Understanding IRS Forms
It’s common in most cases that a taxpayer will be required to fill out vital financial forms in order to receive consideration for any resolution. A frequent mistake most taxpayer’s make when drafting these forms is they often overstate their financial condition, one-way or another. When considering tax resolution, it’s important to know what is allowable and what is not. Adding frivolous expenses and overstating your position can lead the taxing authorities to believe you are filing “solely to delay” and may cause your proposal to be rejected immediately. Such a determination can be very damaging to a case and will likely result in enforcement against the taxpayer.
In many cases filing the form is only step one – you will have to prove your work. The taxing authorities will have push-back and will scrutinize all details to ensure they are getting the most out of collection and repayment. Having experienced representation puts you in the best position to have your case resolved. We understand the taxing authorities’ objective is only to collect the liability in the shortest amount of time possible. That is why Capstone Tax Consulting and its associates take ample time to review your unique financial condition, understand your goals, and reconcile all necessary documents. We work with you to perfect the taxing authority’s financial forms and ensure your best interest is met. These strategies will result in a resolution that is manageable for you and/or your business.
Below are just a few of the forms the taxing authorities will ask you to perfect, under the penalty of perjury.
433-A, Collection Statement for Wage Earner and Self-employed Individuals
This form is used to identify net income, equity in assets and investments. These figures, taken together, are calculated as “Future Collection Potential” (meaning they are they IRS/State are identifying how they can collect from you voluntarily or involuntary). Its important this is form is completed accurately because it is signed under the penalty of perjury.
Use this form if you are a Individual Taxpayer or if your business is a Single-Member LLC or Sole Proprietorship.
433-B, Collection Statement for Businesses
This form is used to identify the business’ viability and sustainability – the taxing authorities will look at equity in all business assets and investments as well as your revenue and expenses over the past 3 months. The IRS can make a determination to force a shutdown of the business if it does not show it’s sustainable while meeting its current tax obligations. To this end, it’s vital to work with a licensed individual. An Enrolled Agent will review this form and any proposal prior to being submitted because of the serious negative implications that can arise if done so without expertise. It’s important this is filled out correctly because it is signed under the penalty of perjury.
Use this form if your business is a C-Corp., S-Corp., Multi-Member, LLC, or Partnership.
Keep in mind, as a business corporate officer or member, you may be assessed with “Trust Fund Recovery Penalty” for you individually and may be required to complete a 433-A.
Capstone’s licensed associates will reconcile and perfect all pertinent finical documents to show the business is viable and make certain its best interests are met.
W-9 Form, Request for Taxpayer Identification Number and Certification
IRS Form W-9, also known as the Request for Taxpayer Identification Number and Certification, is a crucial document used by businesses and individuals for tax purposes. When engaging in various financial transactions, such as hiring independent contractors, making payments to vendors, or opening bank accounts, the W-9 form is utilized to collect essential information from the payee. This includes their legal name, taxpayer identification number (TIN), business entity type, and address. By providing accurate details on the W-9 form, the recipient ensures that the payer possesses the necessary information required for accurate reporting and compliance with IRS regulations. The W-9 form simplifies the process of documenting taxpayer identification, streamlines financial transactions, and promotes transparency in tax reporting.
Form 1099 is an important document used for reporting various types of income received by individuals or businesses in the United States. When a taxpayer receives income that is not reported on a W-2 form (which is typically used for reporting wages from employment), the payer uses Form 1099 to report these payments to the IRS. Common examples of income reported on Form 1099 include freelance or contract work, rental income, dividends, and interest.
At Capstone Tax Consulting, Inc., we understand the significance of IRS forms W-9 and 1099 in the realm of tax compliance. In our recent blog post, we delve into the distinctions between these two forms and shed light on when and why they are used. Understanding the differences between Form W-9 and Form 1099 is crucial for both individuals and businesses, as it helps ensure accurate reporting and compliance with tax laws. Read our blog entry to explore the nuances between these forms and gain valuable insights into the tax implications they carry. Our team of tax experts is always ready to assist you in navigating the complexities of tax compliance and resolving any issues that may arise.
Form 1040, U.S. Individual Income Tax Return
This form is the primary document used by individuals in the United States to report their annual income and calculate their federal tax liability. It includes information about income, deductions, credits, and taxes owed or refunded. Form 1040 is used by taxpayers who have various types of income, such as wages, self-employment income, interest, dividends, and capital gains. This form is used by U.S. taxpayers to file an annual income tax return. When filing this form, taxpayers determine the amount of taxes they owe or the refund they may be eligible to receive.
W-2 Form, Wage and Tax Statement
IRS Form W-2, also known as the Wage and Tax Statement, is used by employers in the United States to report wages paid to employees and the taxes withheld from their paychecks. It summarizes an employee's annual earnings, tax withholdings, and other important information. Form W-2 is provided to employees by their employers at the end of each calendar year, and it must also be filed with the Social Security Administration (SSA) and the IRS.
To learn more about IRS Form W-2 and how it differs from Form 1099, visit our blog by clicking the button below.
Form 1099-K, Merchant Card and Third Party Network Payments
A payment settlement entity (PSE) must file Form 1099-K, Payment Card and Third Party Network Transactions, for payments made in settlement of reportable payment transactions for each calendar year.
Form 1099-K includes information about the gross amount of payments received during the tax year, which may include sales, commissions, fees, or other types of income. This form is used to report income received from online sales, e-commerce platforms, and other digital payment methods.
Form 1099-NEC, Nonemployee Compensation
Form 1099-NEC is used to report payments made to independent contractors or self-employed individuals. It is specifically used to report nonemployee compensation of $600 or more during the tax year.
W-4 Form, Employee's Withholding Certificate
This form is used by employees in the United States to indicate their federal income tax withholding preferences to their employers. When starting a new job or experiencing changes in personal or financial circumstances, employees complete Form W-4 to determine the appropriate amount of taxes to be withheld from their paychecks. After having filled it, employees give this form to their employers. The form includes information about the employee's filing status, number of allowances claimed, and any additional withholding amounts requested. By accurately completing Form W-4 and giving it to their employers, employees ensure that the right amount of federal income tax is withheld from their earnings, minimizing the possibility of owing taxes or receiving a large refund when filing their annual tax return.
Form 1040 (Schedule C), Profit or Loss from Business (Sole Proprietorship)
Schedule C, also known as Form 1040 Schedule C, is an essential tax form used by self-employed individuals in the United States to report their business income and deductions. It is filed as part of the individual's personal tax return (Form 1040).
Schedule C is used to report the profits or losses from a sole proprietorship or single-member limited liability company (LLC). It provides a breakdown of business revenue, deductible business expenses, and calculates the resulting net profit or loss. Common examples of expenses reported on Schedule C include business supplies, advertising costs, professional fees, and vehicle expenses.
By accurately completing Schedule C, self-employed individuals ensure that their business income is properly reported, and they can claim legitimate deductions, reducing their overall tax liability. It is important to maintain accurate records and supporting documentation for all reported income and expenses.
At Capstone Tax Consulting, Inc., we understand the intricacies of Schedule C and the unique challenges faced by self-employed individuals. Our team of tax experts can assist you in navigating the complexities of Schedule C, ensuring compliance with IRS regulations, and maximizing your allowable deductions. Contact us today for personalized tax resolution services tailored to your specific needs.
Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return
IRS Form 4868, also known as the Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, is a form used by individuals in the United States to request an extension of time to file their federal income tax return.
By completing Form 4868, taxpayers can obtain an additional six months to file their tax return, moving the deadline from the usual April 15th to October 15th. It is important to note that Form 4868 only extends the time to file the return, not the time to pay any taxes owed. If taxes are owed, they must still be paid by the original filing deadline to avoid penalties and interest.
Filing Form 4868 requires estimating the tax liability and paying any anticipated taxes owed. While the extension grants additional time to file the return, failure to pay the estimated taxes by the original deadline may result in penalties and interest charges.
Form 941, Employer's Quarterly Federal Tax Return
This form is used by employers to report income taxes, Social Security tax, and Medicare tax withheld from employees' wages. It also includes the employer's portion of Social Security and Medicare taxes.
Form 941 is filed quarterly and provides a summary of wages paid, tips received, and taxes withheld for each quarter. Employers use this form to calculate the total tax liability for the quarter and reconcile it with the deposits made throughout the period.
In addition to reporting tax withholdings, Form 941 also includes information about the number of employees, any adjustments made, and any tax credits claimed.
Filing Form 941 accurately and timely is crucial for employers to ensure compliance with federal tax obligations. It enables the proper reporting and payment of employment taxes, helping to support vital programs such as Social Security and Medicare.
Form 1098-T, Tuition Statement
Form 1098-T is used by eligible educational institutions to report information about the educational expenses paid by students or their families. This form helps students or their parents claim education-related tax benefits when filing their federal income tax returns.
Form 1098-T provides details such as the amount of qualified tuition and related expenses paid during the tax year, as well as any scholarships or grants received. It also includes information about enrollment status, such as whether the student was enrolled at least half-time.
Students or their parents may use the information provided on Form 1098-T to claim tax credits, such as the American Opportunity Credit or the Lifetime Learning Credit, which can help reduce the amount of income tax owed or increase the refund amount.
It is important to note that not all educational expenses may be eligible for tax benefits, and it is advisable to consult a tax professional or refer to IRS guidelines to determine eligibility.
Form 1095-A, Health Insurance Marketplace Statement
Form 1095-A, Health Insurance Marketplace Statement, is used to report certain information to the IRS about individuals who enroll in a qualified health plan through the Marketplace. Form 1095-A also is furnished to individuals to allow them to claim the premium tax credit, to reconcile the credit on their returns with advance payments of the premium tax credit (advance credit payments), and to file an accurate tax return.
Form 1099-MISC, Miscellaneous Income
Form 1099-MISC, Miscellaneous Income, is used to report rents, royalties, prizes and awards and other fixed determinable income.
SS-4 Form, Application for Employer Identification Number
IRS Form SS-4, also known as the Application for Employer Identification Number (EIN), is a form used by businesses, organizations, and other entities to apply for a unique nine-digit identification number assigned by the Internal Revenue Service (IRS).
Form SS-4 collects information about the entity, including its legal name, mailing address, business structure, and the reason for applying for an EIN. The form can be submitted online, by mail, fax, or phone.
Form 1040-X, Amended U.S. Individual Income Tax Return
This form is used to correct errors or make changes to a previously filed Form 1040, 1040-A, 1040-EZ, 1040-NR, or 1040-NR-EZ.
Form 1040-X is typically used when there are changes in filing status, income, deductions, or credits that affect the taxpayer's tax liability. It allows individuals to amend their original tax return to accurately report any changes and claim additional refunds or pay any additional taxes owed.
When filing Form 1040-X, taxpayers must provide details of the original tax return, specify the changes being made, and provide a written explanation for each change.
Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.
This form is used to report distributions from retirement plans, annuities, pensions, and other similar accounts.
Form 1099-R provides information about the total amount distributed during the tax year, any taxable amount, and the applicable distribution codes that indicate the nature of the distribution. It is important to note that distributions from retirement accounts are generally subject to income tax, and additional penalties may apply if the recipient is not of retirement age or fails to meet certain criteria.
14134, Application for Certificate of Subordination of Federal Tax Lien
Liens are filed on a first-come first-serve basis so if the IRS and/or State files a tax lien, it will likely prevent you from obtaining lending. The lending institution will need to file a lien to protect their investment and they are typically unwilling to take a second seat to the IRS. The reason being, should any borrower default the IRS will get their money before the lender. However, with a sophisticated approach you can file IRS form 14134, generally in conjunction with a proposal to resolve the IRS tax debt, to request the IRS to lower its lien position to allow lending. Additionally, tax liens can prevent the sale of a home/asset.
656, Offer In Compromise
Form 656 must be completed in order to receive consideration for an Offer in Compromise (settlement). The IRS has a disclaimer on their website www.irs.gov: “The attached Form 656 is intended for tax professional use only and must not be used by the individual taxpayer…” The IRS is overwhelmed with submission offers, most of which will not be accepted for various reasons; but typically an individual does not know the proper way of submitting an offer and will not include pertinent documents to prove their situation warrants consideration. In some cases filing an offer incorrectly or “frivolously” can create negative case history because it may appear as if the taxpayer only filed it “solely to delay” collection of taxes outstanding.
To learn more about an IRS offer in compromise, click here.
14135, Application for Certificate of Discharge of Property from Federal Tax Lien
This form is used to discharge the federal tax lien for various reasons, even if the liability remains due. If you have paid your tax liability in full, you may file this form to have the lien withdrawn.
Form 8821, Tax Information Authorization
Our competition charges you $500-$1500, plus two weeks time to do an investigation into your tax case. At Capstone Tax Consulting we provide that same investigation by doing a non-invasive, soft, transcript review with the IRS Tax Practitioners office. In most cases we can have our findings within 24 hours, if not the same day. Don't waste precious time or money paying someone to tell you that you have a problem. You know you have a problem. Pay for the solutions to those problems.