Introduction: As the U.S. tax season for 2023 approaches, it’s crucial to understand the latest updates, deadlines, and instructions provided by the Internal Revenue Service (IRS). This comprehensive guide will cover essential aspects, including Form 1040, relevant schedules, filing requirements, and expert advice for a hassle-free tax season.
With the declaration of April 15, 2024, to file form 1040 or 1040 SR as the last date, the modern U S filing season starts with the falling of snow or declaration of snow storm in various parts of the nation. More as a necessity since centuries, tax filing is an addiction ingrained in the US citizen’s lifestyle.
The IRS reported that as of May 2023, approximately 134,224,000 tax returns were e-filed for Tax Year 2022 out of a total of 142,577,000 2021 Returns filed. (IRS represents the income tax wing of the treasury department of the American government, one of the most respected in the last two centuries).
Let us learn the latest instructions from IRS website,
https://www.irs.gov/pub/irs-pdf/i1040gi.pdf
For 2023, you will use Form 1040 or, if you were born before January 2, 1959, you can use Form 1040-SR.
Depending upon the requirement and complexity of the tax returns, Schedules 1,2,3 with parts like 1 and two may be required.
You file the tax return if you are,
| Your filing status was at least | and at the end of 2023, you were | File the return if gross income |
| Single | under 65 | $13,850 |
| 65 or older | $15,700 | |
| Married filing jointly | under 65 (both spouses) | $27,700 |
| 65 or older (one spouse) | $29,200 | |
| 65 or older (both spouses) | $30,700 | |
| Married filing separately | any age | $5 |
| Head of household | under 65 | $20,800 |
| 65 or older | $22,650 | |
| Qualifying surviving spouse | Under 65 | $27,700 |
| 65 or older | $29,200 |
Even if you do not otherwise have to file a return,
you should file one to get a refund of any federal income tax withheld.
You should also file if you are eligible for any of the following credits.
- Earned income credit.
- Additional child tax credit.
- American opportunity credit.
- Credit for federal tax on fuels.
- Premium tax credit.
- Credits for sick and family leave
Yes, you are to file by April 15, 2024 your tax return. However, you can get an automatic 6-month extension if, no later than the date your return is due, you file Form 4868. If you want to apply for an extension electronically, you may do so.
You are already aware that filing tax returns through experts like Certified Public Accountant, in active practice, is an easy, effective and the best way to refer any parts of any tax year returns easily if any query comes from IRS. He/she keeps the records completely and help you at times of need.
What about standard deduction?
The amounts are: • Single or Married filing separately—$13,850. • Married filing jointly or Qualifying surviving spouse—$27,700. • Head of household—$20,800.
Please collect the following papers from the check list before approaching the CPA to file your return.
Check list for filing form 1040 or others.
- Proof of identification
- Status of your tax form and residency status
- Social Security Numbers for you (plus your spouse and any other dependents)
- Dates of birth for you (and your spouse, plus any other dependents)
- A copy of your past tax return
- Statements of wages earned (e.g., W-2, W-2G, 1099-INT, 1099-DIV, 1099-G)
- Statements of interest/dividends from banks, brokerages, etc.
- Proof of any tax credits, tax deductions or tax exclusions
- Your bank account number and routing number (for Direct Deposit)
- Capital gain details if any
- Medical Expenses Paid
- Dependent date of birth
- Any childcare expenses
Capital gains tax
- The maximum federal tax rate on capital gains is 20% for assets held for more than 12 months. The graduated income tax rates apply to capital gains from assets held for 12 months or less.
- There are three capital gains income thresholds. For 2023, these thresholds apply to maximum taxable income levels, as follows (amounts in USD): MFJ- Married filing jointly, H of household – head of household, MFS – Married filing single,
| Single tax payers capital rate (%) | MFJ | H of household | MFS | Long term gains |
| Up to 44,625 | Up to 89250 | Up to 59,750 | Up to 44,625 | 0 |
| 44626-492300 | 89,251 to 553,850 | 59,751-593050 | 44626-276,900 | 15 |
| Over 492300 | Over 553850 | Over 593050 | Over 276900 | 20 |
What are the forms to be submitted?
Form 1040
For 2023, you will use Form 1040 or, if you were born before January 2, 1957, you have the option to use Form 1040-SR. You may only need to le Form 1040 or 1040-SR and none of the numbered schedules, Schedules 1 through 3.
However, if your return is more complicated (for example, you claim certain deductions or credits or owe additional taxes), you will need to complete one or more of the numbered schedules. Below is a general guide to which schedule(s) you will need to be based on your circumstances. See the instructions for the schedules for more information. If you e-file your return, you generally won’t notice much of a change and the software you use will generally determine which schedules you need.
Basic format of form 1040 for 2023 reads as under:
Filing Status
Digital Assets
Standard Deduction
Dependents
Income
Tax and credits
Payments
Refund
Amount you owe
Third party designee
Sign here
Paid preparer uses only
Schedules like A, B, C, D, E, and F are also used as explained below:
Schedule A, as part of form 1040 consist of following information.
It is titled “Schedule A – Itemized deductions”
It consists of 18 columns with the following heads.
- Medical and dental expenses
- Taxes you paid (like state and local taxes, property taxes, real estate taxes, personal property taxes etc.)
- Interest you paid (like home mortgage interest)
- Gifts to charity (various detailed gifts to charity with different results)
- Casualty and theft losses
- Other itemized deductions.
Schedule B
Titled “Interest and dividends”, this schedule consists of two parts, i.e., details on Part 1. interest and Part 2. Dividends.
Schedule C (Profit or loss from business)
With columns A to J with details like name of business, accounting method used, and Part I – Income, Part II – expenses, Part III – Cost of goods sold, Part IV – information on your vehicle, and Part V- other expenses, this schedule is used for business, self- employed etc. Being an important appendix, its details will be covered in details in future.
Schedule D (Capital gains and losses)
Use Schedule D: ((quoted from the IRS website schedule D instructions)
“To figure the overall gain or loss from transactions reported on Form 8949;
- To report certain transactions, you don’t have to report on Form 8949;
- To report a gain from Form 2439 or 6252 or Part I of Form 4797;
- To report a gain or loss from Form 4684, 6781, or 8824;
- To report a gain or loss from a partnership, S corporation, estate, or trust;
- To report capital gain distributions not reported directly on Form 1040 or 1040- SR, line 7 (or effectively connected capital gain distributions not reported directly on Form 1040-NR, line 7); and
- To report a capital loss carryover from 2022 to 2023.”
Publication 544 and 550 may be referred for detailed instructions.
Schedule E (Supplemental income and loss)
Supplemental Income and Loss, is used by filers to report income from rental real estate, royalties, partnerships, S corporations, estates, trusts, and residual interests in real estate mortgage investment conduits (REMICs).
Schedule F (Profit or loss from farming)
This schedule is used to give information on profit or loss from farming.
Let us look at the forms for other types of filing under US Taxation.
Form no 1065, U.S. Return of Partnership Income.
Form is reproduced from IRS website.
https://www.irs.gov/pub/irs-prior/f1065–2023.pdf
Purpose of this form
Form 1065 is an information return used to report the income, gains, losses, deductions, credits, and other information from the operation of a partnership. Generally, a partnership doesn’t pay tax on its income but passes through any profits or losses to its partners. Partners must include partnership items on their tax or information returns.
With revised instructions for the above form, let us learn more.
A partnership is the relationship between two or more persons who join to carry on a trade or business, with each person contributing money, property, labor, or skill and each expecting to share in the profits and losses of the business whether or not a formal partnership agreement is made.
The term “partnership” includes a limited partnership, syndicate, group, pool, joint venture, or other unincorporated organization, through or by which any business, financial operation, or venture is carried on, that isn’t, within the meaning of regulations under section 7701, a corporation, trust, estate, or sole proprietorship.
One has to understand the words like foreign partnership, general partner, limited partner etc.
What is a foreign partnership?
A foreign partnership is a partnership that isn’t created or organized in the United States or under the law of the United States or of any state. In certain instances, a partnership created or organized in the United States can be treated as a foreign partnership. See, for example, Regulations section 1.958-1(d)(1).
A general partner is responsible for partnership debts.
Words like LLC, LLP resonate thousands of giant US entities which lead the economies of the world.
What is an LLC?
An LLC is an entity formed under state law by filing articles of organization as an LLC. Unlike a partnership, none of the members of an LLC are personally liable for its debts. An LLC may be classified for federal income tax purposes as a partnership, a corporation, or an entity disregarded as an entity separate from its owner by applying the rules in Regulations section 301.7701-3. See Form 8832.
What is an LLP?
An LLP is formed under a state limited liability partnership law. Generally, a partner in an LLP isn’t personally liable for the debts of the LLP or any other partner, nor is a partner liable for the acts or omissions of any other partner solely by reason of being a partner.
Some of the schedules of form 1065 are as under:
- Schedule B
- Schedule K
- Schedule K
- Schedule L
- Schedule M1
- Schedule M 2
Detailed instructions on usage of above schedules are easily available in IRS web site.
Electronic Filing
Beginning January 1, 2024, partnerships are required to file Form 1065 and related forms and schedules electronically if they file 10 or more returns of any type during the tax year, including information, income tax, employment tax, and excise tax returns. See Regulations section 301.6011-3, updated by T.D. 9972.
Partnerships with more than 100 partners are required to file Form 1065, Schedules K-1, and other related forms and schedules electronically.
When To File
Generally, a domestic partnership must file Form 1065 by the 15th day of the 3rd month following the date its tax year ended as shown at the top of Form 1065. For calendar year partnerships, the due date is March 15.
If the due date falls on a Saturday, Sunday, or legal holiday in the District of Columbia or the state in which you file your return, a return filed by the next day that isn’t a Saturday, Sunday, or legal holiday will be treated as timely. Calendar year partnerships may therefore timely file their return for the 2023 partnership year by March 15, 2024
U.S. Corporation Income Tax Return – Form 1120
U.S. Income Tax Return for an S Corporation, and other types of form 1120 entities (different form numbers) are as under:
1. Exempt organization with unrelated trade or business income; form – 990-T
2. Religious or apostolic organization exempt under section 501(d) – 1065
3. Entity formed as a limited liability company under state law and treated as a partnership for federal income tax purposes – 1065
4. Subchapter T cooperative association (including a farmers’ cooperative) -1120-C
5. Entity that elects to be treated as a real estate mortgage investment conduit (REMIC) under section 860D – 1066
6. Interest charge domestic international sales corporation (section 992) – 1120-IC-DISC
7. Foreign corporation (other than life or property and casualty insurance company filing Form 1120-L or Form 1120-PC) – 1120-F
8. Foreign sales corporation (section 922) – 1120-FSC
9. Condominium management, residential real estate management, or timeshare association that elects to be treated as a homeowners association under section 528 – 1120-H
10. Life insurance company (section 801) – 1120-L
11. Fund set up to pay for nuclear decommissioning costs (section 468A) – 1120-ND
12. Property and casualty insurance company (section 831)- 1120-PC
13. Political organization (section 527) – 1120-POL Real estate investment trust (section 856) 1120-REIT
Some of the instructions issued under form 1120 as under:
- Who must sign this form? The return must be signed and dated by: • The president, vice president, treasurer, assistant treasurer, chief accounting officer; or • Any other corporate officer (such as tax officer) authorized to sign
- To ensure that the corporation’s tax return is correctly processed, attach all 19 schedules and other forms after page 6 of Form 1120. Experts to choose the relevant schedules.
- Tax Payments Generally, the corporation must pay any tax due in full no later than the due date for filing its tax return (not including extensions). See the instructions for line 35. If the due date falls on a Saturday, Sunday, or legal holiday, the payment is due on the next day that isn’t a Saturday, Sunday, or legal holiday.
- payments of estimated tax. • The corporation must make installment payments of estimated tax if it expects its total tax for the year (less applicable credits) to be $500 or more. • The installments are due by the 15th day of the 4th, 6th, 9th, and 12th months of the tax year. If any date falls on a Saturday, Sunday, or legal holiday, the installment is due on the next regular business day. • The corporation must use electronic funds transfer to make installment payments of estimated tax.
- Permissible accounting methods include cash, accrual, or any other method authorized by the Internal Revenue Code.
- Instructions are specific that File the 2023 return for calendar year 2023 and fiscal years that begin in 2023 and end in 2024.
- When To File the form? Generally, a corporation must file its income tax return by the 15th day of the 4th month after the end of its tax year. A new corporation filing a short-period return must generally file by the 15th day of the 4th month after the short period ends.
The instructions contain 32 pages of detailed information which need to be followed along with details which may be different for each state.
Intentionally, I could not give the detailed information which may be covered in a separate article later on.
Reference
https://www.irs.gov/
Conclusion
Just with the flow of snow and other welcome signs of winter games, U.S. Tax returns are the welcome signs for US tax payers who have adhered to the time frame, paid the taxes on time, and witnessed the best economic nation during the last nearly 100 years. US Tax returns have evolved over the time and helped to attract the best human talent enabling other nations to follow.
Please use the talents of a CPA to handle your tax filing and facing IRS and other regulatory bodies in USA over time.
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Disclaimer: Obviously, this write up helped adequately by irs.gov website instructions/forms are purely informatory in nature and do not constitute any legal advice, tax filing advice, and you are advised to use the services of a CPA to fulfill your tax obligations.
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