in the year you incur them, even if you don't pay them that year), you report your farming income. This section includes adjustments for changes in inventory of livestock and produce.
  • Part IV - Principal agricultural activity codes: The code that best describes your farming business. There's a list of these codes in the Schedule F instructions.

  After completing all the relevant sections of Schedule F, the net profit or loss (income minus expenses) is calculated and reported on Form 1040.

   

  Schedule R, Credit for the Elderly or the Disabled

  This form is designed for individuals who are either 65 or older, or those under 65 who are permanently and totally disabled. The purpose of this credit is to decrease the tax burden for these groups.

  📝 We support filing Schedule R, Credit for the Elderly or the Disabled under the Premium subscription.

  You qualify as disabled if you were under 65 at the end of the tax year and all three of the following statements are true:

  1. You were permanently and totally disabled on the date you retired.
  2. You receive taxable disability income for the tax year.
  3. On January 1 of the tax year, you had not reached mandatory retirement age (the age at which your employer's retirement program would have required you to retire).

  It's worth noting that permanently and totally disabled means that you can't engage in any substantial gainful activity because of a physical or mental condition, and a physician certifies that this condition has lasted or can be expected to last continuously for 12 months or more, or that the condition can be expected to lead to death.

  • Part I: This is where we determine if you're eligible for the credit. There are certain age and disability requirements, and you also have to fall under certain income limits. If you're married and filing jointly, both you and your spouse's age/disability status can affect eligibility.
  • Part II: A statement of permanent and total disability. It asks for confirmation that due to your continued disabled condition, you were unable to engage in any substantial gainful activity in the tax year.
  • Part III: If you're eligible, this is where you'll see calculations of the initial amount of your credit. The amount is based on your filing status and income. Adjustments to the initial amount will be based on nontaxable social security, pensions, annuities, or disability income. The more nontaxable income you have, the smaller your credit might be and your credit can't be more than your tax liability.

  This credit is reported on your Form 1040 and could potentially reduce your tax bill, giving you a larger refund or reducing the amount you owe.

   

  Schedule SE, Self-Employment Tax

  This form is use to calculate and report the tax owed on net earnings from self-employment. Self-employment tax covers Social Security and Medicare taxes that are typically withheld from an employee's paycheck.

  • Part I — Self-Employment Tax: Here, we'll calculate your self-employment tax and deductible part of self-employment tax.
  • Part II — Optional Methods To Figure Net Earnings: This part provides two optional methods to calculate your net earnings, one for farm income and another for nonfarm income. These methods may be used under specific circumstances, such as if your income was not more than a certain amount or your profits were less than a specified amount.
• Credit tax forms

  Credit tax forms on your tax return include those that report various tax credits you may be eligible for, which can help lower your overall tax liability. These forms ensure you maximize any credits you're entitled to, potentially reducing what you owe.

  There's no need for you to complete these forms yourself—our team of tax experts will handle the preparation based on the credit and deduction information you provide during the filing process.

  Below are some of the most common tax credits you might encounter on your tax return.

   

  Form 8812, Credits for Qualifying Children and Other Dependents

  Your eligibility for the Child Tax Credit is determined by the information you report in the “Household Details” section of the filing process.

  The Credits for Qualifying Children and Other Dependents include:

  • Child Tax Credit (CTC): This credit directly reduces the amount of taxes owed, with the potential for a partial refund if the credit exceeds the taxpayer's liability.
  • Additional Child Tax Credit (ACTC): This is a refundable extension of the Child Tax Credit. If the CTC amount exceeds a taxpayer’s tax liability, the ACTC allows them to receive a refund for the remaining credit amount.
  • Credit for Other Dependents: This non-refundable credit is available for dependents who don’t qualify for the Child Tax Credit, such as older children or other qualifying relatives.
  • Earned Income Tax Credit (EITC): This is a refundable credit designed to assist low- to moderate-income workers and families. It is based on earned income and family size, providing a substantial financial benefit to those who meet the eligibility requirements.

  These credits can help lower your tax liability or potentially provide a refund, depending on your eligibility. To determine if you qualify and to calculate these credits, ensure that you’ve included all relevant information, such as your income and dependents, when filing with us. We will automatically apply any credits you're eligible for based on the details you provide.

   

  CTC, Child Tax Credit

  The Child Tax Credit is a program designed to offer financial help to families with children. It provides a tax break to eligible parents or guardians which reduces their tax bill or increases their refund.

  Here's what you need to know about the credit:

  • The Child Tax Credit can either reduce the amount of income tax you owe or provide a refund if you don't owe any taxes.
  • The amount varies, depending on factors like your income, filing status, and the number of children you have. See the current IRS guidelines here.
  • To be eligible, you must have at least one child who's under the age of 17 by the end of the tax year and who has a valid Social Security number — meaning they're a US citizen or permanent resident.

   

  EITC, Earned Income Tax Credit

  This tax benefit is provided by the US government to support low and moderate-income working individuals and families. The EITC is designed to reduce the amount of taxes owed and, in some cases, provide a refund to eligible taxpayers Here’s a helpful blog to learn more. 

  Things to remember:

  1. The EITC is a refundable credit, which means that if the credit exceeds the amount of taxes owed, you may receive a refund. Generally, the credit increases as the number of qualifying children increases, up to a certain limit.
     
     
  2. To qualify for the EITC, you must meet certain requirements, including:
     
     a. Having earned income from working for someone else or running your own business.
     
     b. Meeting specific income limits. The income limits vary based on your filing status, and the number of qualifying children you have.
     
     c. Filing a tax return, even if you’re not otherwise required to do so.
     
     
  3. The amount of the credit gradually decreases as your income goes up, depending on your filing status and the number of qualifying children you have. A qualifying child must meet certain criteria, including age, relationship, residency, and dependency requirements. It's important to check the current income limits and phase-out ranges to determine your eligibility for the credit.
     
     
  4. Much like the Child Tax Credit, we'll take the information you include on your return to determine your eligibility for this credit. If you qualify, we'll automatically include it on your return when you file.

   

  Form 2441, Child and Dependent Care Expenses

  This form reports care expenses for children and disabled dependents. These expenses may be eligible for a tax credit that reduces your federal income tax liability. 

  Not all child and dependent care expenses qualify for the credit. Those that do must be expenses that are necessary for the care provider to work or look for work. Additionally, if the care provider is married, generally both spouses must have earned income, unless one spouse was either a full-time student or was physically or mentally incapable of caring for themselves.

  • Part I - Information on Care Provider: Information about the care provider, including the provider's name, address, and identification number (either a Social Security number or an Employer Identification Number).

  • Part II - Credit for Child and Dependent Care Expenses: Credit calculations credit for child and dependent care expenses. The names and social security numbers of your qualifying persons.

  • Part III - Dependent Care Benefits: If you received any dependent care benefits, like those from a Dependent Care Flexible Spending Account (FSA) offered by your employer. These are subtracted from the amount of eligible expenses for the child and dependent care credit.

  To claim the credit when filing with us, select the “+ Credits and deductions” option on the review or summary page at the end of the filing process, and then choose "Childcare."

   

  Form 8863, Education Credits

  ​​This tax form allows eligible taxpayers to reduce their tax liability by claiming credits for qualified education expenses they paid during the tax year.

  Form 8863 is used to claim one of the two main education credits: the American Opportunity Credit and the Lifetime Learning Credit.

  American Opportunity Credit: Available for eligible students pursuing a degree or other recognized educational credential. It provides a credit of up to $2,500 per student per year for the first four years of post-secondary education.

  Lifetime Learning Credit: Available for both undergraduate and graduate students, as well as those taking courses to acquire or improve job skills. It provides a credit of up to $2,000 per tax return, regardless of the number of students.

  
  To claim either credit, you must meet certain eligibility requirements. These include:

  • Being enrolled at an eligible educational institution.
  • Being in a degree, certificate, or other recognized educational credential program (for the American Opportunity Credit).
  • Having paid qualified education expenses, such as tuition, fees, and required course materials.
  • Meeting income limits and other criteria specified by the IRS

  You don't have to worry about filling out this form when you file with us. Simply upload your Form 1098-T, Tuition Statement, during the filing process so we can determine which credits you are eligible for.

   

  Form 8880, Credit for Qualified Retirement Savings Contributions

  This tax form is used to claim the Credit for Qualified Retirement Savings Contributions. It's designed to encourage those with lower incomes to save for retirement. Eligible plans include:

  • Traditional IRAs
  • 401(k)s
  • 403(b)s
  • Thrift Savings Plan (TSP)

  To be eligible for the credit, you must meet certain requirements, including:

  1. Being at least 18 years old.
  2. Not being a full-time student.
  3. Having adjusted gross income (AGI) below a certain limit, which is determined each year by the IRS. The specific income thresholds may vary depending on your filing status.

  The credit amount is a percentage of the contributions you made to your eligible retirement savings plans during the tax year, up to a certain limit. The percentage ranges from 10% to 50%, depending on your income level and filing status. The maximum eligible contribution for the credit is $2,000 per taxpayer.

  To claim the credit, report your IRA information by selecting the “+Credits and deductions” box on the review or summary page at the end of the filing process, and then choose "IRA." We will assist you in determining your eligibility for the credit.

  
  Form 8835, Renewable Electricity Credit

  This credit is available to individuals or businesses that generate electricity from qualified renewable resources, such as wind, biomass, geothermal, landfill gas, hydropower, and solar energy.

  Here are some tidbits to remember:

  1. This credit encourages homeowners and business owners to invest in clean energy sources.
     
     
  2. To claim the credit, you must meet certain requirements, including:
     
     a. Owning a qualified renewable energy facility that generates electricity. This could include wind farms, solar farms, geothermal power plants, and hydropower plants, among others.
     
     b. Beginning construction or placing the facility into service before a specific deadline. The IRS sets deadlines for each renewable resource type, and it's important to adhere to them.
     
     c. Meeting specific production requirements. The amount of credit you can claim may be based on the electricity produced by the facility.
     
     
  3. The credit amount varies depending on the type of renewable resource used and the date the facility was placed in service. The credit is calculated based on the kilowatt-hours of electricity produced from qualified sources.

  To claim the credit when filing with us, make sure to select the “+ Credits and deductions” box on the review or summary page at the end of the filing process, and then choose "Renewable energy."

   

  Form 8962, Premium Tax Credit (PTC)

  The PTC is a tax credit provided to eligible individuals and families who obtained health insurance coverage through the Health Insurance Marketplace.

  Here are some important points about Form 8962 and the Premium Tax Credit:

  1. The Premium Tax Credit is calculated based on your income, household size, and the cost of premiums for a benchmark health insurance plan in your area. The credit will limit the amount you pay for premiums to a certain percentage of your income.
     
     
  2. When you file your return with us, you’ll need information from Form 1095-A, which is sent to you by the Marketplace. Form 1095-A provides details about your health insurance coverage, including the premiums you paid and any advance premium tax credits you received.
     
     Health insurance premiums are the amounts you pay, often monthly, for your health insurance coverage. An advance premium tax credit (APTC), on the other hand, is a type of subsidy provided by the federal government to help eligible individuals or families with low to moderate income afford health insurance premiums. This tax credit is applied in advance, directly to your monthly premiums, which lowers the amount you have to pay out-of-pocket for your health insurance. This will allow us to properly report your credit when you file.

  This credit is used to reconcile the credits you received throughout the year with the actual credit you’re eligible for at tax time. If the advance payments were too high or your income was higher than estimated, you may need to repay a portion of the credit. On the other hand, if your income was lower than expected, you may be eligible for a larger credit.

  Be sure to upload your Form 1095-A, Health Insurance Marketplace Statement, during the filing process so we can determine your eligibility for the PTC.

   

  Form 1116, Foreign Tax Credit

  This form is included if you’ve paid certain types of foreign taxes and want to claim a credit against your US income tax.

  This credit helps you avoid double taxation, which would occur if your foreign income is taxed by both the US and the foreign country where you earned the income.

  • Part I – Taxable Income or Loss From Sources Outside the United States: Your foreign income and deductions.
  • Part II – Foreign Taxes Paid or Accrued: The taxes you paid to a foreign government on the income listed in Part I.
  • Part III – Figuring the Credit: Calculates the maximum limit on your foreign tax credit amount for each specific category of income.
  • Part IV - Summary of Credits From Separate Parts III: Calculates your total foreign tax credit if you have more than one category of income.

  📝 We can help you claim this credit through our Premium subscription.

• 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.