Overview of Tax Forms
The 1040 tax form is the standard income tax return used to report income and calculate tax liability. The Bipartisan Budget Act created the 1040-SR, a simplified tax form for seniors. Taxpayers age 65 or older have the option to use the 1040-SR. The 1040-SR has larger fonts and wider gaps for seniors. Taxpayers don’t have to be retired to qualify for the 1040-SR.
IRS Schedules and Forms
- IRS Schedule B helps taxpayers compute tax due on interest and dividends. Taxpayers who received over $1,500 in interest or dividends likely need to file Schedule B.
- Sole proprietors use Schedule C to report business income and expenses. The net earnings are reported on the 1040 tax return series.
Changes in Tax Filing Procedures
The IRS discontinued the 1040A and 1040EZ, requiring taxpayers to use the standard 1040 or forms corresponding to their tax situation. This changed tax filing procedures.
Understanding the Bipartisan Budget Act (BBA)
The Bipartisan Budget Act of 2015 (BBA) ushered in a centralized partnership audit regime. The BBA changed how partnerships are audited. The IRS assesses and collects tax from the partnership. The partnership may elect to push out adjustments to its partners. Filing requirements under the BBA include taking certain actions when filing a return.
Partnership Election under BBA
Section 6221(b) provides that a partnership is eligible to elect out of the BBA regime if: (1) it has 100 or fewer partners during the year; and (2) all partners are "eligible partners" at all times during the tax year.
Considerations for Electing Out of BBA
Partnerships should carefully consider whether to elect out of the BBA based on all facts and circumstances. It’s important not to assume this election is always the best choice. Preparation prior to any audit is imperative for partnerships navigating new audit rules under BBA. Elect out if possible. In general, partnerships with 100 or fewer partners can elect out if all partners are eligible.