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Tax Time!

We are now in January of 2022, which means you have to start thinking about completing your taxes for 2021. Your W-2’s and 1099’s are required to be sent to you by the 31st of January, but other forms have more time to be issued and may have multiple versions due to corrections. These forms are also sent to the IRS which is why you get a letter in the mail if you miss reporting one of these forms. Below is a list of common forms that you may receive for your taxes:

  • W-2—this is the income form you should get if you are an employee.
  • 1099—there are lots of different versions of 1099’s. I have listed some of the common ones below.
    • 1099-NEC—this form is for independent contractors. If you were paid $600 or more for a service you provided, you should expect to get one of these UNLESS YOU WERE PAID WITH A CREDIT CARD. In this case, your payment settlement entity will issue you a 1099-K.
    • 1099-MISC—this is the ‘catch all’ form you will receive if there isn’t another specific 1099.
    • 1099-B—this is for sales of securities—think brokerage account with stocks, bonds,etfs, mutual funds
    • 1099-DIV—this is for dividends paid from mutual funds, stocks and etfs
    • 1099-INT—this is for interest paid from mutual funds,etfs, bonds, money markets, bank accounts, etc.
      • Often your 1099-B, DIV and INT will all be in one document from your custodian
    • 1099-G—this is for government payments like a state tax refund (this is federally taxable) and unemployment (also federally taxable, taxable in some states).
    • 1099-R—this is for distributions from a retirement plan like your workplace retirement plan and IRA’s. Remember to tell your tax preparer if the money was transferred or rolled over to another retirement plan—this affects the taxes.
    • SSA-1099—this form is for Social Security income that needs to be reported on your taxes
    • 1099-SA—this is the form you will get if you took any distributions from your HSA (Health Savings Account). As long as your distributions were used for qualified medical expenses, the distribution should not be taxable.
    • 1099-Q—this is the form for 529 plan distributions. You should receive a 1098-T from the school for expenses paid to the school. Keep track of the other expenses that are qualified expenses for 529’s for your tax preparer so that the expenses are offset and no tax will be due.
  • K-1—this is a form you will receive from a partnership.
    • If you own a stock that is an LP, you may receive a K-1 for that particular holding in your brokerage account. This is will not be reported on your custodian’s 1099 and you will have to wait for this K-1 to be issued.
    • If you are a partner in a business, this is your income form.
    • Again, K-1 forms have a later deadline than 1099’s and W-2’s—March 15this the due date for corporate returns and K-1’s, BUT this can be extended to September 15th, so watch out for your K-1’s you are waiting on.

Did you notice that all of the above forms have numbers on them that the IRS can tax you on? The IRS cares about tax revenue which only comes from your income. That is why we don’t have forms for deductions, credits or expenses being sent to the IRS. We are responsible for tracking and keeping records of our own expenses that may qualify for a variety of tax breaks.

It is best to stay organized throughout the year so that you aren’t scrambling at tax time. I keep a folder (digital and paper) for the tax year and anything that I think could qualify as a deduction or expense, I put in that folder. When I’m doing my taxes, I can then organize even further and decide which ones I need to keep. After I have completed my tax return, I then scan and save everything that I used to complete my return. This way I have good records to go back to if I get a letter requesting more info or audited.

What are some ways you stay organized throughout the year?

Financial Journey LLC is a registered investment advisor offering advisory services in the state of Virginia and in other jurisdictions where exempted. Information provided is for educational purposes only and not, in any way, to be considered investment or tax advice.

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