Who Pays The Tax On A Cash Gift?
This question comes up a lot when a parent makes a cash gift to a child or when a grandparent gifts to a grandchild. When you make a cash gift to someone else, who pays the tax on that gift? The short answer is “typically no one does”. Each individual has a federal “lifetime gift tax exclusion” of $5,400,000 which means that I would have to give
This question comes up a lot when a parent makes a cash gift to a child or when a grandparent gifts to a grandchild. When you make a cash gift to someone else, who pays the tax on that gift? The short answer is “typically no one does”. Each individual has a federal “lifetime gift tax exclusion” of $13,990,000 which means that I would have to give away $13.99 million dollars before I would owe “gift tax” on a gift. For married couples, they each have a $13.99 million dollar exclusion so they would have to gift away $27.98M before they would owe any gift tax. When a gift is made, the person making the gift does not pay tax and the person receiving the gift does not pay tax below those lifetime thresholds.
“But I thought you could only gift $19,000 per year per person?” The $19,000 per year amount is the IRS “gift exclusion amount” not the “limit”. You can gift $19,000 per year to any number of people and it will not count toward your $13.99M lifetime exclusion amount. A married couple can gift $38,000 per year to any one person and it will not count toward their $27.98 million lifetime exclusion. If you do not plan on making gifts above your lifetime threshold amount you do not have to worry about anyone paying taxes on your cash gifts.
Let’s look at an example. I’m married and I decide to gift $20,000 to each of my three children. When I make that gift of $60,000 ($20K x 3) I do not owe tax on that gift and my kids do not owe tax on the gift. Also, that $60,000 does not count toward my lifetime exclusion amount because it’s under the $38,000 annual exclusion for a married couple to each child.
In the next example, I’m single and I gift $1,000,000 my neighbor. I do not owe tax on that gift and my neighbor does not owe any tax on the gift because it is below my $13.99M threshold. However, since I made a gift to one person in excess of my $19,000 annual exclusion, I do have to file a gift tax return when I file my taxes that year acknowledging that I made a gift $981,000 in excess of my annual exclusion. This is how the IRS tracks the gift amounts that count against my $13.99M lifetime exclusion.
Important note: This article speaks to the federal tax liability on gifts. If you live in a state that has state income tax, your state’s gift tax exclusion limits may vary from the federal limits.
About Michael……...
Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.
Tax Secret: R&D Tax Credits…You May Qualify
When you think of Research and Development (R&D) many people envision a chemistry lab or a high tech robotics company. It’s because of this thinking that millions of dollars of available tax credits for R&D go unused every year. R&D exists in virtually every industry and business owners need to start thinking about R&D in a different light because
When you think of Research and Development (R&D) many people envision a chemistry lab or a high tech robotics company. It’s because of this thinking that millions of dollars of available tax credits for R&D go unused every year. R&D exists in virtually every industry and business owners need to start thinking about R&D in a different light because there could be huge tax savings waiting for them.
Most companies don't realize that they qualify
Road paving companies, manufactures, a meatball company, software firms, and architecture firms are just a few examples of companies that have met the criteria to qualify for these lucrative tax credits.
Think of R&D as a unique process within your company that you may be using throughout the course of your everyday business that is specific to your competitive advantage. The purpose of these credits is to encourage companies to be innovative with the end goal of keeping more jobs here in the U.S. If you have an engineers on your staff, whether software engineers, design engineers, mechanical engineers there is a very good chance that these tax credits may be available to you. The R&D tax credits also allow you to look back to all open tax years so for companies that discover this for the first time, the upside can be huge. Tax years typically stay open for three years.
Accountants may not be aware of these credits
One of the main questions we get from business owners is “Shouldn’t my accountant have told me about this?” Many accounting firms are unaware of these tax credits and the process for qualifying which is why there are specialty consulting firms that work with companies to determine whether or not they are eligible for the credit. Some of our clients have worked with these firms and the company only pays the consulting firm if you qualify for the tax credits. Kind of a win-win situation.
We recently attended a seminar that was sponsored by Alliantgroup out of New York City and on their website it listed the following description of companies that qualify for these credits:“
Any company that designs, develops, or improves products, processes, techniques, formulas, inventions, or software may be eligible. In fact, if a company has simply invested time, money, and resources toward the advancement and improvement of its products and processes, it may qualify”.
We love helping our clients save taxes and in this case, like many others, we were looking at R&D in a different light.
About Michael……...
Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.
Avoid These 1099 “Employee” Pitfalls
As financial planners we are seeing more and more individuals, especially in the software development and technology space, hired by companies as “1099 employees”. “1099 employees” is an ironic statement because if a company is paying you via a 1099 technically you are not an “employee” you are a self-employed sub-contractor. It’s like having
As financial planners we are seeing more and more individuals, especially in the software development and technology space, hired by companies as “1099 employees”. “1099 employees” is an ironic statement because if a company is paying you via a 1099 technically you are not an “employee” you are a self-employed sub-contractor. It’s like having your own separate company and the company that you work for is your “client”.
There are advantages to the employer to pay you as a 1099 sub-contractor as opposed to a W2 employee. When you are a W2 employee they may have to provide you with health benefits, the company has to pay payroll taxes on your wages, there may be paid time off, you may qualify for unemployment benefits if you are fired, eligibility for retirement plans, they have to put you on payroll, pay works compensation insurance, and more. Basically companies have a lot of expenses associated with you being a W2 employee that does not show up in your paycheck.
To avoid all of these added expenses the employer may decide to pay you as a 1099 “employee”. Remember, if you are a 1099 employee you are “self-employed”. Here are the most common mistakes that we see new 1099 employees make:
Making estimated tax payments throughout the year
This is the most common error. When you are a W2 employee, it’s the responsibility of the employer to withhold federal and state income tax from your paycheck. When you are a 1099 sub-contractor, you are not an employee, so they do not withhold taxes from your compensation…………that is now YOUR RESPONSIBILITY. Most 1099 individuals have to make what is called “estimated tax payments” four times a year which are based on either your estimated income for the year or 110% of the previous year’s income. Best advice……..if 1099 income is new for you, setup a consultation with an accountant. They will walk you through tax withholding requirements, tax deductions, tax filing forms, etc. It’s very difficult to get everything right using Turbo Tax when you are a self-employed individual.
Tracking mileage and expenses throughout the year
Since you are self-employed you need to keep track of your expenses including mileage which can be used as deductions against your income when you file your tax return. Again, we recommend that you meet with a tax professional to determine what you do and do not need to track throughout the year.
The tax return is prepared incorrectly
No one wants a love letter from the IRS. Those letters usually come with taxes due, penalties, and a “guilty until proven innocent” approach. There may be additional “schedules” that you need to file with your tax return now that you are self-employed. The tax schedules detail your self-employment income, deductions, estimated tax payments, and other material items.
Important rule, do not cut corners by reducing the gross amount of your 1099 income. This is a big red flag that is easy for the IRS to catch. The company that issued the 1099 to you usually reports that 1099 payment to the IRS with your social security number or the Tax ID number of your self-employment entity. The IRS through an automated system can run your social security number or tax ID to cross check the 1099 payment and 1099 income to make sure it was reported.
Legal protection
As a 1099 sub-contractor, you have to consider the liability that could arise from the services that you are providing to your “client” (your employer). As a self-employed individual, the company that you “work for” could sue you for any number of reasons and if you are operating the business under your social security number (which most are) your personal assets could be at risk if a lawsuit arises. Advice, talk to an attorney that is knowledgeable in business law to discuss whether or not setting up a corporate entity makes sense for your self-employment income to better protect yourself.
About Michael……...
Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.
Tax Secret: Spousal IRAs
Spousal IRA’s are one of the top tax tricks used by financial planners to help married couples reduce their tax bill. Here is how it works:
Spousal IRA’s are one of the top tax tricks used by financial planners to help married couples reduce their tax bill. Here is how it works:
In most cases you need “earned income” to be eligible to make a contribution to an Individual Retirement Account (“IRA”). The contribution limits for 2025 is the lesser of 100% of your AGI or $7,000 for individuals under the age of 50. If you are age 50 or older, you are eligible for the $1,000 catch-up making your limit $8,000.
There is an exception for “Spousal IRAs,” and there are two cases where this strategy works very well.
Case 1: One spouse works and the other spouse does not. The employed spouse is currently maxing out their contributions to their employer-sponsored retirement plan, and they are looking for other ways to reduce their income tax liability.
If the AGI (adjusted gross income) for that couple is below $236,000 in 2025, the employed spouse can make a contribution to a Spousal Traditional IRA up to the $7,000/$8,000 limit even though their spouse had no “earned income”. It should also be noted that a contribution can be made to either a Traditional IRA or Roth IRA but the contributions to the Roth IRA do not reduce the tax liability because they are made with after tax dollars.
Case 2: One spouse is over the age of 70 ½ and still working (part-time or full-time) while the other spouse is retired. IRA rules state that once you are age 70½ or older, you can no longer make contributions to a traditional IRA. However, if you are age 70½ or older BUT your spouse is under the age of 70½, you still can make a pre-tax contribution to a traditional IRA for your spouse.
Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.
Changes to 2016 Tax Filing Deadlines
In 2015, a bill was passed that changed tax filing deadlines for certain IRS forms that will impact a lot of filers. Not only is it important to know the changes so you can prepare and file your return timely but to understand why the changes were made.
In 2015, a bill was passed that changed tax filing deadlines for certain IRS forms that will impact a lot of filers. Not only is it important to know the changes so you can prepare and file your return timely but to understand why the changes were made.
Summary of Changes
IRS Form Business Type Previous Deadline New Deadline
1065 Partnership April 15 March 15
1120C Corporation March 15 April 15
NOTE: The dates in the chart above are for companies with years ending 12/31. If a company has a different fiscal year, Partnerships will now file by the 15th day of the third month following year end and C Corporations will now file by the 15th day of the fourth month following year end.
Why the Changes?
The most practical reason for the change to filing deadlines is that individuals with partnership interests will now have a better opportunity to file their individual returns (Form 1040) without extending. Form K-1 provides information related to the activity of a Partnership at the level of each individual partner. For example, if I own 50% of a Partnership, my K-1 would show 50% of the income (or loss) generated, certain deductions, and any other activity needed for me to file my Form 1040. The issue with the previous Partnership return deadline of April 15th is that it coincided with the individual deadline. This resulted in partners of the company not receiving their K-1’s with sufficient time to file their personal return by April 15th. With Partnerships now having a deadline of March 15th, this will give individuals a month to receive their K-1 and file their personal return without having to extend.
The deadline for Form 1120, which is filed by C Corporations, was also changed with this bill. Where the Form 1065 deadline was cut back by a month, the Form 1120 was extended a month. C Corporations, for tax purposes, are treated similar to individuals whereas they pay taxes directly when they file their return. Partnerships are not taxed directly, rather the income or loss is passed through to each individual partner who recognizes the tax ramifications on their personal return. For this reason, the deadline for Form 1120 being extended a month has little impact, if any, on individuals. The change gives C Corporations more time to file without having to extend the return.
S Corporations are another common business type. The deadlines for S Corporation returns (Form 1120S) were not changed with this bill. S Corporations are similar to Partnerships in that K-1’s are distributed to owners and the income or loss generated is passed through to the individuals return. That being said, Form 1120S already has a due date of March 15th, the same as the new Partnership deadline.
Extension Deadlines
IRS Form Business Type Deadline
1040 Individual October 15
1065 Partnership September 15
1120 C Corporation September 15
1120S S Corporation September 15
Extension deadlines were not immediately changed with the passing of the bill. Although Partnerships previously had the same filing deadline as individuals, the deadline with the filing of an extension was a month before. This was necessary because if a Partnership did not have to file an extended return until October 15th, individuals with partnership interests wouldn’t have a choice but to file delinquent.
The one change to the extension chart above set to take place in 2026 is the C Corporation extension being changed to October 15th.
Summary
Overall, the changes appear to have improved the filing calendar. This may be a big adjustment for Partnerships that are used to the April 15th deadline as they will have one less month to get organized and file. For this reason, you may see an increase in 2016 Partnership extensions.
About Rob……...
Hi, I’m Rob Mangold. I’m the Chief Operating Officer at Greenbush Financial Group and a contributor to the Money Smart Board blog. We created the blog to provide strategies that will help our readers personally , professionally, and financially. Our blog is meant to be a resource. If there are questions that you need answered, pleas feel free to join in on the discussion or contact me directly.
Do I Have To Pay Taxes On My Inheritance?
Whenever people come into large sums of money, such as inheritance, the first question is “how much will I be taxed on this money”? Believe it or not, money you receive from an inheritance is likely not taxable income to you.
Whenever people come into large sums of money, such as inheritance, the first question is “how much will I be taxed on this money”? Believe it or not, money you receive from an inheritance is likely not taxable income to you.
Of course there are some caveats to this. If the inherited money is from an estate, there is a chance the money received was already taxed at the estate level. The current federal estate exclusion is $5,430,000 (estate taxes and the exclusion amount varies for states). Therefore, if the estate was large enough, a portion of the inheritance may have been subject to estate tax which is 40% in most cases. That being said, whether the money was or was not taxed at the estate level, you as an individual do not have to pay income taxes on the money.
Although the inheritance itself is not taxable, you may end up paying taxes if there is appreciation after the money is inherited. The type of account and distribution will dictate how the income will be taxed.
Basis Of Inherited Property
Typically, the basis of inherited property is the fair market value of the property on the date of the decedent’s death or the fair market value of the property on the alternate valuation date if the estate uses the alternate valuation date for valuing assets. An estate will choose to value assets on an alternate date subsequent to the date of death if certain assets, such as stocks, have depreciated since the date of death and the estate would pay less tax using the alternate date.
What the fair market value basis means is that if you inherit stock that was originally purchased for $500 and at the date of death has appreciated to $10,000, you will have a “step-up” basis of $10,000. If you turn around and sell the stock for $11,000, you will have a $1,000 gain and if you sell the stock for $9,000, you will have a $1,000 loss.
Inheriting a personal residence also provides for a step-up in basis but the gain or loss may be treated differently. If no one lives in the inherited home after the date of death, it will be treated similar to the stock example above. If you move into the home after death, any subsequent sale at a loss will not be deductible as it will be treated as your personal asset but a gain would have to be recognized and possibly taxed. If you rent the property subsequent to inheritance, it could be treated as a trade or business which would be treated differently for tax purposes.
Inheriting An IRA or Retirement Plan Account
Please read our article “Inherited IRA’s: How Do They Work” for a more detailed explanation of the three different types of distribution options.
When you inherit a retirement account, and you are not the spouse of the decedent, in most cases you will only have one option, fully distribute the account balance 10 years following the year of the decedents death. The SECURE Act that was passed in December 2019 dramatically change the distribution options available to non-spouse beneficiaries. See the article below:
If you are the spouse of the of the decedent, you are able to treat the retirement account as if it was yours and not be forced to take one of the options above. You will have to pay taxes on distributions but you do not have to start withdrawing funds immediately unless there are required minimum distributions needed.
Note: If the inherited account was an after tax account (i.e. Roth), the inheritor must choose one of the options presented above but no tax will be paid on distributions.
Non-Qualified Annuities
Non-qualified annuities are an exception to the step-up in basis rule. The non-spousal inheritor of a non-qualified annuity will have to take either a lump sum or receive payments over a specified time period. If the inheritor chooses a lump sum, the portion that represents the gain (lump sum balance minus decedent’s contributions) will be taxed as ordinary income. If the inheritor chooses a series of payments, distributions will be treated as last in, first out. Last in, first out means that the appreciation will be distributed first and fully taxable until there is only basis left.
If the spouse inherits the annuity, they most likely have the option to treat the annuity contract as if they were the original owner.
This article concentrated on inheritance at a federal level. There is no inheritance tax at a federal level but some states do have an inheritance tax and therefore meeting with a professional is recommended. New York currently does not have an inheritance tax.
About Rob……...
Hi, I’m Rob Mangold. I’m the Chief Operating Officer at Greenbush Financial Group and a contributor to the Money Smart Board blog. We created the blog to provide strategies that will help our readers personally , professionally, and financially. Our blog is meant to be a resource. If there are questions that you need answered, pleas feel free to join in on the discussion or contact me directly.
Year End Tax Strategies
The end of the year is always a hectic time but taking the time to sit with a tax professional and determine what tax strategies will work best for you may save thousands on your tax bill due April 15th. As the deadline for your taxes starts to get closer, you may be in such a rush to file them on time that you make some mistakes in the process, but
year end tax strategies
The end of the year is always a hectic time but taking the time to sit with a tax professional and determine what tax strategies will work best for you may save thousands on your tax bill due April 15th. As the deadline for your taxes starts to get closer, you may be in such a rush to file them on time that you make some mistakes in the process, but don't worry, you won't be the only one. If you don't have the relevant tax strategy in place, you are more prone to mistakes. So, the purpose of this article is to discuss some of the most common tax strategies that may apply to you. It may be worth contacting a company that specializes in tax services if you're unsure of how to go about these strategies though. Some of the deadlines for these strategies aren't until tax filing but the majority include an action item that must be done by December 31st to qualify and therefore taking the time before year end is crucial.
Taxable Investment Accounts
Offset some of the realized gains incurred during the year by selling investments in loss positions. Often times dividends received and sales made in a taxable investment account are reinvested. Although the owner of the account never received cash in the transaction, the gain is still realized and therefore taxable. This may cause an issue when the cash is not available to pay the tax bill. By selling investments in a loss position prior to 12/31, you will offset some, if not all, of the gain realized during the year. If possible, sell enough investments in a loss position to take advantage of the maximum $3,000 loss that can be claimed on your tax return.
Note: The IRS recognized this strategy was being abused and implemented the "wash sale" rule. If you sell an investment in a loss position to diminish gains and then repurchase the same investment within 30 days, the IRS does not allow you to claim the loss therefore negating the strategy.
Convert a Traditional IRA to a Roth IRA
If you are in a low income year and will be taxed at a lower tax bracket than projected in the future, it may make sense to convert part of a traditional IRA to a Roth IRA. The current maximum contribution to a Roth IRA in a single year is $5,500 if under 50 and $6,500 if 50 plus. You will pay taxes on the distributions from the traditional but the benefit of a Roth is that all the contributions and earnings accumulated is tax free when distributed as long as the account has been opened for at least 5 years. Roth accounts are typically the last touched during retirement because you want the tax free accumulation as long as possible. Also, Roth accounts can be passed to a beneficiary who can continue accumulating tax free. Roth money is after tax money and therefore the IRS allows you to withdraw contributions tax and penalty free and let the earnings continue to accumulate tax free. If you don't have the cash come tax time to cover the conversion, you can convert the Roth money back to a traditional IRA by tax filing plus extension and the account will be treated as the Roth conversion never took place.
Donate to Charity if you Itemize
If you itemize deductions on your tax return, go through your closet and donate any clothing or household goods that you no longer use. There are helpful tools online that will allow you to value the items donated but be sure you keep record of what was donated and have the charity give you a receipt.
Max Out Your Employer Sponsored Retirement Plan
If you know you will be hit with a big tax bill and want to defer some of the taxes, max out your retirement plan if you haven't already. Employer sponsored plans, such as 401(k)'s, must be funded through payroll by 12/31 and therefore it is important to make this determination early and request your payroll department start upping your contribution for the remaining payroll periods in the year. The maximum for 401(k)'s in 2015 and 2016 is $18,000 if under 50 and $24,000 if 50 plus.
Business Owners – Cut Checks by 12/31
If your company had a great year and the cash is available, use it to pay for expenses you would normally hold off on. This could mean paying state taxes early, paying invoices you usually wait until the end of the payment term, paying monthly expenses like health or general insurance, or buying new office equipment. This might also mean investing in new office furniture such as chairs and desks, or more storage space for all of your paperwork and electronics. Above all, by getting the checks cut by 12/31, you realize the expense in the current year and will decrease your tax bill.
Business Owners – Set Up a Retirement Plan
For owners with no full time employees, a Single(k) plan being put in place by 12/31 will allow you to fund a retirement account up to the 401(k) limits mentioned early. As long as the plan is established by 12/31, the owner will be able to fund the plan any time before tax filing plus extension. If the plan is not established by 12/31, other options like the SEP IRA are available to take money off the table come tax time.With tax laws continuously changing, it is important to consult with your tax professional as there may be strategies available to you that could save you money. Don't procrastinate as some planning before the end of the year may be necessary to take full advantage.
About Rob.........
Hi, I'm Rob Mangold. I'm the Chief Operating Officer at Greenbush Financial Group and a contributor to the Money Smart Board blog. We created the blog to provide strategies that will help our readers personally , professionally, and financially. Our blog is meant to be a resource. If there are questions that you need answered, pleas feel free to join in on the discussion or contact me directly.
Understanding Investment Tax Forms
Making a wide variety of investments is a wise move as it means if one market drops, not all of your investments will be affected. If you've only invested in stocks or real estate then it would be a good idea to diversify. Take a look at this review and see if Bitcoin is something you want to invest in. The whole point of investing is to make a profit from your
investment tax forms
Types of Investment Income
Making a wide variety of investments is a wise move as it means if one market drops, not all of your investments will be affected. If you've only invested in stocks or real estate then it would be a good idea to diversify. Take a look at this review and see if Bitcoin is something you want to invest in. The whole point of investing is to make a profit from your investments so you want to give yourself as much of a chance of success as possible. Income from investments can be divided into four main categories;
Interest – Interest income is paid on bonds and other types of fixed-income securities such as fixed annuities. Interest is always taxable as ordinary income unless it is paid inside an IRA or qualified plan or annuity contract. Municipal bond interest is also tax free and interest from treasury securities is exempt from taxation at the state and local levels.
Dividends – These represent a portion of a company's current profits that it passes on to shareholders. Dividends can be taxed as ordinary income, or they may qualify for lower capital gains treatment in some cases if they are coded as "qualified" dividends.
Capital Gains – This represents the amount of profit realized when an investment is sold at a higher price than that for which it was bought. Long-term gains are realized for investments held for at least a year and a day before they were sold, and are taxed at a lower rate than ordinary income. Short-term gains are taxed as ordinary income.
Retirement and Annuity Distributions – Although distributions from retirement plans are not technically a form of investment income, they are listed here because IRA and retirement plan owners can only access the gains from their investments in these accounts by taking distributions. Normal distributions are always taxed as ordinary income.
Tax Forms
Each income type listed above is broken out on a corresponding 1099 form issued by the broker or issuer of the income generated. Every form includes the name, address and tax ID number of the issuing entity. These forms are listed as follows:1099-INT – Breaks out the interest paid to the investor. This form is issued for anyone who owns bonds, CDs or mutual funds that invested in fixed income securities or cash or has an interest-bearing bank or brokerage account.
Box 1 shows total taxable interest paid
Box 2 shows the amount of early withdrawal penalty, if any
Box 3 shows the amount of U.S. Treasury security interest paid
Box 4 shows the amount of tax withheld
Box 5 shows investment expenses
Box 6 shows foreign tax paid
Box 7 shows the foreign payor
Box 8 shows tax-exempt interest
Box 9 shows interest from special private activity bonds
Box 10 shows the CUSIP number for tax-free bond interest
Boxes 11-13 show state ID information and withholding
1099-DIV – This breaks down the total amount of dividends paid to an investor. It is issued to holders of any common stock, preferred stock, or mutual fund that invests in them. However, it is not issued to owners of cash value life insurance policies, as those dividends are merely a return of premium.
Box 1a shows total ordinary dividends
Box 1b shows total qualified dividends
Boxes 2a-d break down capital gains from mutual funds, REITs and collectibles
Box 3 shows nondividend distributions
Box 4 shows federal tax withheld
Box 5 shows investment expenses
Boxes 6 and 7 show foreign tax paid and the foreign payor
Boxes 8 and 9 show cash and noncash liquidation distributions
Box 10 shows private interest dividends
Box 11 shows specified private activity bond interest dividends
Boxes 12-14 show state ID information and withholding
1099-B – This form breaks down the amount of capital gain or loss that the investor realized for that tax year. It is issued to everyone who bought or sold publicly traded securities at a gain or loss. Many brokerage firms issue additional statements that break down the loss or gain for each trade and then quantify them into net long- and/or short-term gains and losses for the year.
Box 1a shows the date of sale or exchange
Box 1b shows the date of acquisition
Box 1c shows whether it is a long- or short-term gain or loss
Box 1d shows the ticker symbol of the security
Box 1e shows the quantity sold
Box 2a shows the gross proceeds reported to the IRS both before and after commission and expenses
Box 2b shows a checkbox if loss not allowed due to amount shown in box 2a
Box 3 shows cost or other basis
Box 4 shows federal tax withheld
Box 5 shows any amount of wash sale loss that was disallowed
Box 6 has checkboxes for noncovered securities and for sales where the basis in box 3 was reported to the IRS
Box 7 shows income from bartering
Box 8 is for a description of the security if needed
Boxes 9-12 break down realized and unrealized gains and losses from derivatives contracts
Boxes 13-15 show state ID information and withholding
1099-R – This form is issued to everyone who receives distributions from IRAs, qualified retirement plans or annuity contracts that are not housed inside a tax-deferred account or plan.
Box 1 shows the gross distribution amount
Box 2a shows the amount of taxable distribution
Box 2b has checkboxes for taxable amount not determined and total distribution
Box 3 shows amount of capital gain included in box 2a
Box 4 shows federal tax withheld
Box 5 shows employee/Roth contributions
Box 6 shows net unrealized appreciation in employer securities
Box 7 shows the distribution code that determines how the distribution is taxed
Box 8 shows the value of any annuity contract included in the distribution
Box 9a shows the value of distribution percentage that belongs to the recipient
Box 9b shows the amount of the employee's investment for annuity distributions where the exclusion ratio must be computed
If Box 10 is filled, refer to instructions on Form 5329
Box 11 shows the year the recipient first made a Roth contribution of any kind
Boxes 12-17 show state and local ID information and withholding
1099 MISC – Although most of this form pertains to earned income, it is also used to report royalty income (box 1) and working interest income (box 7) in oil and gas leases.Form 5498 – The receiving custodian of a qualified plan rollover or IRA transfer issues this to the account holder as proof that the transfer was not a taxable event and should not be counted as a distribution.
Michael Ruger
About Michael.........
Hi, I'm Michael Ruger. I'm the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.
