Don't Mess With Taxes

We're just a couple of weeks into this new year, and I've received three 1099s and a donation thank-you letter.

I am not alone. Official tax forms and statements are filtering into mail boxes, both curbside and electronic, across the country.

The exact tax-related documents differ from taxpayer to taxpayer, but we all share one thing. We need them in order to accurately fill out annual tax returns.

They include W-2 forms for folks with wage-paying jobs, 1099-NECs for freelancers, and 1099-MISC and DIV documents for those who have investment earnings. It is, after all, called an income tax.

But wait, there's more.

Homeowners with a mortgage should get information from their lenders about tax-related loan interest and property taxes paid from escrow accounts. Retirees will get statements detailing their pension and other retirement account distributions.

Some filers who were out of work for a while last year will get a statement about their taxable unemployment benefits. Others will get tax documents connected to their health care coverage.

Those are just the more common tax-related mailings, most of which must be on their way to taxpayers — and copied to the Internal Revenue Service — by Jan. 31.

Information only, but not to be ignored: A handful of these documents must be submitted with Form 1040. The most notable filing inclusion is the W-2.  

Many, though, are what are known as third-party documents. They are informational only. They're issued to remind you, and let the IRS know, about your various sources of income or payments you can claim on your return.

While they don't have to be sent to the IRS when you file, you can't afford to ignore them. The IRS uses its copies to double check our returns. When there's a mismatch between the IRS' third-party information copy and your tax return entries, you'll hear from the tax agency. 

That's a communication that most of us definitely want to avoid. So if you are expecting any tax statements, don't file before you get them. As noted earlier, most of these tax statements must be issued by Jan. 31. And yes, some issuers wait until that date.

Yes, it's frustrating, especially if you're expecting a refund. But tax here patience is your best move. It can keep you from, at best, having to explain your filing to the IRS or, at worst, having your return processing, and associated refund, delayed.

Tax form lookout list: OK, enough preface. It's time to take a look at the tax forms that will show up in your snail mail or electronically in the next few weeks. 

Below is a listing, mostly in numerical order, of some of the more popular tax information documents. The bold-type titles are, in most cases, links to the official IRS documents. Most should be the 2022 tax year versions, but a few might still be being updated by the IRS, so check back later to see official current filing year forms.

Finally, one more time, most of them must be sent to taxpayers by Jan. 31, unless otherwise noted in the brief discussions of the forms.

W-2 — This is the tax form that most folks anxiously await. It's the wage statement from your employer (or employers, if you hold more than one job) that details how much money you made, how much income tax was withheld, the amounts taken out for Social Security and Medicare, and contributions to workplace benefit programs, such as 401(k) and similar retirement plans, medical accounts, and child care reimbursement plans.

W-2G — If you're lucky, you'll get this earnings statement. It's specially designed to reported gambling winnings, hence the appended G. It's sent to winners who get:

• $1,200 or more from bingo or slot machines,
• $1,500 or more in winnings (reduced by the wager) from keno,
• More than $5,000 in winnings (reduced by the wager or buy-in) from a poker tournament,
• $600 or more in gambling winnings (except winnings previously noted) and the payout is at least 300 times the amount of the wager, and
• Any other gambling winnings subject to federal income tax withholding.

1095 form series — This A, B, and C form series was created to report Affordable Care Act data. However, political battles over the health care coverage popularly known as Obamacare have changed some things.

The Republican tax reform bill, the Tax Cuts and Jobs Act (TCJA) of 2017, eliminated the individual mandate penalty at the start of the 2019 tax year. That penalty was the amount that previously was added to your taxes if you didn't have what was deemed adequate insurance coverage. However, the TCJA did not do away with the associated Obamacare reporting requirements. By law, the forms still must be issued.

That means you still might get at least one of the 1095 series insurance coverage tax statements listed below even though you don't need it/them for federal filing purposes to document your current tax year medical coverage and avoid the now-gone federal penalty.

Note, however, that while the federal enrollment mandate and penalty is gone, some states still require their residents to get medical coverage or pay a price.

Due to the TCJA changes, the IRS has extended some of the deadlines for issuing these forms. State deadlines, however, could be different. So basically, just keep your eyes open for these forms.

You'll need the A version to reconcile or claim any ACA premium tax credit (PTC) you got in advance or are eligible to file for on your return. The B and C versions are informational and you can simply store them with your other tax records for the year.

• Form 1095-A, the Health Insurance Marketplace Statement, debuted for the 2015 tax year. Per its name, it is sent by the exchanges where individuals purchased their medical coverage. As noted, use its data in connection with PTC claims.
• Form 1095-B is issued by health care insurance issuers or some smaller companies that provide coverage for employees. It confirms that you had workplace-provided healthcare that met the ACA's acceptable minimal health insurance coverage standard. It also shows how long you were covered and which family members also were on your policy.
• Form 1095-C is the same as B, but is issued by large employers.

1098 — This form lists how much mortgage interest a homeowner paid on the loan. In most cases, this amount is fully deductible for taxpayers who itemize. The IRS has an official 1098 form (that's what the 1098 link will show you), but most lenders (like every bank that's given us a mortgage) tend to use a substitute document that contains the same data.

This form also includes another key itemized tax deduction, the amount of real estate taxes on the property that the mortgage lender paid on your behalf the previous tax year. Despite Congressional efforts to eliminate or expand the TCJA's limit on the $10,000 deduction limit on property and other state and local taxes (SALT) taxes, the cap is still in effect. Keep that in mind, regardless of the amount shown on this form.

1098-E — The interest paid on your student loan is reported on this form and is sent by your lender it the interest tally is at least $600. You may be able to deduct this interest and possibly other loan-related amounts, such as origination fees and capitalized interest.

1098-T — Universities issue this tuition statement to students. It shows the amount of qualified education expenses the college kid paid. The info is needed to help in the claiming of education-related tax benefits, such as the American Opportunity or Lifetime Learning tax credits.

1099-INT — You'll get one of these forms for each savings, CD or other investment account in which you earned more than $10 in interest. Even if you reinvested the interest instead of receiving it as a cash payment, it still counts as taxable income.

1099-DIV — Earnings from stocks and mutual funds are reported here, including dividends and capital gains distributed that are more than $10. As with reinvested interest, if you used the dividends or distributions to buy more shares, you still have to pay taxes. However, the distributions and certain, qualified dividends are taxed at the lower capital gains rates.

1099-B — If you sold stocks, bonds or mutual funds, you will receive a 1099-B from your broker or mutual fund company. It will detail the number of shares sold, when sold and the amount of the sale. Since 2011, brokers also have been providing information on the basis (the cost of an asset plus some adjustments) of sold stock. This information, along with the date you bought the shares and the amount you paid for them, will help you figure your taxes on your profit. 1099-B forms are due to investors by Feb. 15.

1099-G — When you get a refund of state or local taxes, you'll get this form. If you claimed those taxes as an itemized deduction on your previous year's federal tax return, you must report the 1099-G amount as income in the year received. A 1099-G also goes out to anyone who receives unemployment benefits, which count as taxable income.

1099-K — Payments you got via credit or debit cards or from third-party payment processors, such as Uber, Lyft, PayPal, Amazon and eBay, will be reported on this form. The 1099-K recently got some added attention because of a law change to the amounts that trigger the form's issuance. Originally, it went to taxpayers who made at least $20,000 or had 200 or more transactions. The American Rescue Plan Act (ARPA) of 2021 reduced the issuance requirement to just $600 in earnings. But because of concern that not all transactions paid by third-party processors are taxable, the IRS has decided 2023 is a transition year for 1099-Ks. It will not require or enforce the issuance of Form 1099-K at the $600 level until 2024. The plan/hope is that taxpayers, tax professionals, and third-party payment processors can work out the finer points of issuance by then.

1099-MISC — In 2020, this form changed from the document used to report payments for gig or contract work (that's now 1099-NEC, it's next in this list), to being used to report rent or royalty payments or prizes and awards, such as winnings from television or radio show contest. Form 1099-MISC also will go to some other more esoteric payments, such as fish purchases paid in cash for resales; payments to crew members by owners or operators of fishing boats including payments of proceeds from sale of catch; and crop insurance proceeds. One thing stays the same, though. When a 1099-MISC is required, it will be issued when the payment amount is aid them $10 or more in royalties, or $600 or more in other types of miscellaneous income during a calendar year.

1099-NEC — This form was revived to primarily report what I call freelance work performed by self-employed individuals. The IRS' official name for these earnings is non-employee compensation, which explains the NEC designation. You should get one if you earned $600 or more from a job. You also should get a separate 1099-MISC from each client that paid you that much. This roughly is the self-employed version of a W-2 without, of course, any taxes paid via withholding. These should have been paid via estimated taxes. And remember that even if you don't get a Form 1099-NEC for a job because the remuneration was less than $600, that $1 to $599 payment still is taxable income.

1099-R — If you received a pension or a distribution from an individual retirement account or workplace retirement plan, you'll get a Form 1099-R with those details. The form is issued by your broker, pension plan manager or mutual fund company. Even if you rolled the retirement money into another employer-provided 401(k) plan or an IRA, you'll still get a 1099-R. The form has several boxes that differentiate any taxable amount from the gross (total) distribution amount. You'll also get a 1099-R if you converted a traditional IRA to a Roth IRA. Again, a rollover usually is not a taxable event, but a pension payout may be.

The 1099 forms discussed above are the most commonly issued versions of this tax statement. However, there are many other 1099s with other appended letters. You can more about the various 1099s, what triggers their issuance and when each form is supposed to be supplied to you in my earlier post on the many versions of IRS Form 1099.

5498 — Any contributions you make during the tax year to any individual retirement account are reported on this form. It shows traditional IRA contributions that might be deductible on your tax return, as well as any rollovers, including a direct rollover to a traditional IRA, made during the last tax year. It also reports amounts that were recharacterized from one type of IRA to another. 5498 forms with information on your contributions to such accounts aren't due to you until May 31. The IRS also says, however, that the issuer should make the retirement account's fair market value (FMV) and, if applicable, required minimum distribution (RMD) information, available by Jan. 31.

5498-ESA — This account reporting form has details on contributions to Coverdell Education Savings Accounts, formerly known as Education IRAs. The youngster named as beneficiary of the Coverdell should get a copy of this document by May 1. This information is important is you went overboard last year in contributing to this educational savings vehicle. If your total contributions made to all your Coverdell ESAs for 2022 exceeded $2,000, you must withdraw the excess, plus earnings, by May 31, 2023, or you may owe a penalty.

Schedule K-1 — If you got money from an estate, trust, partnership or S corporation last year, you should get a Schedule K-1. However, because of the complexity of many of these financial arrangements, account managers tend to send out K-1s later in the tax season, often not until well after the April tax return filing deadline.

That's why filers who get K-1 forms usually file another popular piece of tax paperwork, Form 4868, Application for Automatic Extension of Time to File. This gets you six more months to get your K-1 and any other tax statements you need to fill out your Form 1040.

Documenting your generosity: Millions of folks donate to charity. That personal philanthropy can help taxpayers who itemize. You can claim qualified gifts on Schedule A.

Most charities automatically issue receipts, usually at the time the gift is made. Many also have their systems set up to also send out letters with that info at the start of the following year, like the one I mentioned at the start of this post.

In most cases, you don't have to include donation receipts or other acknowledgments with your return. But you'll need the verification if the IRS questions the deductibility of your gift(s). Plus, they're good reminders of a potential tax break.

So keep those letters you get this month from nonprofits with the rest of your tax forms and documents.

Substitute forms acceptable: The tax docs reviewed and linked (for the most part) in this post are the official IRS versions. You, however, probably will get a slightly different looking document.

That's OK. The IRS gives companies leeway to use statements that fit their software and system.

Just look for the notation on the reporting document of the form number you're expecting, as well as its identification as a "substitute" tax statement.

Double check data: Regardless of what format your statements take, be sure to double check them as soon as they show up in your snail mail or email box.

If you find a discrepancy against your own records, call the payor and get an explanation. By catching any mistake early, you'll be able to get the correct information in plenty of time to accurately file your tax return by the April deadline.

Determine the delivery methods: Finally, make sure you're looking for your tax statements in the right places.

If some of them are sent by the U.S. Postal Service, they could (probably will) arrive in your curbside snail mail box after Jan. 31. Give your carrier a few days before you panic.

Nowadays, however, most places use digital delivery. Instead of sending paper forms by mail, businesses, employers, financial institutions, and the various other third-party tax statement issuers deliver them electronically. This usually means you get an email notice that your tax documents are ready for you to download from your account at the issuer's website.

So in addition to keeping an eye on your old-fashioned mail box, also check your email or the appropriate websites for your tax-related accounts periodically during the next few weeks. There are few things as frustrating (or embarrassing) as stewing about a missing tax document that actually was already was waiting for you to get to it.

You also might find these items of interest:

• What's new when it comes to filing your 2022 taxes
• RALs are still around, but be sure they're worth the cost
• IRS starts accepting e-filed business tax returns on Jan. 12
• See more forms at 2022's Talking Tax Forms and the new Tax Forms 2023

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