It’s nearly the end of January. For many, this is the first milepost for checking on those goals. It’s also time for companies to have W-2 statements available for employees. Along with that comes trade confirmations, 1099 forms, and various other tax documents. Many of which need to be completed and ready for issue by the end of January or very soon thereafter.
At this point in the tax planning cycle, you should have started preparing for your 2020 filing by at least organizing a folder or redwell to keep your documents together. You may have already started receiving documents related to your tax filing or have various statements you want to keep together to ask your tax preparer about. Speaking of a tax preparer, if you do not already have a preparer, you are actually running out of time to find one. Most good preparers have annual repeat clients so it may be difficult to find someone now, but you should try. The following is a list of common items to focus on. Your list may be more extensive if, for example, you have major medical issues, own lots of real property, or own a business.
W-2 form
1095-A form
1098 mortgage interest & 1098-E student loan interest statements
1099 forms (various, including 1099-INT for interest, 1099-NEC, 1099-G, 1099-R, etc.)
Equity trade confirmations from your broker
Profit & Loss statement for your business
Schedule K
DMV/car registration receipt (a portion may be deductible)
Franchise Tax Board statements
Sales tax summary if you itemize sales tax
Property tax statement
Charitable giving statements/confirmations
IRA contributions for deductible contributions made
There’s a slew of documents that should be available to you soon. You may receive a document you are not sure about. Just put it with your tax documents and make a note to ask your preparer what it is. For example, would you know what to do if you received a 1099-C? A 1099-C is a cancellation of debt notice. In other words, if you owed money and the lender canceled the outstanding debt, you would receive a 1099-C notifying you that the lender had notified the IRS that they cancelled your debt. Good news; you no longer owe the debt. Bad news; you owe tax on the amount canceled and the amount canceled may be added to your income. There are exceptions and exclusions depending on the type of debt and how the loan was secured. If you receive a 1099-C, talk to your tax preparer immediately.
So, where to look for all of these forms? Keep an eye on the physical mail to see what may be arriving in your mailbox. If you receive something and aren’t sure what it is, stick it in your folder to ask your tax preparer about. Check your email inbox and periodically check your spam folder for possible statements or notifications that may have been caught in your spam folder. Log in to your retirement, brokerage, banking, and other accounts. Most now have a ‘Tax Forms’ tab or link. Check that area for your most recent tax statements. You may want to circle back and do this again in mid-February just to make sure you have collected all relevant documents.
For most of us, assembling and preparing for tax filing is not exactly at the top of list of fun things to do. It is however and essential task and we should give it our attention. Filing on time and with all necessary and available documents can save heartache and frustration later. If you rush, and are not careful, and for example miss a W-2 or 1099 form, you will most likely receive a notice from the IRS and will most likely have to file an amended return, pay a penalty, pay your preparer additional filing fees, or some combination thereof. By getting ready and getting it right the first time, you’re doing yourself a solid.
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