Why do I get so many tax forms?

An easy breakdown of your tax docs

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Daniel A. Mace, CPA

Why do I get all these tax forms and what are they for? You’ve probably asked yourself this question. You’ve probably asked your tax advisor this question. Can’t I just tell my advisor the amounts? Generally, the answer is no. Even being off by just a few dollars can cause you to receive notices from the IRS. So, here’s a breakdown of all the tax forms that will be hitting your mailbox to help make some sense of why you get so many and what they’re telling you.

Form W-2

Your Form W-2 reports the amount of taxable income you received for the prior year and is essential to filing your taxes – you can’t complete your return without it! It also lists the amount you contribute to your retirement plan, how much your employer paid for your health insurance, how much you received in other pre-tax items such as dependent care benefits and contributions to your health savings account, as well as how much Social Security and Medicare tax was withheld from your pay.

Your employer will send you your W-2. Copies also go to the IRS, the Social Security Administration, your state and potentially local tax authorities – if you’re subject to a city tax. Your employer must have your W-2 in the mail no later than January 31, so you should receive it by the first week of February. Or, your job may provide it to you electronically. Even if you quit a job last year, you should still get a W-2 for it, so make sure your address is up-to-date with any previous employers.

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When you receive your W-2, make sure you look at it right away. If there’s an error, you’re going to want to get that fixed ASAP. Notifying your employer of any corrections quickly increases the chance the corrections are made before the IRS receives its copy of your W-2, which would save you time and a headache in the long-run.

Form W-4

Form W-4 is basically an easy form that can get very complicated very quickly – depending on your filing status and if you have more than one job. This form is what you fill out to tell your employer how much federal tax to withhold from your paycheck.

The IRS issued a new form after the new tax law, but there are concerns that the form is too long and too complicated. So, the IRS has committed to releasing a new form, but it will not be available until 2020 (that’s right, 2020). In the meantime, you can use the current form to calculate your withholding but be prepared to spend some time filling it out. Check out our blog on Form W-4 for more details.

Form 1099-MISC

This form is generally used to report other earned income you receive that is not wages. For example, you might have rental income or non-employee compensation. Like your W-2, a 1099-MISC must be in the mail to you by January 31. For more information on filing requirements, exceptions and more, check out our in-depth article.

Form 1099-R

The 1099-R is used to report retirement income such as distributions from IRAs, 401(k)s, pensions, annuities as well as rollover distributions. It will tell you the total amount of your distribution and the taxable amount if any of it isn’t fully taxable (which is generally the case for pension and annuity payments). It also reports any withholding on your retirement distributions. Box 7 contains a distribution code that tells you if you’re subject to penalties for early withdrawals and also tells your CPA if your distribution is taxable or nontaxable.

Essentially, any time you have a transaction with a retirement account, you should receive a 1099-R. Distributions of $10 or more must be reported along with rollovers, even if they’re nontaxable. Your 1099-R must be in the mail by January 31 and will come from the fiduciary of your account.

Form 1099-SSA

Form 1099-SSA reports your Social Security benefits received in the prior year, any benefits you were paid, your net benefits, the amount you paid for Medicare premiums and if you had any voluntary federal withholding. You may not realize that a portion of your Social Security benefits may be taxable depending on how much other income you have. This form is mailed to you in January. If you don’t receive it, or you need a replacement, visit the Social Security website.

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Form W-2G

If you receive a W2-G, congratulations on your gambling winnings, but you still have to pay taxes. Whether you receive a W2-G depends on the game you play and how much you win. It will be issued by the casino, usually on the day of your winning (they will not mail you a copy in January), and you will receive one form for each jackpot. One copy will go to you and a copy is also sent to the IRS. The W2-G reports how much you won, where you won it, what type of game you were playing, any federal income tax withheld from your winnings and some other transaction details as well as identify verifying information.

Form 1098

This form reports the amount of mortgage interest you paid to your bank last year along with the outstanding mortgage principal as of January 1, origination date of your mortgage, refunds for overpaid interest, mortgage insurance premiums and mortgage points paid. You will receive a separate 1098 if you have a rental property or a second home with a mortgage on it. Property taxes you paid through your escrow account will appear on either your 1098 or an accompanying statement.

Other forms

Forms 1099-INT, 1099-DIV and 1099-B are issued by brokers to report interest, dividends and sales of stocks and mutual funds. These generally hit your mailbox in mid to late February.

If you have questions about any tax forms you receive, just reach out to your Henry+Horne professional advisor.

Daniel A. Mace, CPA, Senior Manager, specializes in providing tax services to small businesses, individuals and nonprofit organizations. You can reach him at (520) 836-8201 or DanM@hhcpa.com.