It’s tax season with about about month left before taxes are due and its the time of the year when all of my “friends” come out of the woodwork with questions. I do not mind being their go-to-person, but it cracks me up that some of their questions pertain to items that are above their knowledge and they still insist on filing them on their own. I get it, everyone is trying to save a dollar and will cut costs where they can. Totally understandable if your situation is very simple… anything above that, I would highly recommend seeking out some professional help. Difficult situations include owning your own business, having rental properties, trading stocks, owning your own house, etc.
By help, I mean sitting down with a tax professional and going through your situation. Not, “how do I get past this screen in ________ on turbo tax/tax act/1040.com/H&R Block/etc.” The thing that people do not truly understand is that even when you hit send on your documents, the government still has about 3 years in general terms to assess errors in your return. (ie. You forgot a W2 or no one will know about that 1099 that you got on the side – chances are – they will) The Internal Revenue Service in its simplest form is a matching service that matches the organization (ie. where you work) to the individuals (ie. what you report in income from your company). If there are errors, it will automatically generate a letter that is mailed directly to you. If you owe taxes on that error, interest and penalties start accruing from the day the return was filed/due.
Chances are that you have been mailed a majority of your forms already and you just are not sure which ones you need and which ones are merely informational. The forms all look similiar and the different numbers and letters are starting to stress you out. Here is a listing of some of the documents that you will need for your individual tax preparation. Please note that taxes unfortunately are not “one size fits all” so you may or may not need all of these items to prepare your taxes!
W2 – wage information
1099G – prior years state refund, unemployment wages, gambling winnings, etc.
1099MISC – if you do contract work or anything over $600, you would receive one of these for your services
1099INT – interest earned from your savings accounts
1099DIV – any dividends earned from stocks that you own
1099 Consolidated – Brokerage accounts that might have interest, dividends and stock transactions included in one document
Form 5498 – IRA forms that show your contributions for 2010 (please note that you can still contribute to 2010 up to the date you file your tax returns)
1099R – IRA forms if you withdrew from your retirement accounts or rolled your IRA from one account into another (ie. if you changed jobs and moved your 401K – its non taxable but still has to be reported)
1098T/E – tuition statement and/or interest on your student loans
Schedule K-1 – any activity that you might have in a partnership, small business and/or trust
Childcare Expenses – proof of payment from day care center
MA – rent, commuter deduction, Fast Lane pass
Itemized vs. Standard Deduction (about $5,700 if you are single) – my rule of thumb is that you would generally take the standard deduction unless you own a house!
1098 – mortgage interest forms (you would have multiple forms if you refinanced throughout the year)
Real Estate Tax – generally quarterly tax forms (this amount can also be seen on your Form 1098 if you pay your real estate taxes through your mortgage company)
Auto Excise Tax – from your town for your car
Medical Expenses (keep in mind these have to be above 7.5% of your adjusted gross income so it might not be worth the time and effort to put together)
Charitable Donations – donations to charity, colleges, towns, etc. This also includes non-cash donations to organizations like Goodwill, Salvation Army, etc. but you will need to provide a receipt of your donation (ie. if you donate, you need to go inside to get the form, not allowed to just leave the items in a bin)
Miscellaneous Deductions – keep in mind these have to be above 2% of your adjusted gross income – tax preparation fees, investment fees, uniforms, union dues, etc.
This is just a sample of the common forms that are required from you when you go to prepare your taxes for the year. Based on your tax situation, some of these above forms may not be valid for you. If you think that your tax situation is getting difficult, I would suggest getting in touch with a tax preparer as soon as possible. While every tax preparer loves the challenge of taking on new clients, time is of the essence and the seconds are ticking away… you can also file an automatic six month extension that would give you until October 15th, 2011 to file your returns. Just remember it is an extension to file your returns, but you are required to pay your balance as of April 15, 2011 and interest and penalties will be assessed from April 15, 2011 until the day you file. The IRS doesn’t let you get away with anything!
And if you just blacked out after reading this post.. I would suggest that you save yourself the headache of trying to do your own taxes and seek out a preparer in your local area. These preparers will be more educated and knowledgeable than say an H&R Block, Liberty Tax, etc. Does it make sense for you to file your own tax return or would you rather a professional do it?