When a taxpayer sells a capital asset, i.e., property owned and used for personal or investment purposes, the sale will result in either a capital gain or a capital loss and is generally reported on Schedule D (Form 1040). The following items are not capital assets: Inventory for sale to…

 Amended Return (1040X) Claim Refund Due a Deceased Taxpayer (1310) Injured Spouse Allocation (8379) MFJ vs MFS Comparison MFS Allocation Record for Community Property States Net Operating Loss Worksheet / Form 1045 Installment Agreement Request (9465) Automatic Extension Form (4868) Power of Attorney Form (2848) Information to Claim Certain Refundable…

An installment sale is a sale of property in which the taxpayer receives at least one payment for the sale after the tax year of the sale.  If a sale qualifies to be an installment sale, the gain must be reported under the installment method unless the taxpayer elects not…

Beginning in January 2011, the IRS started sending notice (CP01A) to taxpayers who had previously contacted them and have since been validated by the IRS as being a victim of identity theft.  The new notice will provide the taxpayer with a 6-digit identity protection PIN (IP PIN), valid for the…

Schedule K-1 is used to distribute the net profit/loss to shareholders or partners based upon the percentage of stock or how the partnership agreement reads. Also, if a trust didn’t pay the income tax on their earnings it may be passed through to the beneficiaries on a Schedule K-1. To…

Beginning in January 2011, the IRS started sending notice (CP01A) to taxpayers who had previously contacted them and have since been validated by the IRS as being a victim of identity theft.  The new notice will provide the taxpayer with a 6-digit identity protection PIN (IP PIN), valid for the…

Form 8582, Passive Activity Loss Limitations is used to calculate the amount of any passive activity loss that a taxpayer can take in a given year. (Limiting passive activity losses began with the Tax Reform Act of 1986 as a means of discouraging economic activity undertaken strictly as a tax…

Several other taxes may need to be paid on Form 1040. These will carry to Schedule 2 Line 8 (in 2018, Schedule 4 Line 62). Multiple amounts will be added together, with the letters STM indicating a statement is included with the return detailing the individual codes and amounts. From…

Unemployment compensation is included in gross income.  Taxpayers must report unemployment compensation on Form 1040, Form 1040A, or Form 1040EZ.  Unemployment compensation generally includes any amounts received under the unemployment compensation laws of the United States or of a state.  It includes unemployment insurance benefits and benefits paid to a…

Are you filing a Form 1099-R for your client? Find the explanation for box 7 codes here. 2020 1099-R Box 7 Distribution Codes: 1 (1) Early distribution, no known exception (in most cases, under age 59 1/2). (See Form 5329) For a rollover to a traditional IRA of the entire…