Tax statements you’ll need to file your return

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January is not your mail carrier’s favorite time of the year.

In this tax tip
  • Common tax statements
  • Late-arriving forms
  • Schedule K-1
  • On arrival, check them!

Common income, deduction statements

Most taxpayers depend on the same basic data to file returns. If you work for someone else, the IRS expects you, and the agency, to get a statement detailing that income. The data are slightly different, depending on whether you get paid a salary or do contract work, but there’s a form for either case.

– This is the key form, and you need one from each employer you worked for during the past year. Your W-2 shows how much money you made, how much income tax was withheld, Social Security and Medicare taxes paid, and any benefit contributions — retirement plans, medical accounts and child care reimbursement plans.

– For most homeowners, mortgage interest is tax-deductible, and this document will tell you how much you paid last year. Your lender is required to send you one of these forms if you paid at least $600 interest. Actually, your mortgage company probably won’t send you an official Internal Revenue Service form, but a document of its own design that contains the same data. In addition to the mortgage interest, other information often found on this statement includes amounts paid toward points to get the loan and escrow disbursements for real estate taxes (also deductible) and property insurance (not deductible).

– Are you paying back a student loan? The interest on your educational debt is reported on this form; your lender must send you one if the interest tally is at least $600. You may be able to deduct your student loan interest and possibly other loan-related amounts, such as origination fees and capitalized interest. To figure the deductible portion of the interest amount found here, use the work sheet in your Form 1040 or Form 1040A instructions.

– If you earned more than $10 in interest on a bank account or a certificate of deposit, you’ll get one of these forms for each account. Don’t dismiss this statement if you reinvested the interest. Tax law says you received the income even if you didn’t actually have it in your hand, and reinvested earnings are still taxable income. 1099-INT statements also are issued to people who cashed in savings bonds.

– Earnings from individual stocks and mutual funds are reported on Form 1099-DIV. This will show dividends and capital gains distributed over $10. As with reinvested interest, if you used the dividends or distributions to buy additional shares of the stock or mutual fund, you still have to pay taxes.

Don’t be confused by capital gain distributions if you didn’t sell any of your stock or fund shares or if your investment lost value. Capital gain distributions are not connected to these considerations. Rather, these distributions come when a portfolio manager sells securities at a profit during the tax year. This profit then is passed on as distributions (usually at the end of the year) to all the individual fund shareholders proportionate to the amount of shares they own. Unfortunately, this means you may have to pay taxes regardless of whether your investment gained or lost in overall value.

The good thing about capital gains distributions and dividends is that, in most cases, they are eligible for the lower rates that apply to capital gains. Be sure to read the 1099-DIV and tax return instructions for guidance on how to report and figure taxes on the varying dividend and capital gains amounts.

– If you sold stocks, bonds or mutual funds, you will receive a 1099-B from your broker or mutual fund company. This will tell you the number of shares sold, when they sold and the amount you got for the sale. You’ll need this information, along with the date you bought the shares and the amount you paid for them, to figure your taxes.

– Taxpayers who got a refund of state or local taxes last year will get this form. If you used those taxes as a deduction on your previous year’s federal income tax return, you’ll need to report the 1099-G amount on this year’s return. You don’t have to worry about reporting this refund as income, however, if you took the standard federal deduction instead of itemizing.

If you were out of work for a while last year and collected unemployment, you’ll get a separate 1099-G showing those payments. Sorry, unemployment benefits are taxable income.

– If you received a pension or a distribution from an individual retirement account or retirement plan, the 1099-R provides the details of these transactions. The form is issued by your broker, pension plan manager or mutual fund company. You’ll also get a 1099-R if you rolled over money in a retirement plan, usually a 401(k) to an IRA, or if you converted a traditional IRA to a Roth IRA. A rollover usually is not a taxable event, but a pension payout may be.

– Self-employed individuals who earned $600 or more should get a 1099-MISC from the employer. You should get a separate 1099-MISC for each independent job you had during the previous tax year.

Late-arriving forms

There are a couple of statements you might need for your tax records, but because of the intricacies of the financial arrangements they cover, the documents do not always arrive before the April filing deadline.

Form 5498
– Any contributions made during the calendar year to any individual retirement accounts are reported on this form. The 5498 shows traditional IRA contributions that might be deductible on your tax return, as well as any rollovers, including a direct rollover to a traditional IRA, made during the last tax year. It also reports amounts recharacterized from one type of IRA to another. It notes any amounts converted from a traditional IRA, simplified employee pension or savings incentive match plan for employees to a Roth IRA.

Because these savings plans allow contributions up until the April 15 tax filing deadline, Form 5498s for these accounts aren’t due to taxpayers until May 31. You should, however, get a statement of each account’s fair market value in early February. You don’t need it to file your return, but keep it for your records. It will be helpful when you begin taking money out of these accounts and need to calculate any taxes.

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.

Schedule K-1

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.