TAX TIP No. 17
Be on the lookout for these tax statements
Contributions to Coverdell education savings accounts, formerly known as Education IRAs, previously were reported on Form 5498,
but these plans now have their own statement: Form 5498-ESA. The youngster named as account beneficiary should get a copy of this document by April 30.
Finally, if you received 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 arrangements, account managers tend to send out K-1s later in the tax season -- sometimes not until after the April filing deadline.
Because you do need to know this amount of K-1 income to file your return, consider getting IRS Form 4868, Application for Automatic Extension of Time to File. Filing this form, along with any tax you estimate you might owe, will give you six more months to get all your tax statements in hand.
When they arrive, check them!
As your various tax statements come in, don't just stuff them in a drawer and forget them until April. Take a few minutes to look over all your tax forms as you get them. This will give you an idea of what your tax liability -- or refund -- will be, and you'll be reassured that you're getting all the right information you need to complete your return.
You also need to check for errors as soon as the forms arrive so you can get them corrected in plenty of tax-filing time.
If a W-2 or 1099 statement is wrong -- erroneous income, more interest on a savings account than was actually received, a pension payout listed as taxable when it shouldn't be -- you'll need to contact the form issuer and get the information corrected as soon as possible.
Just as important, make sure they send you -- and the IRS -- a copy of the corrected document. Without it, any IRS questions on your tax return could result in post-filing headaches.
If you file your return without getting the updated tax statement and enter information different from that on the tax statement, you'll hear from the IRS, even though your number is correct. This is because the IRS gets copies of all your tax statements and uses them to routinely cross-check your tax return entries. The IRS is going to rely on the only documentation it has, even if it contains bad information.
Don't forget to double-check your Social Security number on each statement. Making sure this number is correct is crucial, not only to your current tax filing but also to your future retirement income. Social Security retirement, disability or survivors' benefits are based on your earnings. If what you make isn't credited to your personal Social Security account because your identification number is wrong, you could be shortchanged when time comes to collect those payments.
Finally, make sure you are getting all of the necessary documents. If you've signed up to have your financial information sent electronically, double check your e-mail box, not just the curbside one.
|-- Updated: Jan. 28, 2009