Navigating IRS tax forms can be a daunting task – the language is dry, and the requirements are complicated. But for HR professionals, it’s essential to know which forms to fill out and when to file them, especially in a small business setting. With so many tax forms available, it can be hard to know how to properly fill them out and which ones are used in which situations. This blog post makes life easier by providing an easy-to-follow guide that anyone can understand.
Note: While this information is accurate as of the time of writing, this is subject to change and you should consult the IRS website (which this article links to when available) or a tax professional for the most up-to-date information. Nothing in this article constitutes financial or legal advice, and it’s always best to consult with a tax professional for guidance.
There is a limit to the number of losses a business can have each year. Form 461 – Limitation on Business Losses is used to report any excess losses from your business. Your business is considered to have excess losses if the number of total deductions from trades and businesses exceeds your gross total income plus the threshold amount.
You’ll need to file Form 461 in any given year only if you’re a noncorporate taxpayer and net losses from all of your trades or businesses add up to the threshold of over $262,000.
Keep in mind: The rules surrounding business losses can be complex and it’s always best to consult with a tax professional for guidance.
Form 720 – Quarterly Federal Excise Tax Return is used to report federal excise taxes to the IRS. Federal excise taxes comprise several categories of taxes, including
If your business is subject to any excise taxes, you must file Form 720. Note that excise taxes are not included in income taxes; instead, they are filed and reported separately.
Almost every business must file Form 941. Form 941 – Employer’s Quarterly Federal Tax Return is required for any business that has hired employees. As its name implies, the Employer’s Quarterly Federal Tax Return should be filed once per quarter. Form 941 is due each year on the same dates: April 30, July 31, October 31, and January 3.
When reporting Form 941, you’ll need to report information about your employees, such as:
Form 944 – Employer’s Annual Tax Return is an annual alternative for smaller businesses to the quarterly tax return Form 941. Like Form 941, Form 944 requires businesses to report information about their employees, wages paid, and taxes withheld.
Businesses that file Form 944 instead of Form 941 must have a combined annual liability of $1,000 for social security, Medicare, and withheld federal income taxes. If your business qualifies to file Form 944 instead of Form 941, you will need to contact the IRS to get an exception. If you file Form 944, you will not need to file Form 941.
If you benefit from discharged indebtedness, you must report the amount you benefited as gross income. There are certain circumstances. However, that might exclude you from reporting that amount as gross income.
Even if you don’t have to report your canceled debt as income, you might need to report it under Form 982 – Reduction of Tax Attributes Due to Discharge of Indebtedness. Form 982 determines how much discharged indebtedness you can exclude from your gross income.
If you received Form 1099-C and plan on excluding canceled debts from your total calculated income, you’ll need to file Form 982.
Form 1040 – U.S. Individual Income Tax Return is used by individuals to file their annual income tax returns. Essentially, Form 1040 is used to calculate individuals’ income and then calculate how much tax is owed on that income.
Some information you will include on Form 1040 includes:
There are multiple versions of Form 1040, and you may need to fill out more than one, depending on your circumstances. Businesses will typically not file a Form 1040, as this return is for individuals, though business owners and employees will need to fill one out.
Some individuals, like independent contractors, freelancers, and others who do not complete a W-2 and are not subject to withholding, do not automatically have tax taken out of their paychecks by employers. Instead, they must calculate and pay owed income taxes on their own.
Form 1040-ES – Estimated Tax for Individuals is a form used for individuals to calculate and pay the estimated amount of taxes owed by an individual for any given year. If you expect to owe at least $1,000 in taxes at the end of the year, then you should file 1040-ES to pay your taxes every quarter.
The Form 1040-SR – Form For Filing Seniors is one version of Form 1040 intended for those 65 and older. There are no major differences between the content of Form 1040 and Form 1040-SR. The only difference between the two is that Form 1040-SR has larger text boxes and larger fonts, making it more accessible for seniors if this form is filled out by hand.
Form 1040-X – Amended U.S. Individual Tax Return is a form used by individuals who need to correct errors in a previously filed tax return within three years of the original report. To file a Form 1040-X, you must have already filed a Form 1040, 1040-SR, or 1040-NR.
According to the IRS, individuals should file Form 1040-X for the following purposes:
Though partnerships do not need to pay direct taxes on their income, their partners still must pay taxes on the partnership’s income. As such, partnerships still need to report their income to the IRS using Form 1065 – U.S. Return of Partnership Income.
Form 1065 – U.S. Return of Partnership Income is the form used by partnerships to report their income, gains, losses, deduction, and other financial information. All partnerships must file a Form 1065 each year unless the partnership is inactive, meaning that there is no income or expenditure for the calendar year.
Form 1094-C – Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns must be filed alongside Form 1095. These two forms are used to report information regarding the business’s health coverage for employees, as well as employees’ active enrollment in that health coverage. Form 1094-C is a transmittal form, so it is not filed independently of Form 1095.
Form 1095s are used to report information to the IRS about individuals’ health insurance. There are three types of Form 1095: Form 1095-A, Form 1095-B, and Form 1095-C. Each of these forms determines how much taxes individuals owe on their health insurance and whether they owe an individual shared responsibility payment. You may need to file one or multiple types of 1095 forms depending on your circumstances, health insurance, and payments.
Form 1095-C – Employer-Provided Health Insurance Offer and Coverage is a form filed by companies with more than 50 permanent full-time employees. This simple form is filed and given to each and every employee to report their participation in employee-offered health coverage. In this form, employees outline their offer of coverage, required contribution, and relief.
Form 1099s are used by individuals who are paid by entities other than their employer. For example, if an individual engages in gig work or is a freelancer or independent contractor, they will need to complete Form 1099 to report the income given to them by their clients.
Many employers have two types of employees: 1099 workers and W-2 workers. 1099 workers are freelancers, independent contractors, and gig workers, whereas W-2 workers are legally considered employees.
There are several types of Form-1099s, including:
Form 1099-B – Proceeds from Broker and Barter Exchange Transactions is a form filed by brokers and bankers. Form 1099-B allows the IRS to oversee individual transactions through bankers and brokers.
Bankers are required to send Form-1099-B to those who:
Form 1099-G – Certain Government Payments is a form intended to be filed by local, state, and federal governments if they have made certain payments to individuals, organizations, and companies during the tax year.
Governments must file a 1099-G if they make payments, including:
If you accept any form of debit or credit card payments online, you will likely have to file a Form 1099-K. In fact, Form 1099-K is required for any small business owner, self-employed individuals, and gig workers that earn over $600 through payment card and third-party network transactions. For example, if you own an Etsy or Shopify store and you make over $600 in a year, you will likely need to file Form 1099-K.
Form 1099-K – Payment Card and Third Party Network Transactions ensures that all income – including that earned and processed through third-party vendors like PayPal, Mastercard, Visa, and many others – is reported to the IRS.
Form 1099-R – Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. is used by organizations and companies to report the distribution of retirement benefits. If you make pension or annuity payments to your retired employees, your company must fill out this form annually.
Form 1099-MISC – Miscellaneous Income is intended to be filed when individuals are paid income in ways that are not covered by other Form 1099s. For example, individuals can report their income from self-employment, gig work, and other affairs in other forms, but certain types of income are not covered under those umbrellas.
According to the IRS, you will need to file a 1099-MISC for every person to whom you have paid:
Essentially, if you make money in ways that aren’t covered by self-employment, W-2 employment, or other 1099 forms, you must include them in your Form 1099-MISC.
Form 1099-NEC – Nonemployee Compensation is a new tax form that replaces the older Form 1099-MISC. Like the 1099-MISC, this form is used to report any income made from sources that are not W-2 employers.
Self-employed individuals, gig workers, and freelancers will need to complete this form if they receive more than $600 from any non-employer source.
Form 1128 is necessary if you need to request a change in a tax year. Entities that may need to use this form include:
Form 1128 lets these types of organizations adopt, change, or retain a specific tax year. You must file Form 1128 by the due date of the federal income tax year for the first effective year.
Form 2106 lets your employees deduct ordinary and necessary expenses for their jobs. The IRS defines an ordinary expense as a cost that your industry considers typical and accepted. The definition of a necessary expense is an expense that is useful and appropriate for your business.
The IRS allows relatively few types of employees to use Form 2106. Form 2106 is for use by:
Expenses for Form 2106 can include transportation, lodging, meals, or entertainment. Employees must have receipts or other records for these expenses.
Form 2210 helps taxpayers determine if they owe a penalty for underpaying their estimated tax. If the taxpayer owes a penalty, the form helps determine the amount. Individuals, estates, and trusts may need to use Form 2210.
Common uses for Form 2210 include self-employed taxpayers or taxpayers with significant income that isn’t subject to regular withholding. Form 2210 isn’t necessary if the total balance due is less than $1,000.
In some circumstances, the IRS will waive all or part of the underpayment penalty. Form 2210 allows the taxpayer to request a waiver.
Form 2290 is used to calculate and pay the tax on certain taxable vehicles. Individuals and any type of organization may need to use this form. You can use Form 2290 to calculate and pay the tax for:
You can also use Form 2290 to claim:
The mileage limit is 7,500 for agricultural vehicles.
Form 2555 is for use by U.S. citizens and resident aliens. Eligible taxpayers can calculate their foreign-earned income exclusion and their housing exclusion or deduction. Taxpayers can’t exclude or deduct more than their foreign-earned income for the year.
To be eligible to use Form 2555, a taxpayer must:
A tax home is a taxpayer’s primary place of business or employment. The tax home must be in a foreign country throughout the period of bona fide residence or physical presence.
Bona fide residence means that a U.S. citizen stays in a foreign country with the intent to make that country their home. To use Form 2555, the taxpayer must be a bona fide resident continuously for the entire tax year. The period of physical presence is 330 days when the taxpayer was present in a foreign country.
Form 2555 is due with Form 1040 or 1040-SR. If the taxpayer lives in a foreign country on the due date, the IRS grants a two-month extension. A statement attached to the return should explain why the taxpayer qualifies for this extension.
You can use Form 3115 to request a change in your overall method of accounting or the accounting treatment of a specific item. Applicants using Form 3115 can be entities, persons, or a separate trade or business of an entity or person. A separate Form 3115 is usually necessary for each change in accounting method.
Common method changes include:
Taxpayers with average annual gross receipts of $10 million or less for the three tax years preceding the change in accounting have a reduced Form 3115 filing requirement. This reduction applies to certain accounting changes.
If you’re eligible to file under the automatic change procedures, you must do so. The IRS provides a list of automatic changes in the instructions for Form 3115. Otherwise, you can file under the non-automatic change procedures.
For automatic change requests, you should file Form 3115 with your federal income tax return for the year of the change.
You should file non-automatic requests during the tax year for which you’re requesting the accounting change. In this case, the earlier you file Form 3115, the better. This gives the IRS time to respond before your tax return is due.
Form 3468 is used to claim the investment credit. Form 3468 includes several credits:
The credit reduces federal income tax liability based on the taxpayer’s investment in these types of properties.
The IRS defines investment credit property as any depreciable or amortizable property that qualifies for these credits. The criteria a project must meet to be eligible for an investment credit is available with the instructions for Form 3468.
The basis of the investment credit may be lower if:
The investment credit is available to property owners. People who lease property and use it in a way that would qualify for the credit may also be eligible.
Form 3800 accumulates all the business credits you’re claiming in a specific tax year. It helps you calculate your total tax credit.
Partnerships and S corporations always need to complete the source credit form. Other taxpayers can generally report the business credit directly on Form 3800 if the only source for the credit is a:
You may not be able to use the full general business credit because of the tax liability limit. In that case, you can carry the unused amount back to the previous year. For some credits, the carryback period is five years.
Any remaining credit can be carried forward for up to 20 years after the year of the credit.
The list of credits included on Form 3800 is extensive. Examples include:
The complete list is available on the instructions for Form 3800. Each of these credits has its own form in addition to Form 3800. You’ll need to complete the form for the individual credit(s) you’re claiming before entering them on Form 3800.
Form 4562 has several uses. You can:
The IRS defines section 179 property as real property or certain other property that you buy for business use. You can choose to treat some qualified real property as section 179 property. This lets you recover the cost without taking depreciation deductions over the recovery period.
You need to file a separate Form 4562 for each business or activity that requires this form. Employees who are claiming a deduction for job-related vehicle expenses using standard mileage or actual costs should use Form 2106 (Employee Business Expenses), not Form 4562.
Other than Part V of the form, you don’t need to submit detailed information about the depreciation of assets placed in service in earlier tax years.
You can use Form 4684 to report gains and losses from casualties and thefts. The losses must result from federally-declared disasters.
The President of the United States has the authority to declare these disasters. Declarations can be for either a major disaster or an emergency declaration under the Stafford Act. Disasters can be natural or human-caused.
Form 4684 covers:
Federal casualty losses and qualified disaster losses are limited to property for personal use. Disaster losses can cover personal or business property.
The criteria for each loss category are different. The instructions for Form 4684 list these criteria.
If you have insurance coverage for your property and the loss is deductible, you must file an insurance claim. Failure to file a timely claim limits the amount you can deduct using Form 4684.
Form 4797 is used to report the sale of business property. This includes involuntary conversions and recapture amounts under sections 179 and 280F(b)(2). You can report gains or losses.
Property can include capital or noncapital assets such as:
You may need to file other forms in connection with Form 4797, like Form 4684 (Casualties and Thefts) or Form 6252 (Installment Sale Income).
Individuals can use Form 4868 to request an extension of the deadline to file their federal income tax return. The extension is typically for six months. A four-month extension applies to taxpayers who are out of the country.
The IRS doesn’t require an explanation of why someone is requesting an extension.
Taxpayers must file Form 4868 by the regular deadline to file their taxes. If a payment would be due, the extension doesn’t apply to the payment. Failure to make any required payments by the regular deadline will result in interest charges and possible penalties.
Employers can use Form 5884 to claim the Work Opportunity Tax Credit (WOTC). The WOTC is available to employers who hire people from groups that have faced barriers to employment.
To be eligible for the WOTC, employers should pre-screen job applicants. A designated state workforce agency must certify that an employee is a member of a targeted group. The targeted groups are:
You can claim the credit for first- and/or second-year wages. Qualified wages have the same definition as under the Federal Unemployment Tax Act.
Form 5884 is a requirement for:
Other taxpayers can claim the credit directly on Form 3800 if their only source for the credit is one of these types of organizations.
You can use Form 5884-A to claim the employee retention credit. You may be eligible if your business continued to pay wages after it became inoperable due to damage from a qualified major disaster. The IRS lists the qualified disasters on the instructions for Form 5884-A.
You may not claim the employee retention credit for wages that you claim under the work opportunity credit.
The employee retention credit is worth 40% of up to $6,000 of qualified wages per eligible employee. This credit is not the same as the employee retention credit under the CARES Act for businesses impacted by the COVID-19 pandemic.
Understanding IRS forms is critical for HR leaders. By taking the time to learn the process and properly filing paperwork, HR professionals can save their companies significant time, energy, and money.
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