Everyone with a job knows about Form W-2 — that’s the document your employer submits with all the information about the wages you earned, the taxes your boss withheld and everything else you need to report your income to the IRS. Side hustlers, people who collect rental income, investors and anyone else who earns non-employee compensation are familiar with the 1099 series of forms.
But there are a whole lot of other documents that aren’t nearly as well known, though are no less important. Depending on your situation, your accountant might ask you to hand one of them over.
Will you be ready?
Here’s a look at some of the most common second-tier forms, schedules and publications that you might not have heard of but that could make or break your tax season just the same.
Lenders use Form 1098 to report mortgage interest payments of $600 or more. The information it includes can be used for certain deductions, like the interest itself, as well as points and mortgage insurance premiums. There are also three other variants:
- 1098-C: This form is for the donation of vehicles such as boats, cars and airplanes
- 1098-E: This form deals with student loan interest
- 1098-T: This form is used to report tuition payments and related expenses
This form reports the total contributions you made to your individual retirement account (IRA), including variations like Roth IRAs, SIMPLE IRAs and SEP IRAs. The form states the market value of all the investments in your account and reports the amount of any required minimum distributions. It also contains information on any money you rolled over from one retirement account to another. There’s also a variant called Form 5498-SA, which deals with health savings accounts.
This form varies depending on whether it’s filed by an S Corporation, a partnership or a trust. With businesses that operate as partnerships, the partners — not the business — must pay taxes on the business’s income, and each partner will receive a K-1 to report their share. It works much the same for S corporations, only in this case, shareholders, not partners, receive K-1s to report business income.
Trusts use Schedule K-1 only when they pass income through beneficiaries — otherwise, they use Form 1041.
The IRS requires all taxpayers to pay as they go throughout the tax year. For most people, this happens automatically when their employers withhold tax payments on their behalf for remittance to the IRS. Otherwise, it’s up to the taxpayer to submit quarterly estimated payments. If they pay too little, they might be required to pay a penalty and submit a special document called Form 2210, which is used to calculate the amount of the penalty.
The Alternative Minimum Tax (AMT) was created to prevent high-income earners from using deductions to reduce their taxable income to zero or close to it. If you’re a high earner whose deductions eliminate nearly all of your taxable income, your accountant will use this form to determine whether the AMT applies to you. If it does, the same form will be used to calculate what you owe.
If you adopted a child during the year, you can deduct qualified adoption expenses if you meet all of the qualifications. You or your accountant will use Form 8839 to report those expenses. For tax year 2021, the maximum credit is $14,440 per child — but the credit is nonrefundable, meaning it can lower your tax bill all the way down to zero. But, if there’s any left over, you don’t get to keep it as part of your refund.
This form is for people who itemize their deductions and plan to include medical and dental expenses as part of those deductions. Your accountant will use Publication 502 to determine which expenses qualify. Not only must the expenses meet the IRS’s guidelines, but you can deduct only the portion of those expenses that exceed 7.5% of your adjusted gross income.
If you earned more than $1,500 in taxable interest or dividend income in 2021, your accountant will need to fill out a document called Schedule B. In the case of interest, the bank that paid it will send you a Form 1099-INT, which your accountant will use to fill out Schedule B. In the case of dividend income, your brokerage will send you Form 1099-DIV, which contains the information your account will use to complete Schedule B.
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