Best Results Organizing

If you drive a car, I’ll tax the street.
If you try to sit, I’ll tax your seat.
If you get too cold, I’ll tax the heat.
If you take a walk, I’ll tax your feet.

~ “Taxman”, The Beatles

Sitting on a cornflake, waiting for the van to come.
Corporation T-shirt, stupid bloody Tuesday.
Man, you been a naughty boy, you let your face grow long.
I am the eggman, they are the eggmen.
I am the walrus, goo goo g’joob.

~ “I Am The Walrus”, The Beatles

If you’ve ever sat down to do your own taxes without any advanced preparation, you’ve probably been babbling the nonsensical “goo goo g’joob” into the wee hours of the morning. (Perhaps crumpled tax forms sound like Corn Flakes when you sit on them? Oh, those Beatles!)

Organizing your paperwork for tax season can be easy, if you’ve been filing away your paperwork all year as it’s come into your life, and if you have a handle on what papers should already have arrived. If not, you might find yourself procrastinating on what could be profitable (if you’re expecting a tax refund) or at least insightful (because the sooner you know how much you owe, the more time you’ll have to amass it before April 15th).

Different types have different approaches to the coming tax season. For example, if you’ve practically memorized IRS Publication 552 and know the differences between Forms 5498 and 5754, you’re the Taxman. Maybe you already work for the IRS, or are a certified public accountant, or feel about schedules and forms and worksheets (Oh, my!) the way others feel about Facebook or I feel about a certain Mr. Clooney.

If you sell services or products, like ovoid chicken byproducts, for example, you are the Eggman. You’re a self-employed small business owner, and we will cover your tax paperwork issues in a post two weeks from now.

If you look decidedly like Wilford Brimley:

but are not actually human, then you are the Walrus, and it’s highly likely that you don’t owe any taxes this year. (Note: if you are a walrus, but work in the performing arts sector and have received a W-2 or 1099, please see your accountant for further instructions.)

In this post, we will cover the information returns, forms you should have received (or will soon be receiving) that inform you (and the IRS) what monies you have received, and in some cases, paid. These documents are essential to filling out your taxes, which is why I frequently advise having a Tax Prep hanging folder (with interior folders for informational documents like these, as well as charitable and medical receipts, which will be covered in next week’s post).

Have you noticed if you’ve received all your forms? All W-2s and most 1099s are normally required to be mailed by the last day of January, but because January ended on a Sunday this year, companies and individuals had an extra day. Although employers had to deliver or mail W-2s to employees by February 1st, they have until March 1st to postmark copies to the IRS.

Note also that financial institutions have until February 16, 2010 to mail 1099-B forms (Proceeds from Broker and Barter Exchange Transactions), relating to the sales of stocks, bonds, and mutual funds. 1099-S forms, related to real estate transactions, also have the 2/16/10 mail deadline, so watch your mailbox for these items.

Each taxpayer’s situation is unique, but the following are the most common types of information return forms used by individuals (i.e., not those involving trusts, estates or corporations).

W-2

This is the Wage and Tax Statement 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 regular donations to the United Way, payroll purchases of stock options or savings bonds, etc.

Don’t confuse the W-4 (that tells your employer how much tax to withhold) with the W-2. Yes, the IRS number system is weird–you get a “4” when you start a job or change your deductions, but a “2” at the end of each year’s performance of that job…not at all in numerical order.

There are multiple copies of any one W-2. Employers submit copy A directly to the Social Security Administration and keep copy D for their records. You get to keep copies B (to send with your federal tax return) and C (to keep for your records), as well as copies 1 and 2 to file with any applicable state or local tax authorities. Paper Doll maintains that it’s awfully disorganized to change nomenclature in the middle of a sequence from letters to numbers.

If you haven’t received your W-2s by February 15, 2010, contact your payroll or human resources department immediately. W-2s may be given directly to employees at work, or might be mailed to the address of residence you listed on your W-4. Also consider:

• Did you change employers this year? If you had more than one job in 2009, be sure that you have received W-2s from each employer. If you received a promotion or moved laterally, 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 to give you your W-2. Remember, just because you don’t have your W-2 does not mean the IRS doesn’t know what you earned–remember Copy A!

If former employers drag their feet about sending a W-2, or if a past employer has gone out of business, and your W-2 hasn’t shown up by March, contact the IRS at 800-829-1040. They’ll run interference and also send you a form 4852, which you can fill out in lieu of one supplied by your pokey old company.

1099

There’s not just one type of 1099. In fact, there make a whole bunch of 1099s, to reflect the myriad types of financial transactions of which you might have been a part. For example:

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 revenue for doing work when you were not actually considered an employee. Individuals and companies are only required to submit 1099-MISC forms to you and the IRS if you earned $600 or more from them during a calendar year. 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 for yourself. (We’ll discuss this more two posts from now. I bet you can’t wait!)

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

1099-DIV indicates the dividends or capital gains you received as an investor. You would receive this from a broker, mutual fund company or other type of investment company. You may not have actually received dividend payments; check your account history, as you might be registered in a DRIP, or direct re-investment plan where dividends are invested back into the stock.

Unlike W-2s, which normally come in separate envelopes with nothing but a cover letter to obscure them from view, 1099s aren’t always so easy to find. Very often, instead of sending a 1099 in a separate envelope, a bank or brokerage may attach a tiny 1099 to the bottom of a fourth quarter statement, divided only from the actual statement by a faint perforation. Keep your eyes open!

Some internet-only banks, like ING, only provide 1099-INTs digitally. By now, you should have received an email from your online bank, telling you how and where to locate your online 1099. To avoid any kind of phishing scams, log into your online bank account directly (instead of clicking on any email links) to access 1099s as downloadable, printable PDFs.

If you haven’t received your 1099’s by the end of February (or your 1099-B or 1099-S by March 15th), contact the financial institution directly. If they do not respond to your inquiries in a timely manner, you have a few alternatives.

For most 1099s, if you can gather the information via another method (i.e., year-end statements for bank and brokerage accounts, copies of checks deposited as an independent contractor, etc.) and are reasonably sure that your own paperwork is accurate, substitute that to fill out your tax forms.

However, 1099-R forms must be attached to your tax return because they indicate when income tax has been withheld. If you can’t get anyone to help you acquire your 1099-R, call the IRS at 800-829-1040, as described above for W-2s, and they will send you a substitute form 4852 to use in lieu of an official 1099-R.

1098

1098s are not merely 1099s with low-self-esteem, nor have they sworn off carbs. This form, the Mortgage Interest Statement, reflects the interest you paid on your household mortgage, which is generally deductible on your federal taxes. If you paid more than $600 in mortgage interest last year, your mortgage holder should send you (and the IRS) a 1098.

Your 1098 doesn’t just reflect mortgage interest paid; it also delineates whether you paid PMI, or private mortgage insurance, which can be up to 100% deductible if your adjusted gross income is less than $100,000. (Check with your CPA; I’m just here to give organizing advice.)

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

If you have not yet received a 1098, don’t panic. You’re not required to send 1098s to the IRS with your return. However, it is important that you have accurate information to submit on your return. So, are you missing a:

–1098 for mortgage interest? Contact your mortgage holder by phone to request documentation of the mortgage interest you’ve paid; if possible, request that they fax the figures to you so you have something in writing right away. Email, however, is not a safe medium for transmitting documentation, especially as your file likely includes your Social Security number.

–1098-E for educational interest? Contact the lender or your school’s student aid office. Note that not all educational interest is deductible. (And if you have a campus ID card that can be used as a charge card, the interest you pay on a balance carried for late-night snack food is definitely not deductible.)

–1098-T for tuition paid? Contact your school’s administrative business office. If you (or your child) live on campus, an in-person visit will likely achieve quicker satisfaction than a phone call or fax, as ID can be verified more quickly and it’s harder for staffers to ignore someone hovering around their desk (vs. an email, fax or voicemail).

These are just a few of the informational forms that individuals are most likely to receive in support of completing tax returns. If your personal financial dealings are complex, you might find it useful to peruse this lengthy list and description of all tax-related forms…or hire a professional.

Next week, we’ll look in-depth at all the supporting materials (other than information return forms) that taxpayers should be collecting and organizing to help ease the strain of tax time…so you don’t find yourself sitting on a Corn Flake in the wee hours of April 15th.