If you are earning some kind of income from the investment, then you must pay net investment income tax in the US. Form 8960 will calculate all the income earned through the investment. This tax is applicable to estates, individuals, and trusts that have income from investments above a specific threshold. Here, you need to understand the federal tax Form 8960 instructions properly. These taxes are applicable only when you report net investment income; self-employment earnings and wages are not subject to taxes. Many people in the US are confused about Form 8960. So, this guide will help you understand how to fill out this form better and fulfill the regulations.

What are the Federal tax form 8960 instructions?

An overview of the 8960 form is listed below:

• Who must file?

Determine if there is a need to file Form 8960. Generally, individuals, estates, and trusts with net investment income and modified adjusted gross income above certain thresholds are required to file.

• Gather all the necessary information

Collect all necessary information and documentation related to your net investment income, modified adjusted gross income, and any deductions or adjustments. This information must be put in proper places in the form.

• Calculate net investment income

Follow the instructions provided to calculate your net investment income. This includes income from sources such as dividends, interest, capital gains, rental and nonqualified annuities, royalty income, and certain other passive income.

• Determining the Modified Adjusted Gross Income (MAGI)

Calculate your modified adjusted gross income using the guidelines provided in the instructions. MAGI includes your adjusted gross income with certain modifications.

• Apply the applicable thresholds

Determine if you meet the threshold requirements for filing Form 8960. This will be totally based on your filing status and MAGI.

• Complete Form 8960

Fill out all the required sections of Form 8960 based on your calculations and the information you have gathered. It will complete all the form-filling activities.

• Attached to the tax return

If you are filing Form 8960 as part of your individual income tax return (Form 1040), attach it to your Form 1040 when filing with the IRS. This will give all the tax return details.

• Review and Submit

Review your completed Form 8960 for accuracy and completeness before submitting it to the IRS. Keep a copy for your records.

• Pay any tax due

If you owe Net Investment Income Tax based on your calculations, ensure that you pay the tax due by the applicable deadline to avoid penalties and interest.

• Maintain the records

Keep all supporting documents and records related to Form 8960, including receipts, statements, and calculations, for at least three years in case of IRS inquiries or audits.

These are some of the important Federal tax form 8960 instructions that must be understood and applied. You must always keep checking the latest updates about these instructions from the IRS official website.

Meru Accounting provides all the support you need with Form 8960. We have worked for many US-based organizations on 8960 Forms. Our experienced staff has deep knowledge of Federal tax form 8960 instructions to help you deal with better taxes. We are proficient in dealing with taxes associated with investments. Contact us now!