Best Results Organizing

Have you ever been on a treasure hunt?  Given a list of oddities, you and your team members are sent out into your city or neighborhood for a limited period of time, to “collect” (in fact or by digital photo) the items described.  Whoever collects the complete set of listed wins the big prize. Yay!  The last team to show up, cranky with one another and missing at least two items, ends up having to pay everyone else’s restaurant tab. Boo!

Well, organizing your paperwork for tax season is a lot like a treasure hunt.  (Don’t roll your eyes at Paper Doll!) There’s a set list of possible items, a limited neighborhood in which the items can be found (in your mailbox, under those receipts Paper Doll encouraged you to file, at the end of a phone line with a heretofore less-than-diligent corporation, etc.), and a deadline (April 15th).  The faster you find all of the necessary treasures, the sooner you earn one of two prizes, either a tax refund or more ample time to figure out how to come up with the funds to pay your taxes.

This Saturday, January 31, 2009, is the deadline by which companies and individuals are should mail most of the treasures you need.  (Rumor has it some mysterious items, such as the 1099-B (Proceeds from Broker and Barter Exchange Transactions), need not be mailed until mid-February.)

Every taxpayer’s situation is different, but we’ll review the most common items you should be collecting in your treasure hunt kit (i.e., a hanging folder labeled “Tax Prep 2008) to complete your tax return.

Let’s start with the tax support paperwork sent to you from outside entities:

W-2
Not to be confused with a Federal W-4 (the form you fill out so that your employer knows how much tax to withhold) or a W-W-W-W-W-W (used only in the municipality surrounding Sesame Street), the W-2 (Wage and Tax Statement) is the form your employer gives you (and sends to the IRS) to delineate how much you were paid, and, if applicable, how much money was withheld from you and paid to the federal and/or state governments for taxes and FICA (Social Security and Medicare). 

Your W-2 may also indicate other values withheld from your check, including payroll purchase of United States Savings Bonds, regular donations to the United Way, payroll purchases of stock options, etc.

There are multiple copies of the information on Form W-2. Your employers submit copy A directly to the Social Security Administration and keep copy D for their records.  You get to keep copies B and C (to send with your federal tax return and keep for your records, respectively), as well as copies 1 and 2 to file with any applicable state/local tax authorities.  (Don’t ask why they aren’t E and F.  Paper Doll just reports these things; she doesn’t make them up.)

Your employer(s) should mail your W-2(s) by the last day of January, so if you haven’t received it by Valentine’s Day, be sure to amble down to Human Resources or place a call to them.  W-2s may be given directly to you at work, or might be mailed to the address of residence you listed on your W-4.  Thus, there are a few other issues you might want to consider.

• Did you change employers this year?  If you had more than one job this year, be sure that you have received W-2s from each employer.  If you received a promotion (or, demotion,  because you were reading blogs on company time), you’ll still only receive one W-2 from each employer, not one per position.
• Did you change addresses?  There’s only so much a former employer will do to track you down and give you your W-2.  But remember, just because you don’t have your W-2 does not mean the IRS doesn’t know what you earned.  Don’t forget about that Copy A!  The government always knows!

1099
Actually, there are a whole bunch of 1099s, a veritable Alphabet Soup of versions of 1099s, to reflect the myriad types of financial transactions of which you might have been a part.  Some of the more common are:

1099-MISC is what you may receive from a client/customer if you were an independent contractor (i.e., self-employed) or received any kind of miscellaneous revenue for doing work for someone else when you were not actually considered an employee.  Please note that even if someone paid you for doing work as an independent contractor, they may not know they should be sending you a 1099-MISC.  This is why, if you are self-employed or irregularly-employed, it’s still vital to keep track of your incoming revenue. 

1099-INT reflects the interest income you receive from interest-bearing savings and checking accounts, money market bank accounts, Certificates of Deposit, and other other accounts that pay interest.  This form also notes whether foreign or U.S. taxes were withheld and if there were any penalties assigned for early withdrawal from an interest-bearing account.

1099-DIV indicate the dividends or capital gains you received as an investor.  (In 2008, the numbers on your 1099-DIV might seem particularly small.)  You would receive this from a broker, mutual fund company or other type of investment company.  Not all dividends are created equally; ask your tax professional if you have any that seem unusual or complicated.

1099s can be sneaky, hidden treasures. 
Quite often, instead of sending a 1099 in a separate envelope, a bank or brokerage may include a 1099 form in the same envelope  as a quarterly or end-of-year financial statement.  Indeed, the 1099 for many stocks may be found at the bottom of a quarterly statement, divided only from the actual statement by a faint perforation.  If the legal-sized paper was folded multiple times, the 1099 may merely be a flap, folded backward, that you might not notice.  Keep your eyes open! 

Some internet-only banks, like ING, often only provide 1099-INTs online.  Log into your online bank account by the end of January to see if your 1099s are accessible as downloadable PDFs.

1098
In case you were wondering, 1098s are not merely 1099s with low-self-esteem.  This form, the Mortgage Interest Statement, reflects the interest you paid on your mortgage, which is generally deductible on your federal taxes.

There are sub-types of 1098s.  For example, you might receive a 1098-C from a charitable organization if you donated car, boat or airplane; a college might provide you with a 1098-T to indicate you paid tuition, or a financial institution might send a 1098-E to show you’ve paid student loan interest.

If you’ve stayed with this treasure hunt so far, you might be interested in a fairly lengthy list and description of all tax-related forms.  (Knock yourself out.)

Correspondence
In addition to the W-2s, myriad 1099s, 1098s and more, you might have received other treasure over the course of the tax year:

• Confirmation of donations from charitable entities–These may come in the form of full letters or they may appear as small asterisked* comments at the bottom of other requests for donations.  A confirmation should include the name of the qualifying charitable entity, a date (or at least a year) and a dollar amount or a description of materials, if an in-kind (non-monetary) donation was made.
• Insurance company summaries of out-of-pocket health expenditures during the prior calendar year can yield a treasure trove of information if your family’s medical expenses were high in any given year.
• Notice of gambling or lottery winnings–Yay!  But be assured, even if you don’t receive the notice, the government did.  Don’t think you can hide these winnings.
• Proof of payment for jury duty–Most people get less than $9/day, but since it’s reported to the government, you need to keep your records, too.

Of course, all of the above are tax paper treasures that should find their way to you with minimal effort on your part.  The rest of what you’ll need to prepare your taxes will include the papers you should have been collecting all throughout the year in your tax prep folder.  These would include receipts for:

Medical expenses–Be sure you’re counting only medical expenses you paid and not portions paid by the insurance company or the section on the “Explanation of Benefits” generally referred to as network savings.  (That amount isn’t something you paid, or even something paid by the insurance company.  It’s the amount knocked off the bill simply because you have insurance.  If you were uninsured, you’d be charged more than the total paid by you and the insurance company.  Oy.)

Pharmaceutical expenses–Did you know you can call or go into your pharmacy and request a printout of all pharmaceutical purchases you made for yourself or your children?  Because of privacy laws, your spouse, however, may have to make a separate request.

Self-employed/small business expenses–If you own your own business, Paper Doll is sure you have a carefully-created filing system for all your business-related expenses.  Right?  (If not, don’t worry.  We’ll be talking about this soon enough.)

Un-reimbursed employee expenses–Unfortunately, you have to itemize (i.e., not take the standard deduction) and these itemized expenses must equal 2% or more of your adjusted gross income.   

Childcare-related costs–While you want to keep these records to support tax deductions, as the news stories surrounding political appointments always indicate, be sure you’re not running afoul of Nanny Tax requirements for withholding if you have an employee to care for your children. If you have a dependent in elder-care, bear these expenses in mind, as well.

The foregoing is by no means a complete treasure list, but it’s a chance to help you into the game.  If you haven’t yet started on your treasure hunt, check your mailbox and recent paper piles and begin collecting what you need.  Please join the game and start hunting for your tax treasures now–and i f you plan on using a tax professional to advise you and prepare your taxes, there’s not a moment to waste.  The sooner you call to set up an appointment, the closer you’ll be to your own pot of gold.

Good luck!