J.K. LASSER'S YOUR INCOME TAX 2022 : for preparing your 2021 tax return.

931 Pages·2022·43.803 MB·English

by  J.K. LASSER INSTITUTE.

™
For Preparing Your 2021 Tax Return
Prepared by the
J.K. LASSER INSTITUTE™
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Staff for This Book J.K. Lasser Editorial
Elliott Eiss, Member of the New York Bar, Contributing Editor
Barbara Weltman, Member of the New York Bar, Contributing Editor
Angelo C. Jack, Production Manager
William Hamill, Copyediting and Proofreading
Index by WordCo Indexing Services
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ISBN 978-1-119-83921-7 (paperback)
ISBN 978-1-119-83923-1 (ePDF)
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Eighty-Fifth Edition
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How To Use Your Income Tax 2022
Tax alert symbols. Throughout the text of Your Income Tax, these special symbols alert
you to advisory tips about filing your federal tax return and tax planning opportunities:
Filing Tip or Filing Instruction �������������������������A Filing Tip or Filing Instruction helps you prepare your 2021 return.
Planning Reminder .................................A Planning Reminder highlights year-end tax strategies for 2021 or planning
opportunities for 2022 and later years.
Caution ..............................................A Caution points out potential pitfalls to avoid and areas where IRS opposition may
be expected.
Law Alert ............................................A Law Alert indicates recent changes in the tax law and pending legislation
before Congress.
Court Decision ......................................A Court Decision highlights key rulings from the Tax Court and other federal courts.
IRS Alert .............................................An IRS Alert highlights key rulings and announcements from the IRS.
The federal income tax law, despite efforts at simplification, remains a maze of statutes,
regulations, rulings, and court decisions written in technical language covering
Visit jklasser.com thousands and thousands of pages. For 85 years, J�K� Lasser’s™ Your Income Tax has aided
for FREE download and guided millions of taxpayers through this complex law. Every effort has been made
to provide a direct and easy-to-understand explanation that shows how to comply with
of e-Supplement
the law and at the same time take advantage of tax-saving options and plans.
You can download a free e-Supplement The 2022 edition of Your Income Tax—our 85th edition—continues this tradition. To
to Your Income Tax 2022 at jklasser�com. make maximum use of this tax guide, we suggest that you use these aids:
The e-Supplement will provide an update Contents Chapter by Chapter. The contents, on pages v–xxv, lists the chapters in Your
on tax developments from the IRS and Income Tax. References direct you to sections within a particular chapter. Thus a
Congress, including a look ahead to 2022. reference to 21�1 directs you to Chapter 21 and then to section 1 within that chapter.
On the homepage at jklasser�com, you Section and page references are provided in the index at the back of the book.
will find free tax news, tax tips and tax
What’s New for 2021. Pages xxvii–xxix alert you to tax developments that may affect
planning articles.
your 2021 tax return.
Key Tax Numbers for 2021. Pages xxx–xxxii.
Tax-Saving Opportunities. Page xxxiii.
Pending Tax Rule Changes. Page xxxiv.
Expiring Provisions. Page xxxvi.
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Contents Chapter by Chapter
What’s New for 2021 xxvii
Tax News for 2021 xxvii
Key Tax Numbers for 2021 xxx
Tax-Saving Opportunities for 2021 and Beyond xxxiii
Pending Tax Rule Changes xxxiv
Expiring Provisions xxxvi
FILING BASICS 1
Do You Have to File a 2021 Tax Return? 2
Filing Tests for Dependents: 2021 Returns 4
Where to File Your 2021 Form 1040 or 1040-SR 5
Filing Deadlines (on or before) 6
What Forms Do You Need to File? 8
Filing Status 9
1.1 Which Filing Status Should You Use? 10
1.2 Tax Rates Based on Filing Status 11
1.3 Filing Separately Instead of Jointly 13
1.4 Filing a Joint Return 14
1.5 Nonresident Alien Spouse 16
1.6 Community Property Rules 16
1.7 Innocent Spouse Rules 18
1.8 Separate Liability Relief for Former Spouses 19
1.9 Equitable Relief 22
1.10 Death of Your Spouse in 2021 23
1.11 Qualifying Widow/Widower Status for 2021
If Your Spouse Died in 2020 or 2019 24
1.12 Qualifying as Head of Household 25
1.13 Filing for Your Child 27
1.14 Return for Deceased 27
1.15 Return for an Incompetent Person 29
1.16 How a Nonresident Alien Is Taxed 29
1.17 How a Resident Alien Is Taxed 30
1.18 Who Is a Resident Alien? 30
1.19 Certificate of Tax Compliance for Alien
Leaving the United States 33
1.20 Expatriation Tax 33
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Contents Chapter by Chapter
REPORTING YOUR INCOME 35
Wages, Salary, and Other Compensation 37
2.1 Salary and Wage Income 40
2.2 Constructive Receipt of Year-End Paychecks 41
2.3 Pay Received in Property Is Taxed 42
2.4 Commissions Taxable When Credited 42
2.5 Unemployment Benefits 43
2.6 Strike Pay Benefits and Penalties 43
2.7 Nonqualified Deferred Compensation 44
2.8 Did You Return Wages Received in a Prior Year? 45
2.9 Waiver of Executor’s and Trustee’s Commissions 46
2.10 Life Insurance Benefits 46
2.11 Educational Benefits for Employees’ Children 47
2.12 Sick Pay Is Taxable 48
2.13 Workers’ Compensation Is Tax Free 48
2.14 Disability Pay and Pensions 49
2.15 Stock Appreciation Rights (SARs) 51
2.16 Stock Options 51
2.17 Election to Defer Income on Qualified EquityGrants
from Private Companies (Section 83(i) election) 54
2.18 Restricted Stock 54
Fringe Benefits 56
3.1 Tax-Free Health and Accident Coverage Under Employer Plans 58
3.2 Health Savings Accounts (HSAs) and Archer MSAs 58
3.3 Reimbursements and Other Tax-Free Payments
From Employer Health and Accident Plans 61
3.4 Group-Term Life Insurance Premiums 65
3.5 Dependent Care Assistance 67
3.6 Adoption Benefits 67
3.7 Education Assistance Plans 68
3.8 Company Cars, Parking, and Transit Passes 69
3.9 Working Condition Fringe Benefits 71
3.10 De Minimis Fringe Benefits 72
3.11 Employer-Provided Retirement Advice 72
3.12 Employee Achievement Awards 73
3.13 Employer-Furnished Meals or Lodging 73
3.14 Minister’s Housing or Housing Allowance 76
3.15 Cafeteria Plans Provide Choice of Benefits 77
3.16 Flexible Spending Arrangements 78
3.17 Company Services Provided at No Additional Cost 83
3.18 Discounts on Company Products or Services 83
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Contents Chapter by Chapter
Dividend and Interest Income 84
4.1 Reporting Dividends and Mutual Fund Distributions 85
4.2 Qualified Corporate Dividends Taxed at Favorable
Capital Gain Rates 86
4.3 Dividends From a Partnership, S Corporation,
Estate, or Trust 87
4.4 Real Estate Investment Trust (REIT) Dividends 87
4.5 Taxable Dividends of Earnings and Profits 88
4.6 Stock Dividends on Common Stock 88
4.7 Dividends Paid in Property 89
4.8 Taxable Stock Dividends 89
4.9 Who Reports the Dividends 89
4.10 Year Dividends Are Reported 90
4.11 Distribution Not Out of Earnings: Return of Capital 91
4.12 Reporting Interest on Your Tax Return 91
4.13 Interest on Frozen Accounts Not Taxed 92
4.14 Interest Income on Debts Owed to You 93
4.15 Reporting Interest on Bonds Bought or Sold 93
4.16 Forfeiture of Interest on Premature Withdrawals 94
4.17 Amortization of Bond Premium 94
4.18 Discount on Bonds 96
4.19 Reporting Original Issue Discount on Your Return 97
4.20 Reporting Income on Market Discount Bonds 98
4.21 Discount on Short-Term Obligations 100
4.22 Stripped Coupon Bonds and Stock 100
4.23 Sale or Retirement of Bonds and Notes 101
4.24 State and City Interest Generally Tax Exempt 102
4.25 Taxable State and City Interest 102
4.26 Tax-Exempt Bonds Bought at a Discount 103
4.27 Treasury Bills, Notes, and Bonds 103
4.28 Interest on United States Savings Bonds 104
4.29 Deferring United States Savings Bond Interest 105
4.30 Minimum Interest Rules 107
4.31 Interest-Free or Below-Market-Interest Loans 107
4.32 Minimum Interest on Seller-Financed Sales 110
Reporting Property Sales 112
5.1 General Tax Rules for Property Sales 113
5.2 How Property Sales Are Classified and Taxed 113
5.3 Capital Gains Rates and Holding Periods 115
5.4 Capital Losses and Carryovers 119
5.5 Capital Losses of Married Couples 119
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Contents Chapter by Chapter
5.6 Losses May Be Disallowed on Sales to Related Persons 120
5.7 Special Treatment of Gain on Sale of Small Business Stock
or Qualified Opportunity Zone Investment 121
5.8 Reporting Capital Asset Sales on Form 8949
and on Schedule D 123
5.9 Counting the Months in Your Holding Period 131
5.10 Holding Period for Securities 131
5.11 Holding Period for Real Estate 132
5.12 Holding Period: Gifts, Inheritances, and Other Property 132
5.13 Calculating Gain or Loss 133
5.14 Amount Realized Is the Total Selling Price 134
5.15 Finding Your Cost 134
5.16 Unadjusted Basis of Your Property 134
5.17 Basis of Property You Inherited or Received as a Gift 136
5.18 Joint Tenancy Basis Rules for Surviving Tenants 140
5.19 Allocating Cost Among Several Assets 143
5.20 How To Find Adjusted Basis 143
5.21 Tax Advantage of Installment Sales 144
5.22 Figuring the Taxable Part of Installment Payments 145
5.23 Electing Not To Report on the Installment Method 148
5.24 Restriction on Installment Sales to Relatives 149
5.25 Contingent Payment Sales 150
5.26 Using Escrow and Other Security Arrangements 151
5.27 Minimum Interest on Deferred Payment Sales 152
5.28 Dispositions of Installment Notes 152
5.29 Repossession of Personal Property Sold on Installment 154
5.30 Boot in Like-Kind Exchange Payable in Installments 154
5.31 “Interest” Taxed if Sales Price Exceeds $150,000
With Over $5 Million Debt 155
5.32 Worthless Securities 155
5.33 Tax Consequences of Bad Debts 157
5.34 Four Rules To Prove a Bad Debt Deduction 158
5.35 Family Bad Debts 159
Tax-Free Exchanges of Property 160
6.1 Like-Kind Exchanges of Real Property Used
for Investment or Business 161
6.2 Receipt of Cash and Other Property—“Boot” 162
6.3 Time Limits and Security Arrangements
for Deferred Exchanges 165
6.4 Qualified Exchange Accommodation Arrangements (QEAAs)
for Reverse Exchanges 167
6.5 Exchanges Between Related Parties 168
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