Keep an eye out for your tax statements
Friday, January 24, 2014
I spent most of this morning at my personal computer downloading statements necessary to file our annual tax return.
Most of what I was getting today was tax information from our investment accounts. I set up online access to every account, investing and basic bills, that I could when we moved back to Texas in 2005 so I wouldn't have to worry about things being forwarded by the U.S. Postal Service.
It generally works out well. But now and then I do miss getting the statements in the curbside mailbox. Online access means I have to take responsibility to get them rather than just wait for them to show up.
And this year a couple of the sites had changed their security protocols since the last time I visited. I appreciate increased security of my financial information, but I hate the hassle of recreating new passwords and verification questions. I know, I know. It's a first world problem.
But now I'm set to file our 1040.
Finding the forms: Most of the forms I downloaded today were 1099-DIVs. There also are a couple of 1099-INTs, but with savings rates so low I can't believe those accounts earned enough to trigger the $10 interest paid reporting requirement!
I also got our mortgage interest info on our lender's substitute 1098. The hubby got his W-2 online.
And then there was this beauty, a 1099-R detailing the rollover of a 401(k) I had at a former employer to an IRA.
I left it there for quite a while, but it was doing pretty well as you can see. I hope the fund I chose will continue to grow nicely for a few more years until I can call the ol' 9-to-5 quits.
Although I don't have to report the rollover amount as income on our 1040 -- note pox 2a, Taxable amount, and the lovely 0.00 there -- the information is important, to both me and the Internal Revenue Service.
Like its annual third-party reporting cousins, the 1099-R is copied to the IRS so it knows that my retirement money is still tax-deferred.
The other statements, however, include income I must include on our return.
Today's Daily Tax Tip looks at the wide variety of tax reporting statements that will be arriving in your snail or email boxes. Issuers of the statements have until Jan. 31 to get them in the mail.
Here's a quick look at some of the most popular tax reporting forms.
Income: The biggie for most filers is the W-2. This is what employers send their workers. It shows what you earned, what income taxes (federal and state) were withheld, how much Social Security and Medicare payroll taxes were taken out, the value of any benefits that might (or might not) be taxable and, in box 12, the value of company-sponsored health coverage.
You'll need to check the back of your W-2 for the codes that apply to the various boxes. That's where you'll also get some guidance on where to enter the information.
While the hubby gets a W-2, I get 1099-MISC forms from the clients who paid me for jobs last year. This form is required if you got at least $600 from a payor. But even if you made less and didn't get a 1099-MISC, you are still are required by law to report the income.
Other income, such as a state tax refund or unemployment benefits are reported to you on Form 1099-G. Prize winnings, both on cash payouts or value of property won, is reported to you via Form W-2G.
And if a lender or debtor forgave your credit card or other debt, that canceled amount, in most instances, is considered taxable income and is reported on Form 1099-C.
Investment earnings: Many of you, like me, are receiving 1099-DIV and 1099-INT forms.
Earnings from these go on Schedule B. The interest is in part 1 of that form and is taxed at ordinary rates.
The 1099-DIV data will go in part 2 of Schedule B. Note that some dividends on 1099-DIV are qualified, meaning they get the lower capital gains rate tax treatment.
Speaking of capital gains, 1099-DIV also might include capital gains distributions, which also get the lower tax rate when figuring how much they'll add to your tax bill.
And if you used a broker to handle your trades, then you'll also get a 1099-B.
Homeowners: Mortgage interest and any points you paid to get a lower rate on your home loan are shown on your lender's Form 1098. If your property tax bill is paid by your mortgage holder on your behalf, that tax information will be on the 1098, too.
So is any private mortgage insurance, or PMI, which for the 2013 tax year is still deductible for some taxpayers as mortgage interest.
Education: Students might get Form 1098-T, which shows tuition payments.
There's also Form 1098-E showing how much student loan interest you paid last year.
Variations accepted: The forms noted and linked here and discussed in the tax tip over at Bankrate.com are the official IRS versions. You, however, might get a different looking document. That's OK.
The IRS gives companies leeway to use statements that fit their software and system. Just look for the identification of it as a "substitute" tax statement.
Double check information: Whatever format the document uses, be sure to check all of the tax statements as soon as they arrive or you download them.
If you find a discrepancy against your own records, call the payor and get an explanation. If your numbers are correct, ask the issuer to send you and the IRS a corrected form.
By catching any mistake early, you'll be able to get the correct information in plenty of time to file your tax return by the April 15 deadline.
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