Preparing for Tax Season

Links and Show Notes

The IRS has a checklist here, https://www.irs.com/articles/tax-form-checklist.  The financial Website Investopedia has a great article and checklist to help you get prepared here:  https://www.investopedia.com/articles/pf/07/tax_prep.asp

if you are making Charitable contributions, here is a link to the IRS pamphlet

Common Informational IRS Forms:

W2 (Income earned, and taxes paid.  For an Employee)

1098 Mortgage Interest Statement

1098-C, E, T (Donations, student loan interest, and Tuition payments)

1099-Misc (Non-employee compensation)

1099-B (reports Gains or Losses on securities investments)

1099-R (IRA distributions)

1099 INT (Interest received)

1099-DIV (Dividend received)

1099-LTC (LTC benefits received)

5498 (IRA contributions)

 

  

 Contact Information

 Please feel free to send me questions by going to our website at www.bowmanfinancilastrategies.com and go to the Contact Us page or send me an email at [email protected].  Finally you can always reach us at 303-222-8034.

 

You're listening to Uncommon Cents podcast by bowman financial strategies. I'm your host, Erik Bowman, and thank you for joining me today.

00:34                                     Hi everyone. Thank you for joining me today for Uncommon Cents, episode one. My name is Eric Bowman and I am your host. Uncommon Cents is the financial education series by bowman financial strategies. Today's podcast is the inaugural episode of Uncommon Cents and I wanted to provide you a brief overview of what you can expect and how this podcast differs from its sister podcast mastering Mondays. Many of you may be familiar with mastering Mondays. It's a non-financial podcast discussing topics to help you live better in retirement, covering topics like health psychology, food travel, relationships, and hobbies, just to name a few Uncommon Cents by contrast is focused solely on financial topics with a focus on areas relevant to those that are near or at the transition from accumulation to distribution. Today we're talking about tax forms, just saying it makes every accountant get excited. Ooh, tell me more about my 10, 99 are please.

01:39                                     Today I'm going to review the most common forms that you will run across and some other basic tax preparation tips. Many of these forums are related to accounts I manage for my clients, so if you're a client you ever have questions about any tax form or need a copy from a current or prior year, please reach out to my office and we are glad to help. As you prepare for the 2018 tax filing season, you may find the following checklists helpful on the text and blog version. You can click on the active links they outlined, the forms you should be collecting in the coming months so you can successfully file your taxes. The IRS has a [email protected]/articles/tax-form-checklist. The financial website Investopedia has a great article and checklists to help you get prepared. It's located at www.investopedia.com/articles/pf/07/tax _prep.asp, and of course you can just click on it if you look in the notes section of the podcast,

02:58                                     now as many of you sit down at your computer to begin gathering documents in preparing for your tax appointment, I wanted to go over some of the common steps that can help make this process more efficient for you. Here's a summary of the action steps that you should be considering to prepare for tax season. Step one, schedule a time with your preparer so you can have an appointment prior to April 17th. This allows you to ensure that you can institute any tax savings actions prior to deadlines imposed by the IRS. If you use an accountant be early, they get very busy during the accounting season and the first folks in the door will get taken care of first. If you don't use an accountant, I recommend finding one unless you're taxes are extremely simple. Step to gather information. We're going to dig into many of the forms that you will be required to have as part of your tax filing process, so I'll be digging into that more a little bit later on.

04:02                                     Step three, gather receipts and charitable contribution information. In addition, if you are making charitable contributions and you believe their deductible, here's a link to an IRS pamphlet that details that type of substantiation. You may need to include your contribution as a deduction. Once again, you can find that link in our notes section of the podcast. Step four, gather all personal information like social security numbers for you and any dependents you will be filing for gather he ends if you happen to own a company or have one associated with a trust. In addition, a TIN, taxpayer identification number or your social security number may also be the number that's appropriate for the trust. Step five, gather last year's tax returns, particularly if you're using a new accountant they will need to see last year's, state and federal tax returns. Step six, go to your appointment and file your taxes. Now here's a quick list of forms I commonly see my clients receiving. You can click on the name of a form in the quick list, and it will take you to the Investopedia website where you will find the specific description of each forum. I also wrote a brief description of each form below as well as a slightly longer description and some unique circumstances that may apply to you.

05:26                                     Common Informational IRS forms. The first one is the [inaudible], which is based on income earned and taxes withheld. You would receive this forum if you are an employee of a company. Ten Ninety eight mortgage interest statement, the 10 98 c or the 10 98 e or the 10 98 t in order these cover donations, student loan interest and tuition payments, the 10 99. Miscellaneous shows, non employee compensation. Most people think of themselves as an independent contractor when they receive these forms, a 10 99 B, which reports gains and losses on securities and investments in non qualified accounts, a 10 99 r which shows IRA distributions the 1099 INT that shows interest received 10 99 dividend or d I v for dividends received 10 99 ltc which shows long-term care benefits received and the 5498 which shows IRA contributions.

06:40                                     Now some details on each of these forms. First, the w two, many of you are still working. Many of my clients are still working and very well. We'll be working potentially part time during the early part of retirement. If you are an employee of a company, you will receive your annual w two from each company you work for in that calendar year. This form is provided by your employer and per the IRS website. It reports the wages earned by employees and the taxes that were withheld from their paychecks. It also reports a social security tax, also known as the Federal Insurance Contributions Act, tax or FICA to the Social Security Administration. The FICA tax has two components, the social security portion and the Medicare portion, which are separately reported on tax form w two, you should receive these forms per current law by January 30. First, you may have multiple w two forms.

07:37                                     If you worked for more than one company in the calendar year and you should receive one from each employer. 10, 99. Miscellaneous. For those who are not w two employees but earn their income as independent contractors, you will receive a 1099 miscellaneous per the IRS tax form 1099-Misc is commonly used amongst self-employed professionals to report profits from services performed for other organizations. If you are a sole proprietor and were paid more than $600 for services during a given tax year, the business you work for is required to send tax form 10 99. Miscellaneous. The 10 99 are a common form that our clients will see each year. The 10 99 form is issued by the IRS and reports distributions from IRAs, annuities, profit sharing plans, insurance contracts, or pensions. The form must be mailed to the recipients by the custodian at the latest by January 30, first of the year after the distribution was made.

08:44                                     Now more on the 10 99 R and for my clients, you may see this form in three common scenarios, although all scenarios may not apply directly to you. One, the first common scenarios is when you make a distribution from an IRA. If you're taking the distribution during the normal course of retirement just to supplement your income called a normal distribution and it's used to cover expenses, for example, will those distributions will be taxable at your ordinary income tax rate and are reportable on a 1099 are so the account that you took your distribution from that custodian will be the entity that sends you the 10 99 are number two. If you perform a rollover or a qualified transfer of funds from one IRA or qualified plan to another IRA, that transaction is considered a distribution, although a nontaxable one if done correctly, and you will receive a 10, 99 are some of you to get specific about some of the strategies that we put in place at Bowman financial strategies may have a one America asset care three long-term care plan.

09:55                                     That specific strategy incorporates a qualified 20-year fixed annuity that pays annual distributions as premiums into a whole life policy with long-term care benefits each year. The 20 year fixed annuity will pay that premium through a distribution and that distribution will show up on a 10 99. Are each year the purpose of having the annuity payout over 20 years is simply to spread out your tax obligation over a 20 year period while still enjoying long-term care coverage immediately. The next form you may see as a 1099-DIV for dividends, and this is a form you received from banks and other financial institutions to report dividends and other distributions to taxpayers and to the IRS. The 10 99 int is sent to those taxpayers who receive interest income during the current tax year, such as that from a savings account. Ten Ninety nine LTC reports long-term care benefits received from a long-term care insurance policy. Just because you receive that 10 99 LTC does not necessarily mean that those long-term care benefits are taxable. You will want to check with your accountant and poor professional advisor the form 54 98 lists any contributions into IRAs during the calendar year. Depending on your situation. All or some of those contributions may be tax deductible. Once again, please confer with your tax professional.

11:32                                     Then there's also a 1098 series of forms, and in that series of forms we cover the mortgage interest statement where you will receive the 1098 mortgage interest statement documents showing how much you paid in interest on your mortgage during the previous calendar year. You may also receive a 10, 98 C or e or t as in tango, and these cover in order donations, student loan interest and tuition payments. These are just some of the highlights. They probably represent about 80 percent or more of the tax forms you should receive. However, your situation is unique and what applies to someone else may not apply to you, so be sure to get with an accountant professional to ensure you're not paying more in taxes than you need to with all of the tax changes in the last year. I believe it is wise to consider using an accountant speak with your accountant to determine how these tax forms will be used to calculate your taxes this year and you don't want to get sideways with the IRS.

12:40                                     I hope that this podcast helps you prepare and maybe get you started earlier than you otherwise would have to have a successful tax filing season. Thank you for joining me for Uncommon Cents, the Bowman Financial Strategies Financial Education series. I'd love to hear your feedback on financial topics you would like to learn more about. Just drop me an email at Eric that's [email protected], or go to the Bowman Financial Strategies' website and send me a note on our contact page. In addition, you can always search for topics of interest in my archive on our podcast page at www.bowmanfinancialstrategies.com/podcasts.

13:24                                     Have a great day.