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What Is a Tax-Free Savings Account?

The Tax-Free Savings Account (TFSA) is a financial gem in the world of Canadian savings and investment. This unique account allows individuals aged 18 and older to grow their wealth without the drag of taxation. In this comprehensive guide, we'll delve into the details of what a TFSA is, how it works, and why it's such a valuable financial tool. Continue reading...

What Is Form 1099-NEC?

Form 1099-NEC, the Internal Revenue Service's (IRS) designated form for reporting nonemployee compensation, plays a vital role in the financial landscape of businesses and independent workers alike. This article aims to demystify this crucial form, explaining its purpose, key features, and how to navigate it efficiently. Form 1099-NEC is the IRS's solution to the confusion surrounding income and compensation reporting. Before 2020, all nonemployee compensation was reported in box 7 of Form 1099-MISC, causing headaches for many payers who faced dual-filing deadlines. Continue reading...

Is Investing in Property Tax Liens a Lucrative Opportunity?

One investment niche that often goes unnoticed amidst the glamour of stocks and traditional real estate is property tax liens. These legal claims against assets serve as an alternative investment avenue for those seeking above-average returns. In this article, we will delve into what property tax liens are, how to invest in them, and the potential disadvantages associated with this investment vehicle. Continue reading...

What is IRS Form 1099-SA used for?

Navigating the maze of tax documentation can be daunting. Enter Form 1099-SA, a pivotal IRS document detailing distributions from health accounts. But what is its purpose? Who needs to file it? And how does it affect your tax landscape? This comprehensive guide demystifies Form 1099-SA, offering insights into its components, tax implications, and the nuances of different health accounts. Whether you're an individual taxpayer or a financial institution, understanding Form 1099-SA is crucial to ensuring compliance and maximizing the benefits of health accounts. Dive in to unlock the world of health account distributions and their tax intricacies. Continue reading...

Inheritance Tax: What It Is, How It's Calculated, and Who Pays It?

Navigating the maze of inheritance tax? This comprehensive guide breaks down the complexities of the 'death tax', distinguishing it from estate tax, and highlighting its nuances. Learn how it's calculated, who's liable, and the exemptions available. Whether you're planning your financial future or deciphering an inheritance, understanding these tax intricacies is crucial. Dive in to ensure your assets are passed on efficiently and to make informed decisions in the world of finance and taxation. Continue reading...

What is the definition of Goods and Services Tax (GST), and how is it calculated?

Unlock the world of Goods and Services Tax (GST)! Explore its definition, global adoption, and the ongoing debates. Discover how GST impacts your finances and nations worldwide. Dive into the calculation and benefits of GST. Learn how it compares to VAT. Join the discussion on taxation's evolving landscape. 🌍💰 #GSTexplained #TaxationInsights Continue reading...

What is Common Law and how is it utilized in legal systems?

Unlock the Mysteries of Common Law 📜 Delve into the intriguing world of common law! Discover its origins in medieval England, the power of precedent (stare decisis), and how it shapes our legal system. Explore its dynamic role in marriage recognition and its influence on social change. 🏛️ #CommonLaw Continue reading...

What are the key facts to understand about 1099s?

Unlock the secrets of 1099 forms! 🧐 Learn who should receive them, the various types, what to do if you don't get one, and how to handle errors. Stay tax-savvy with these vital insights! #TaxTips #1099Forms Continue reading...

What Are the IRA Contribution Limits for 2022 and 2023?

The importance of planning for retirement cannot be overstated. Individual Retirement Accounts (IRAs) are a popular choice for individuals looking to secure their financial future. However, to make the most of these accounts, it's crucial to understand the IRA contribution limits for 2022 and 2023 and the associated rules and conditions. For the 2022 tax year, the maximum annual contribution to both Roth and traditional IRAs is $6,000. Continue reading...

What Is Disbursement?

Disbursement, in the realm of finance and accounting, is a fundamental concept that underpins the financial health of businesses and individuals alike. It involves the distribution of funds from a source to a recipient for various purposes, from sustaining business operations to funding education. In this comprehensive guide, we delve into what disbursement entails, how it functions, the different types, and real-world examples. Disbursement, at its core, refers to the act of paying out or disbursing money from a fund or account. This term can encompass a wide array of financial transactions, making it a crucial aspect of both personal and business finance. Continue reading...

What is Form 1040-X?

IRS Link to Form — Found Here Form 1040-X is the amendment form used to change previously submitted information from the 1040, 1040-A, or 1040-EZ tax filing form. The taxpayer has 3 years to file the 1040-X to make changes. The 1040-A and EZ are simpler versions of the 1040 which can be used by individuals who have relatively simple filings to do, and have modest household income. The 1040-X requires a line-by-line amendment request and explanation of why the changes are being requested. You will also need to attach supporting documents that provide more information about the changes being requested. Continue reading...

What is Form 1099-DIV?

IRS Link to Form — Found Here Form 1099-DIV is used to report dividend income and distributions from investments, and is usually filed by the company making the distribution. The taxpayer will only use the form as a reference for reporting on other forms, such as the Schedule B if the distributions are over $1,500. Mutual funds are a common source of the 1099-DIV, since they have to distribute their gains to shareholders every year. Continue reading...

What is Form 1099-MISC?

IRS Link to Form — Found Here The 1099-MISC form is filed by the payer, which is the business (whether for-profit or not-for-profit) making the distributions or payments to an individual who is operating in a non-employee capacity as independent contractor. This form is also used to report rental income, royalties, and Indian gaming profits. Independent contractors are often used by businesses for various kinds of labor. These arrangements might be temporary or long-standing, but the business and worker have agreed that the contractor is not an employee, and does not have employee benefits. Continue reading...

What is Form 1099-INT?

IRS Link to Form — Found Here Interest income, such as that paid in certain bank accounts and government bonds, will be reported to the taxpayer and the IRS by the payer of the interest income. Form 1099-INT is the form used by these businesses or entities to report the income. Interest income from bonds and interest-paying bank accounts, such as savings accounts, and certain investments, will be reported on Form 1099-INT. The payer of the interest will submit the form to the IRS even for very small amounts of interest payments. Continue reading...

What is Form 1099-Q?

IRS Link to Form — Found Here Distributions from qualified educational accounts such as 529s will be reported on a 1099-Q. This will be submitted by the institution serving as the custodian of the account. Qualified tuition programs (QTPs) might include Coverdell Educational Savings Accounts (ESAs) or 529 plans, and distributions from these plans are not taxable when used for qualified educational expenses, such as college tuition. Continue reading...

What is Form 1099-R?

IRS Link to Form — Found Here Sources of retirement plan income, such as pensions, annuities, and IRAs, will be associated with a 1099-R filing. The form is filed by the company making the distribution. The taxpayer uses the information on it for when filing income taxes. The IRS receives Form 1099-R from the companies making distributions from retirement plans. They have categorized all annuity contracts as retirement plans by default, so those are included, as are pensions, profit sharing plans, other forms of employer-sponsored retirement plans, cash-value life insurance distributions, and individual retirement accounts (IRAs). The company making the distribution sends the 1099-R to the IRS and the account owner. Continue reading...

What is Form 2106-EZ: Unreimbursed Employee Business Expenses?

IRS Link to Form — Found Here Some necessary expenses paid in the course of performing the duties of a job will go unreimbursed by an employer but are eligible for tax deduction. These can be filed by the employee on a 2106 or a 2106-EZ. The 2106-EZ is, of course, the simpler of the two, and allows for standard mileage deductions and most of the common types of related deductions. Unreimbursed business expenses are expenses that can be considered necessary to performing a job, such as paying for business-related insurance or professional organization dues, that aren’t paid for by an employer. These can be used to file for tax deductions on a 2106 or 2106-EZ. Continue reading...

What is Form 1045: Application for a Tentative Refund?

IRS Link to Form — Found Here Form 1045 can be used to apply for a refund that might carry-back of up to 5 years, if an individual or trust has overpaid on their taxes, finds Net Operating Losses (NOL), or has section 1256 losses to carry-back. The 1045 is meant to be the quickest way to get a carry-back refund. Net Operating Losses from a pass-through entity or business can be carried back up to 5 years now, according to updates to IRC 172(h). Section 1256, which applies to futures contract investing, will allow a carry-back of losses in a 3-year time frame. For such carry-backs, the standard filing is IRS Form 1045. Continue reading...

What is a Form 2106: Employee Business Expense?

IRS Link to Form — Found Here Form 2106 is the long-form way to request deductions for unreimbursed business expenses incurred by an employee in the course of work. This can include professional affiliation dues, continuing education, insurances, vehicle mileage and depreciation, and other possible deductions. Often, employees are not reimbursed for every out-of-pocket expense they incur in the course of their work. This might include wear and tear on a vehicle, professional dues, travel expenses, business meals, and many more items. For any amount to go towards a tax deduction, the itemized unreimbursed expenses must be over 2% of adjusted gross income. Continue reading...

What is Form 2848: Power of Attorney and Declaration of Representative?

IRS Link to Form — Found Here Sometimes individuals need representation to argue their case to the IRS or the tax court. To this end, there is an IRS form, the 2848, which designates an individual to represent the taxpayer on tax matters. The person receiving agency must be qualified and certified to perform such work. CPAs, Enrolled Agents (EAs), tax attorneys, and a few other professionals are qualified to represent taxpayers (or non-taxpayers, as the case may be) on tax matters in a tax court or IRS audit. To give one of these registered tax advisors the authority to serve as your agent and proxy for such matters before the IRS and tax courts, you must file a Form 2848. Continue reading...

What is Form 4563: Exclusion of Income for Bona-Fide Residents of American Samoa?

IRS Link to Form — Found Here Residents of US Territories will sometimes have to file their taxes with their resident territory as well as the US Department of Revenue. For those who are bona-fide citizens, they are more likely to be able to exclude their income from US taxation. Bona-fide residency of a territory is most easily defined by the 183-day rule: if the person is physically present and living in the territory for 183 days out of the year, he or she is a bona-fide resident of the territory (in most cases). Beginning or ending bona-fide residency requires form 8898. American Samoa is the only place that can exercise the “possession exclusion,” as defined in IRC Section 931. Continue reading...

What is Form 5405: Repayment of First-Time Homebuyer Credit?

IRS Link to Form — Found Here If a person moves from his first-purchased home, or it is destroyed, and he took the first-time homebuyer credit at purchase, he may have to repay the credited amount if the home was sold or destroyed within 36 months. He must file a 5405 and begin making payments in the form of additional taxes going forward. Form 5405 is the filing for those who sell their home or see it destroyed within 36 months of receiving the first-time homebuyer tax credit. The First Time Homebuyer Look-Up Tool is an IRS database allowing consumers to see all relevant information about when they took the FTHBC and how much they might owe back if they no longer used it as a primary residence within 36 months. Continue reading...

What is the Form 6251: Alternative Minimum Tax, Individuals?

IRS Link to Form — Found Here The Form 6251 is used to calculate the alternative minimum tax (AMT) for individuals who may have high income but relatively low taxes due after deductions. The individual first computes his or her adjusted gross income, which does not allow for some deductions that may have been taken for the tax filing. If the AMT is higher than the taxes already paid, the individual will have to pay the difference. Continue reading...

What is Form 6781: Gains and Losses from Section 1256 Contracts and Straddles?

IRS Link to Form — Found Here Form 6781 is used to calculate and report gains and losses due from Section 1256 contracts, which covers futures on commodities and indexes, as well as their derivatives, and from straddles, which are options strategies defined under Section 1092. 6781 is used to report positions in futures and options at the end of the year even if no gains or losses were realized through trades. The value of the positions will be marked-to-market at the end of the year, and these will serve to compute the gains and losses for these purposes. Continue reading...

What is Form 706: Estate Tax and Generation-Skipping Transfer Tax?

IRS Link to Form — Found Here The Form 706 is required not only if there is a tax implication for an estate, but also to claim exclusions. Each person has an exclusion of 5.49 Million as of 2017. For married couples, that goes double, such that heirs to an estate under $11 million probably will not owe any estate taxes. A surviving spouse should still report the inherited portion of the deceased spouse’s estate up to the exclusion amount, otherwise the exclusion will be lost. There are also lines for the lifetime gift exclusion amount and the generation skipping transfer tax. Continue reading...

What is Form 8282: Donee Information Return?

IRS Link to Form — Found Here Non-cash contributions to a charity which are valued at over $5,000 must be reported on a Form 8282 by the organization receiving the donation. The organization does not have to include publicly traded securities on this form, or items used in the course of the organization’s mission, such as medical supplies. Non-profit organizations must report non-cash contributions that they receive from donors if the value of the item is over $5,000. These items will also need to be reported by the donor or form 8283, Section B. Continue reading...

What is Form 706 GS (D): Generation Skipping Transfer Tax Return for Distributions?

IRS Link to Form — Found Here Form 706 is the Estate Tax return, and it has a section concerning Generation-Skipping Transfers. 706 GS (D), specifically, is the form which 706: GS (D-1) is the corresponding form if the transfer is associated with a trust, which is filed by the trustee. The Generation-Skipping Tax attempts to prevent an estate from transferring too many assets directly to grandchildren instead of children for the purpose of shielding heirs from estate taxes. The form for reporting Generation Skipping Transfers is 706 GS (D), where 706 is the Estate Tax Return filing. Continue reading...

What is Form 8891?

IRS Link to Form — Found Here Form 8891 was previously used by individuals with retirement plans held in Canada when they were living in America, each time they took distributions. The process proved to be cumbersome for many good-natured Canadians, and caused the IRS a lot of trouble as well. This form has been retired in favor of an acknowledgement on the IRS Form 1040. Form 8891 is no longer used, which came as a relief to many Canadian-Americans who had retirement plans from work they did in Canada. Certain filing requirements still exist, such as a new form replacing the FBAR, for foreign bank accounts, now called the FinCEN Form 114. Continue reading...

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