Deducting Your RV as a Second Home

 

You may be able to deduct your RV interest on your tax return.

Traveling the country in your RV may be a little more affordable if you can take advantage of the tax break for the mortgage interest.

 

If you own a Recreational Vehicle for your own personal use, you might be able to deduct the interest you pay on your tax return!

 

The IRS allows you to deduct mortgage interest on two homes as long as the loan amounts do not exceed $1.1 million dollars.  That’s $1.1 million on the two homes combined, not $1.1 million per home.

 

You may be wondering, “Does my RV really qualify as a second home?”  According to the IRS, a second home must have a sleeping area, a bathroom and kitchen facilities to be considered a “home.”  So if your RV has all three, then your loan interest is deductible as mortgage interest on your tax return.

 

Besides deducting your RV interest on your tax return, you may be wondering if there are any other tax advantages to owning an RV.  The answer is:  maybe!

 

If you live in an area that charges personal property taxes on vehicles, like they do here in Missouri, you can also deduct those taxes on your Schedule A as well.

 

You might even deduct expenses when you use your RV for business purposes.  If that’s the case, I’ve got a whole blog post about that.  See  Can I Claim My RV as a Business Expense?  for more information there.

 

But let’s say you don’t use your RV for business, but you wouldn’t mind making a little extra cash on the side.  This is my favorite tax trick for RV owners:  You can rent your RV out for 14 days or less and not pay tax on that income!

 

I know, that sounds outrageous, right?  Let me explain:  If you own rental property, you normally would report your income and expenses on that property and it would be subject to all of the regular tax treatment for rental property.   There are tons of rules about what you can and can’t claim as a landlord and I’m not going into that here.  But if you’re looking for guidance on that there’s information in IRS Publication 527.

 

But – if you rent out your personal dwelling unit (which, that’s what we’re claiming your RV is) for 14 days or less, the IRS does not treat that as a rental property and they don’t tax that income!

 

How awesome is that?  When do you ever see that income is not taxable?  I’m also taking this from IRS Publication 527.  I know it sounds crazy, so I’m going to put the line from the IRS publication right here:

Your are allowed to rent your home for 14 days or less without paying tax on that income.

 

So, you can rent your RV to someone for 14 days or less, you can still take a deduction for your mortgage interest, and you don’t have to pay any tax on the money you make renting it!.  How sweet is that?

 

RVs can be pretty expensive, but it’s nice to know there are some tax breaks out there for RV owners.

Taxation of Egg Donors

Egg donors can expect to pay self-employment tax on the money they earn from their donations.

Egg donors are generally between the ages of 20 and 30, non-smokers with a normal height to weight ratio.

 

Egg donors typically receive between $5,000 and $10,000 for an egg donation.  And while you may feel that you are being compensated for pain and suffering, or that you are doing a charitable deed, the IRS treats that pay as self employment income.

 

How do they figure that?  Well, for one thing, there’s the 2015 Tax Court case of Perez v. Commissioner of Internal Revenue.  In that case, the court ruled that the money paid to Perez was indeed taxable income.

 

Now the Perez case really only argues whether the money is taxable or not.  It doesn’t actually argue the merits of whether it constitutes self-employment income,  but much of the language of the case implies that providing eggs and being compensated for it is a service business.

 

So, if you’re thinking about becoming an egg donor, you need to look at the tax consequences before you put your body through that painful process.  Let’s say you’re a first time donor and the fee you should receive is $5,000. Now suppose you’ve got a job already and you’re in the 15% tax bracket.  This extra $5,000 will be taxed as self employment income meaning that the 15.3% self employment tax on that income, plus the 15% regular tax on that income.  The self employment income is really taxed at 30.3% to you.  (And of course, it’s higher if you’re in a higher tax bracket.)

 

So if you’re getting paid $5,000 for the egg donation, then you’re coming out of the deal with just $3,485.  Here’s how the math works on that:

$5,000 times 30.15% tax rate equals $1,515 in taxes

$5,000 minus $1,515 in taxes  equals $3,485 to keep

The point here is that you’re not getting that $5,000 free and clear.  You’re actually earning less than $3,485 if you add state income taxes to the equation.

 

So what about the argument that you’re not providing a service, that you’re really selling body parts?  Okay, I have to admit here that I have a hard time with that argument.  I guess I’m a little old-fashioned.  (Excuse me, I can hear my daughter reading this and yelling, “A little old fashioned?  How about stone age!”)  But perhaps more importantly, it is still illegal to sell body parts in the United States.

 

But let’s take this argument to the extreme anyway.  What if you could sell body parts?  How would you value them? I think, I would use the example of livestock.  That’s as close as I can come to the body part argument.  If you buy an adult cow for $1,000 and later sell it for $2,000, you would pay a capital gains tax on the $1,000 profit from the sale of that cow.

 

But, if that cow gave birth to a calf while you owned her, and then you sold that calf for $500 – that $500 would be taxed as ordinary income.  It would be the sale of inventory that you didn’t pay for so the full $500 would be taxed as ordinary income.   And, since selling cattle would be your business – well then you would pay self employment tax on that calf that you sold.   I think that egg donation is more like selling the calf–you’re not buying the eggs to re-sell, you’re “manufacturing” then.  (You see how I find this a very uncomfortable argument?)

 

So whether you doing the egg donation as a “service business” or a “sale of property” business – you are still going to be subject to self employment tax on that income.  As you make your decision, take into account the taxes you’ll be required to pay and whether or not you’re being compensated fairly for your efforts.

 

 

 

 

 

 

3 Numbers That Can Get You Audited!

Some numbers can cause the IRS to audit your tax return.

Certain numbers on your tax return can cause the IRS to be more interested in you than you might like.

 

 

Can just one number cause you to be audited by the IRS?  Probably not.  But there are some numbers that are just plain old suspicious, and once your return gets flagged for review, a suspicious number can move you from the “review” pile to “audit” pile.

 

Now, you can ask an IRS auditor why you’re being audited, and she’ll tell you it was just a random audit.  And that’s usually a lie.  Random audits account for a very small percentage of the actual audits.  Usually, something makes the computer kick out your return for review – like unreported income.  And that usually generates a simple IRS letter, “Hey, we noticed you missed something here….yada, yada, yada, please send us some more information.”   That’s called a correspondence audit and they’re usually no big deal.  The IRS sends you a letter, you send them a letter back with some explanation.

 

But if the computer kicks out your return and the reviewer sees a couple of anomalies, well, then you’ll more likely to be asked for a personal appearance.   Let’s face it, you don’t want to make a personal appearance at the IRS office.  You don’t even want to have a correspondence audit for that matter.

 

So what are the three nasty numbers?

 

The first one is $5,000.  I often see this number for “non-cash charitable contributions”.  $5,000 is the value you can donate without having a written appraisal.  It goes on form 8283 which feeds to your Schedule A for itemized deductions.  Here’s the thing – if you are claiming that you donated $5,000 worth of items to a charity, you’d better be able to substantiate it – even if you didn’t have an appraisal.  First, you need to keep those receipts from Goodwill or Salvation Army.  Also, you want to maintain a list of everything you donated.  On that list you also want to write down what the item was worth at the time you donated it, and what you paid for it in the first place.  Here’s a clue:  if you bought a sofa for $1,000 and kept it in your house for 10 years – sitting on it, sleeping on it, letting the dog puke on it, etc.,   before donating it to charity– it’s not worth $5,000 now.  Just being honest with you here.

 

Another nasty number is $10,000.  For some reason, people who lie on their taxes like to lie with this number.  I once had a woman call me because she was being audited.  She was distraught because she had received a letter from the IRS about her charitable donation.  I told her it was no problem, all she had to do was mail a copy of the donation receipt to the IRS.  She said, “You don’t understand the problem, I don’t have a receipt!”  I asked her how much the donation was for, she said, “$10,000.”  I asked her who the donation was to, she said, “My college.”   So I told her, “That’s not a problem!  If your donated $10,000 to your college they will gladly you send you a copy of your receipt.”  She told me, “You don’t understand the problem, I didn’t give no money to my college!”  I now understood the problem completely and told her to write the IRS a check, I couldn’t help her.

 

Here’s the thing.  Sadly, liars like to use the number 10,000.  So if you have a real deduction that is for $10,000 – you really want to make sure that you’ve got your receipt.

 

My last nasty number is 20,000 – usually this is the number of miles claimed as a business expense.  The average male driver puts 16,550 on his car per year, female drivers average 10,142 – and that’s total miles.  So if you’re claiming 20,000 business miles it looks a little suspicious.  Especially if you claim 20,000 miles even.  Seriously?  You drove 20,000 miles even?  A round number like that is a lot suspicious.  You should always have a mileage log to back up your auto expense deduction.  You can get a blank copy here:  mileage log.

 

Are you noticing a pattern here?  Round numbers get extra scrutiny.  It’s okay if you have deductions that are round numbers, but make sure you can back them up with receipts or logs.

Itemized Deductions 2016

Claiming itemized deductions in 2016

The 2016 GOP Tax Plan calls for eliminating many current tax deductions like state and local income taxes.

 

Is 2016 your last chance to itemize your deductions?  It’s possible.  With a Republican President, Senate, and Congress, it’s highly likely that many things that we currently itemize will be on the chopping block next year.

 

That’s not all bad, the trade-off will be a larger standard deduction and for many people, lower tax brackets.  This is not law yet.  Right now, it’s all speculation based upon the 2016 House Republican Tax Reform Plan.

 

Normally, I don’t like to do tax planning based upon speculation.  But here’s my opinion–you know that you may claim itemized deductions for 2016.  You don’t know if you can claim them for 2017.   It seems to me, that it makes sense to stack as many of your deductible expenses on your 2016 return as you can so you won’t lose them if the law changes.

 

So what’s at stake here?  Currently, the GOP plan would eliminate the deductions for medical expenses, state and local income taxes, real estate taxes, and employee business expenses.  (The current plan keeps the charitable donation and the mortgage interest deduction.)

 

So what does that mean?  How would you “stack” your deduction?  Let’s use state and local income taxes for an example.  If you make estimated tax payments, your fourth quarter payment isn’t due until January 15th.  That payment gets applied to your 2016 state tax return as tax paid, but if you pay the estimated payment on January 15th, you can’t claim it as a deduction on your federal return until you file your 2017 tax return.   By making your estimated tax payment by December 31st, you move that deduction up to your 2016 federal 1040 return.

 

I live in St Louis and many of my clients have to pay City of St Louis income taxes.  Almost everybody pays those taxes in April, when they file their tax return and then we claim the deduction on the next year’s taxes.  But, you can actually make an estimated payment for the City of St Louis tax.  By paying the tax in advance, you can also move that deduction to 2016 instead of losing it next year.  Here’s a link to the City of St Louis Estimated Payment Voucher    There are other cities and localities with taxes that this would apply to as well.

 

So does it really make a difference?  Well yes it does!  Let’s say your estimated tax payment is $500 and you’re in the 25% tax bracket.  That would be a tax savings of $125.  Now before, it would have been save $125 now, or $125 later – but if the GOP plan gets passed, there is no $125 later.

 

Medical expenses are another potential item on the chopping block.  If you have enough medical expenses to itemize on your return, it might make sense to pay for any additional procedures, or buy your glasses, or refill prescriptions before the year ends.  Also, if you’re a senior citizen —  even if the tax laws don’t change, you should be aware that the threshold for claiming medical expenses will go up from 7.5% of your adjusted gross income to 10% of your AGI.    So whether the tax law changes or not — if you’re over 65 your medical expense deduction will be reduced in 2017.

 

If you claim employee business expenses (that includes job hunting costs) and you’re trying to decide if you should make a purchase now or later, it might be a good time to buy now so you can put it on your 2016 taxes.

 

And just don’t forget to pay your real estate and personal property taxes before the end of the year if you want to claim them on this year’s taxes.  Remember, you can only claim the deduction in the year you actually paid the tax!

 

I’ve got one important caveat here:  if you have to pay the Alternative Minimum Tax (AMT) – moving up tax payments might not help you at all because with AMT you don’t get the use the state income tax deduction or the deduction for employee business expenses.

 

So like I said, the GOP tax plan is only a proposal, it’s not law yet.  But given the political climate, it’s highly likely that it will pass and I’d hate to see people lose out.  But even if it doesn’t pass, you’re just getting the tax benefit now rather than later.

 

 

Filing as a Surviving Spouse: Five Things You Need to Know

 

The death of a spouse can create tax confusion.

Losing a spouse is difficult enough. You don’t need your taxes to be overly complicated.

 

One of the worst things I have to do in my job is to help people whose husband or wife has died file their tax returns. There’s nothing I can say or do to make the situation any better. If you should find yourself in this situation, first, I am sorry for your loss. Here are my tips to help you get through the filing process.

 

One: You are still considered married for the full year that your spouse died. That means you may file as married filing jointly, even though your spouse has died. (Had you divorced instead of being widowed, you would be considered single. Different rules for different situations.)

 

Two: For most couples, married filing jointly is the best filing status to use in the year of death. But there may be situations where you will want to file as married filing separately. If you have any concerns about your spouse’s tax liabilities, you should consult with a tax professional just to be safe.

 

Three: When you are signing the MFJ return, you will sign your name on your line, and write “filing as surviving spouse” on your spouse’s signature line. If you are paper filing your return, you’ll want to write “Deceased” across the top of the tax form. If you are e-filing, you’ll complete the box that shows the date of death. I always put “deceased” in the occupation box.

 

Four: If you still have children at home, you may claim the Qualifying Widow(er) status for two more years after your spouse died. Normally, a single person with children at home would claim the head of household filing status.  Qualifying Widow(er) is a better tax rate so you want to use it if you can. You may not claim Qualifying Widow(er) if you do not have children at home. That’s a very common mistake. If you have no children remaining at home, then your filing status will become Single, not Qualifying Widow(er).

 

Five: If you get married again before the year ends (it does happen) you would file as Married Filing Jointly with your new spouse, and you would file a return for your deceased spouse as Married Filing Separately. (You could, if you choose to, file your own return as Married Filing Separately as well. Usually it is not the best filing status to claim.)

 

 

 

Earn Cash Blowing the Whistle on Tax Cheaters!

Report tax fraud to the IRS using form 211 to earn an informant award.

Blowing the whistle on tax cheats could earn you cash, but it could also cause you a lot of trouble.

You’ve thought about it, haven’t you?  Someone you know is cheating on their taxes, making huge refunds when they don’t even work, while you bust your backside making ends meet.  Makes your blood boil doesn’t it?  I know it does because people write to me all the time wanting to report an ex or a neighbor that they know is cheating on their taxes.  I did a post about reporting fraud a few years back, here’s a link to it:  Reporting Tax Fraud

 

Basically, if you’re just reporting fraud, you file form 3949, send it to the IRS and let them take it from there.  You’re done.

 

But if you want to get a reward for reporting the tax fraud, that’s a different story!  And, of course, a different form. But how do you know you can qualify for an award?  Well first, you have to be able to provide specific and credible information.  You can’t just send the IRS a form saying, “I think my neighbor’s cheating on his taxes, he can’t afford that new Volvo on the money he makes at the Post Office.”That’s just not going to fly.  Also, it’s got to be a significant Federal tax issue.  “My ex-wife claimed that those old clothes she gave to Good Will were worth $500 and they couldn’t have been worth more than $450.”  That’s not big enough to make it worth their while to investigate.

 

There are two types of whistle blower cases:  ones where the amount of tax, penalties, and interest exceed $2 million dollars.  (Geek speak, that’s a section 7623(b).)  That’s usually a business case.  Or if you’re dealing with an individual, his or her income must be over $200,000 annually for at least one of the tax years you’re reporting on.  In these types of cases, the IRS will pay between 15% and 30% of the tax that they recover.  Seriously, if you’re in a position to report on a major case like that, you should find an attorney to represent you.  Don’t mess with that on your own.  30% of $2 million is $600,000, it’s worth hiring an attorney for!

 

The IRS also has another program for cases where the tax is under $2 million or an individual makes less than $200,000.  (Geekspeak, that’s section 7623(a).)  Although the paperwork is the same, the rules are a little different for the smaller cases.  The maximum award will be 15% of the tax recovered.  Also, the awards are discretionary;  meaning – the IRS doesn’t have to give you an award if they don’t feel like it.  And, if you’re not happy with your award, you can’t go to Tax Court and argue it.  You’re done.  That’s it.  So even if you’ve got the perfect case, there’s no guarantee that you’re going to get paid.

 

Just to give you an idea of how things go though, in 2015, of the 204 claims that were paid, 99 awards were given so it’s about half of the claims.  But the IRS generally doesn’t pay awards until 5 to 7 years after a claim is filed so if you are going to get anything out of this, you’re going to be waiting for quite some time.

 

But let’s say you still want to go ahead with this.  What do you do?  You’re going to want to submit form 211.  Here’s a link to that:  Form 211

 

Basically, the form is going to ask for the name, address and the last 4 digits of the tax cheat’s social security number.  The IRS will also want a description of what he or she did and why you believe it’s a violation of tax law.  You’re also going to need to describe how you know about the cheating.  How are you related to that person?  And also how much tax you think that person owes.  The bottom line here is, you really need to know something about the tax cheat  to report them.

 

Here’s the last piece of information I want you to have.  The IRS Whistleblower – Informant Award, unlike other whistle blower programs, does not provide whistle blower protection.  That means that whoever you report on could find out.  If it’s an employer, you could lose your job.  If it’s someone you know (like an ex spouse), you could be placing yourself in danger.  You really want to think about this before sending the IRS form 211.

 

If you still want to report a tax cheat, and don’t care about a reward, then go ahead and send form 3949-A instead.  You can do that and remain anonymous.   Continue reading

Settle Your IRS Debt!

1040 Tax Form With Calculator And Coffee Lying On Wooden Desk

 

Over the past year I’ve taken hundreds of calls from people asking me about settling their IRS Debt.  They have all sorts of questions:

 

Have you heard of that Fresh Start Initiative?

Do I need an attorney?

Can I really settle my debt for pennies on the dollar?

How much does it cost to do that anyway?

A lot of those companies that advertise on TV are charging from $5,000 to $8,000 – that’s money that you could have used to pay down your tax debt!   And they keep your money even if the IRS turns you down!

 

So I’m going to be teaching a class about  how to do do an offer in compromise by yourself.  A step by step, easy to understand, instruction guide.  Why do that?  Because, the hardest part about making a deal with the IRS isn’t the forms you fill out, it’s pulling your paperwork together and figuring out your monthly expenses.  And you’re doing that part yourself even if you’re paying the TV tax guys $5,000.  So why give them all your money after you’ve already done all the work?  You can use that cash to pay the IRS instead!

 

I’ve done a bunch of offers in compromise.  The key is to use the IRS formula for making the offer.  If you use the right formula-you get your offer accepted.  If you can’t afford to pay what the IRS formula says you need to pay, you’re not out of options.  You can still make an installment agreement to settle that debt.

 

So if you could do me a little favor, I’d really appreciate it.  Don’t leave a comment below, please just respond to my survey.  I want to make sure that I cover all the questions that people really care about.   And most importantly, I want to make sure that I make it easy to understand.   Thanks for your feedback

-Jan

 

Click Here for the Survey!

Missouri Sales Tax Issues for Professional Photographers

Missouri has special rules for sales taxes for photographers

Professional photographers have unique issues when it comes to Missouri sales taxes.

 

I work with quite a few professional photographers and I’m always being asked about Missouri sales tax.  There seem to be different answers about what is considered taxable and non-taxable here in Missouri.  Well, I decided to get to the bottom of this – I called the Missouri Department of Revenue and this is what they told me.

 

Service – is not subject to sales tax.  So if you perform the service of photographing a wedding (for example) the service portion of your work is not subject to sales tax.

 

Product – is subject to sales tax.  So, if you produce a tangible product that you can hold in your hand – like a wedding album – that product is subject to sales tax.  Even if you ship that product out of the state–it’s going to be subject to Missouri sales tax.  Note – that’s for photographers only!  Let’s say you manufacture a product – like wedding garters for example.  You sell those garters online to people all over the country.  If you sell that garter in Missouri, yes, that’s subject to tax, but if you sell it to someone outside of the state – then there is no Missouri sales tax.  Photographers are treated differently on this issue.

 

Combined service/product is subject to sales tax.  Let’s say you are going to photograph a wedding and the fee is $5,000 and that includes a wedding album book that you provide the bride and groom with at the end. In a situation like this – because the service and the product are priced as one unit – then the whole thing is taxed!

 

What’s the lesson here?  You separate out the price of your service from your product!  So if that album is worth $500 – then you say the service of taking the photos is $4,500 and the album is $500.  You need to break it out so that your clients will not be taxed on your service of photographing the event.

 

Here’s a few more things to consider:

 

Electronic downloads are not taxable.  If your client can purchase the photos by downloading them online – the photos are not subject to sales tax.  It doesn’t matter if the downloads occur across state lines or in Missouri  – downloads are not subject to sales tax.  (That would include things like video games or apps as well.)

 

One more thing – if you paid sales tax on the product instead of using your business exemption – then you don’t have to charge sales tax on that product!  So if you take the photos and have the wedding book printed up by someplace that charges you sales tax – then you don’t have to charge sales tax when you sell the book!  Remember, even in this situation, you still need to break out the service fee from the product!

 

Some other thoughts –

 

What about saying the service is $5,000 and the album is free?  My opinion is that would make the whole thing taxable.   Your clients are basically getting the wedding book for $5,000 and I believe that would make your service taxable.

 

Okay, so what if I said the service is $5,000 and the wedding album is a penny?  Once again, I would think that would still make your service taxable.  Being realistic, the wedding album is worth more than a penny.  I think you need to price the album at a fair market rate to pass Missouri scrutiny.

 

The big take away here though is that you must separate out your service fee from your product fee or else you’ll be paying sales tax on all of your work.

 

 

Death, Taxes and IRAs

IRAs are taxable after you die.

When people talk about “death” taxes, they usually mean “estate” taxes.  Now, for 2016, there is no federal estate tax if your estate is under $5,450,000.  So for most people, you don’t have to deal with estate tax.  But IRAs are a different animal!

 

An IRA is considered to be taxable income.  So – if you die, your beneficiary will have to pay tax on that IRA money.  So, maybe you don’t care – since you’ll be dead anyway.  But if you do care about leaving a taxable legacy to your heirs, here’s a few things to think about.

 

1.  Roth IRAs are not taxable.  Not to you, not to your heirs.  (I always like Roth IRAs.)

 

2.  A lot of people sign up for IRAs but they don’t know who the beneficiary should be (or they don’t have all the information they need to complete that part of the paperwork.)   When they sign up they just put “estate” down in the beneficiary box.   This is usually a bad thing.  What happens is that your heirs wind up having to file a form 1041, an Estate and Trust tax return.  Now, if you Google “estate tax” you’ll probably find all the tax rates on estates – and you’ll read the tax brackets for if you have over $5,450,000.   (And that’s a form 706 – it’s a different animal.)

 

The 1041 form for income tax on estates and trusts is for the income earned by the estate – which includes your IRA income.  The first $2,500 is taxed at 15%, the next bracket up to $5,900 is taxed at 25%, the next bracket up to $9,050 is at 28%, then up to $12,200 is at 33%, and anything over that is $39.6%.  It doesn’t take a whole lot of money to kick your IRA income into the top tax bracket!  Just to give you a comparison – a single person won’t hit the 39.6% tax bracket until he or she reaches $415,050 in taxable income.

 

So what does this mean?  Well, if your heirs aren’t rich, they’re going to be better off if they inherit your IRA directly from you instead of from your estate.

 

3.  If your goal is to leave a legacy to your children – life insurance is better than an IRA.  (I can’t tell you how much I hate sounding like a life insurance salesman but it’s true.)  Your IRA is your retirement account – it’s supposed to be money for you to spend during your retirement.  In a perfect world, you spend it all before you die.  (And of course, have enough to enjoy a long and happy retirement.)  Life insurance provides your loved ones with tax free cash after you die.

 

This is really a personal decision on your part.  Do you want to leave something for the kids or not?   For some people that’s a major priority, for others, not at all.  It’s your choice.  But not matter what you decide, be sure to work with your financial advisor to make sure your heirs are properly listed as beneficiaries to your taxable retirement accounts.

What You Need to File Your Taxes

tax paperwork

Sometimes, the hardest part about filing your taxes is getting the paperwork together.

 

Updated:  June 2016.

Whether you’re hiring a professional or preparing your own return, make sure you have all of your paperwork together before you start.  If you’re expecting a refund, you’re probably anxious to get everything together so that you can file as soon as possible.  For those of you who expect to pay, you’re probably not too thrilled about it.  I know I never am anyway.

 

Here’s a list of some of the more common documents associated with filing.  Not every person will have every form on this list, but hopefully this will help jog your memory so that you don’t forget something you need.

  • W-2 forms – that’s your statement of wages, you’ll need a W-2 for each job you held
  • 1099 forms – there are several types:
    • 1099-INT for interest
    • 1099-DIV for dividends
    • 1099-B for sale of securities  (some companies, like Edward Jones or Raymond James, will send out a combined form that has your 1099-INT, 1099-DIV and 1099-B all in one statement)
    • 1099-R for annuities, pensions and other retirement plan withdrawals
    • 1099-G is for government payments like a state tax refund or unemployment benefits
    • 1099 MISC is for miscellaneous income, like commissions or non-employee compensation
    • SSA-1099 is for Social Security income — a note about the SSA 1099 form, it has to be the most frequently lost form on the planet.  It’s usually the first one mailed out and I think it kind of gets lost in the shuffle.  If you receive Social Security benefits, or are assisting someone who does, please make sure that this form is included with the other tax documents.   For some people, it’s not taxable—but you need to include the figures from this form when preparing your taxes to determine if it is taxable or not.
    • W-2G is for gambling income.  If the Social Security form is the most frequently lost form, the W2-G comes in second.    If you’ve received one of these statements, you need to include it on your tax return.  If you don’t, you will get a letter from the IRS.   (Gambling losses, up to the amount of winnings, can be deducted on your Schedule A.
  • 1098 tells how much interest you paid on your mortgage – you want this because it can be used as a deduction
  • 1098-E shows interest paid on a student loan – ditto!
  • 1098-T shows the amount of tuition paid at an educational institution (you need this to claim those college tax credits.)  Here’s the kicker, if you’re the parent paying the tuition, you won’t get the form, your student child will.  You may need to work at getting your student to download this of the student portal.

 

If you sold stocks, mutual funds, or real estate, you’ll want to have your basis information on hand.  (Basis is what you paid for the property.  Many investment firms include the information right on your 1099B, but some don’t, especially if you sold old stocks.)  Make sure you have this information ready before you file – it can save you lots of money!

 

If you purchased or sold a home this year, you’ll want to have a copy of your settlement statement.  Depending upon your situation, there may be valuable deductions hidden in those statements.

 

If you are a member of a partnership, joint venture, S corporation, estate or trust, you will also need a copy of the Schedule K-1.  Those forms aren’t required to be completed until March 15th, so you may not be able to file your personal return before then.   It’s a good idea to make your tax appointment once you have all of your other forms together.  The K-1 information can be added at a later date.

 

And of course, you’ll want to have all the documents to support your deductions like real estate taxes, charitable contributions or deductible business expenses.

 

It’s always a good idea to have a copy of your last year’s return with you also.  Sometimes you might have items that can carry forward into the next year.  If you don’t provide you preparer with your old return, you’ll miss those deductions and credits.

 

If you save all the mail that says “Important Tax Information Enclosed”, you’re onto a good start.  Having all of your tax paperwork together before you start your tax return is one of the best ways to avoid getting a letter from the IRS later.