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Posted by Deb Malone on Mon, Mar 4, 2019 @ 10:51 AM

tax-burdenThe tax filing season opened on Jan. 28, and the partial government shutdown is over, for now. As the IRS accepts tax returns it will be business as usual for individuals and entities who are required to provide tax information documents. Hence, you will still be receiving all of those “Important Tax Documents” letters in the mail or in electronic format. This includes W-2 forms, any number of types in the 1099 series, and K-1 schedules.

Making sense of these forms at times can be difficult, as they don’t always contain clear instructions or may be a single document that represents a consolidation of several stand-alone forms, such as with multiple types of 1099 forms that can be combined into one consolidated 1099. These consolidated 1099s are typically issued by brokerage firms and can contain many pages of supplemental information that are of equal importance to the consolidated Form 1099 itself.

And while many taxpayers just hand these documents over to tax advisors, a basic understanding of the various types and purposes for each of these forms can make a huge difference. For example, a taxpayer who trades stocks in her spare time will likely receive a 1099-B, which reports proceeds from brokerage and barter exchanges. Part of this reporting is the character of the gain (or loss) incurred by the taxpayer, such as short-term or long-term. Long-term gains are taxed at a lower rate than short-term gains. Understanding this difference ahead of time could save this taxpayer if she is able to adjust her trading strategy to maximize the amount of long-term gains. With this in mind, here are some common information documents, a general overview of what each reports, and what is new in 2018 on each.

Form W-2

What is it? As the most familiar form for many taxpayers, it reports wage income from an employer. All employees should receive this form, including those who are owner/employees of S corporations. Partners in a partnership cannot receive a W-2, even if they provide services to the partnership.

What’s new? Forms W-2 in 2018 include reporting for a new election available to taxpayers. It is known as the 83(i) election, and it allows employees of private corporations (those that are not publicly traded) to defer tax on stock options or restricted stock units that become taxable in 2018. There are many requirements for stock to be eligible for this election, so it may not be available to many taxpayers. This election was created by the 2017 law commonly known as the Tax Cuts and Jobs Act (TCJA), which will be a common theme among many of the new items on 2018 information documents.

Form 1099-MISC

What is it? This tax form is becoming more common as more taxpayers become independent contractors. This form is issued for payments made to non-employees in the course of the issuer’s trade or business if the total payment amount during the year exceeds $600. Taxpayers who receive a 1099-MISC for work performed as an independent contractor will likely be subject to self-employment taxes, and potentially be required to make estimated tax payments. Knowing this in advance can reduce the sticker shock of an unexpected bill at tax time, and can avoid penalties for underpayment of estimated tax.

What’s new? This form was not changed for 2018, but self-employed taxpayers may be able to claim a new 20 percent deduction against qualified business income from their business under Section 199A. This deduction and other changes to the tax code enacted by the TCJA are discussed in our 2018 Tax Reform Guide.

Form 1099-INT

What is it? Form 1099-INT is used to report interest payments made to the taxpayer in excess of $10 ($600 if paid in the course of the taxpayer’s trade or business). Banks and other financial institutions are frequent issuers of this form and generally use it to report interest accumulated on savings accounts, money market accounts, and Certificates of Deposit.

What’s new? This form also did not change for 2018, but for some taxpayers this form may take on added importance. Taxpayers with average annual gross receipts exceeding $25 million are subject to a new interest expense limitation. For 2018, this limitation essentially is the taxpayer’s interest income plus an amount that is 30 percent of tax-basis EBITDA. The ability to substantiate interest income will be essential for taxpayers subject to this limitation, but note that issuers are not required generally to send Form 1099-INT to corporations.

Form 1099-B

What is it? As mentioned, Form 1099-B is used to report brokerage and barter exchanges. A broker is required to issue this form to anyone for whom they sold stocks, commodities, regulated futures contracts, foreign currency contracts (pursuant to a forward contract or regulated futures contract), forward contracts, debt instruments, options, securities futures contracts, etc., for cash. Essentially, anyone who conducts trading activity through a broker, even an online broker, should receive this form.

What’s new? Nothing new here, but this form may be part of a consolidated Form 1099 and therefore it can be difficult to read and understand. One key item to note is whether the securities reported on the form are designated “covered” or “non-covered” securities. If a security is a covered security, its basis (generally the cost of the security) is reported to the IRS. Non-covered securities do not have basis reported to the IRS. This is important as basis is used to calculate the taxpayer’s gain or loss, and if the taxpayer cannot establish the basis of an item, such as with a non-covered security, its basis is presumed to be zero. This would cause 100 percent of the proceeds to be taxable.

Form 1099-DIV

What is it? Form 1099-DIV is used to report dividend payments and other distributions on stock. As with Form 1099-B, this may be included on a consolidated Form 1099.

What’s new? A new box has been added to report Section 199A dividends. These are dividends that are treated as Qualified Business Income (QBI) for purposes of the 20 percent Section 199A deduction.

Schedule K-1 (Form 1065)

What is it? Partners in a partnership and shareholder(s) of an S corporation each receive Schedules K-1 from the entity with respect to their ownership. Schedules K-1 from partnerships to partners contain several significant changes for 2018. A partnership Schedule K-1 reports the partner’s items of income and deduction that are passed through from the partnership and reported by the partner on the partner’s tax return. It also reports the partner’s share of the partnership’s profits, loss, and capital, as well as the partner’s capital account balance.

What’s new? There are some very substantial changes to information on this form. There are new codes for reporting income and other additional information that were made necessary as a result of the TCJA. This includes a new code for the partnership to report excess business interest expense in Box 13, codes for the information necessary to calculate the Section 199A deduction and limitations in Box 20, and other new codes for foreign related partnership items in Boxes 11 and 20. Of these, the excess business interest limitation and the Section 199A deduction are of special note. As discussed previously, the excess business interest expense limitation may prove costly for some taxpayers while the Section 199A deduction can provide a substantial benefit.

Schedule K-1 (Form 1120)

What is it? Similar to a partnership Schedule K-1, the S corporation Schedule K-1 reports income and expenses passed through to the shareholders in the S corporation. However, it differs in that it does not report the shareholder’s ownership percentages or capital account balances (capital accounts are unique to partnerships).

What’s new? Changes to this form include the addition of Section 199A data and certain excess business interest expense data, as is the case with partnerships. Unlike partnerships, the carryforward of excess business interest expense is confined to the S corporation at the entity level, so that particular data for excess business interest expense will not be part of S Corporation Schedules K-1.


The myriad of changes to tax information reporting for 2018 need not be daunting. Familiarity with these changes can also be leveraged into effective tax planning for the future. For more information on these changes and how they impact your tax return, please contact us.


Debra-Malone-Print ColorDeb Malone is a Director in the Tax Department in New England. She can be reached at 617.761.0558 or



Copyright © 2019 CBIZ & MHM (Mayer Hoffman McCann P.C.). All rights reserved. CBIZ and MHM are separate and independent legal entities that work together to serve clients. CBIZ is a leading provider of tax and consulting services. MHM is an independent CPA firm providing audit and other attest services. This article is protected by U.S. and international copyright laws and treaties. Use of the material contained herein without the express written consent of the firms is prohibited by law. Material contained in this alert is informational and promotional in nature and not intended to be specific financial, tax or consulting advice. Readers are advised to seek professional consultation regarding circumstances affecting their business.

Tags: tax planning, tax, tax forms, 1099, W-2

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