MoneyDo: Get Organized For Income Taxes
You’re probably already receiving tax documents from your employers, investments, and contractors, so you know what time it is – time to get yourself organized and prepared to file your 2019 tax return.
One easy way to keep yourself from being overwhelmed is to create a folder on your computer’s desktop – or a real folder on your real desktop or kitchen counter. As you get tax documents and collect information, you can put it inside as you prepare.
Personal information you’ll need –
- Social Security numbers and dates of birth for you, your spouse and your dependents.
- Copies of last year’s tax return for you and your spouse are helpful. (If you filed using one of the popular tax filing websites, they may have archived a copy for you online).
- Bank account number and routing number for making a payment or receiving a refund.
- Foreign bank account information—location, name of bank, account number, peak value of account during the year
As you start receiving information on your income sources, make sure you review your withholding. This would involve reviewing your payroll exemptions, and the rate you are using to have taxes withheld form IRA, pension, or social security income.
- We did discuss this in an earlier MoneyDo, but a review at this time of year – in light of any changes in your life or changes in taxes due to new laws or different income – is a wise habit to get into.
Information about your income you’ll need, if applicable:
- W-2 forms for you and your spouse
- Investment income—various forms 1099 (-INT, -DIV, -B, etc.), K-1s, stock option information
- Income from state and local income tax refunds and/or unemployment: forms 1099-G
- Alimony received from agreements executed before 2019
- Business or farming income—profit/loss statement, capital equipment information
- If you use your home for business—home size, office size, home expenses, office expenses.
- IRA/pension distributions—forms 1099-R
- Rental property income/expense—profit/loss statement
- Social Security benefits—forms SSA-1099
- Income from sales of property—original cost, cost of capital improvements, total amount depreciated, escrow closing statement, and cancelled debt information (form 1099-C)
- Prior year installment sale information—forms 6252, principal and Interest collected during the year, SSN and address of payer
- Other miscellaneous income—jury duty, gambling winnings, Health Savings Account (HSA), scholarships, etc.
Adjustments to your income:
This list refers to items or incidences that may help to reduce your taxable income, which in turn can increase your tax refund or lower the amount you owe.
- IRA contributions
- Energy credits
- Student loan interest
- Health Savings Account (HSA) contributions
- Self-employed health insurance payments
- Keogh, SEP, SIMPLE and other self-employed pension plans
- Alimony paid according to agreements executed prior to 2019
- Educator expenses
Itemized tax deductions and credits:
The Tax Cuts and Jobs Act made itemized deductions harder to claim, we still suggest compiling the following expenses:
- Child care costs—provider’s name, address, tax id, and amount paid
- Adoption costs—SSN of child, legal, medical, and transportation costs
- Home mortgage interest and points you paid—Forms 1098
- Investment interest expense
- Charitable donations—cash amounts and value of donated property, miles driven, and out-of-pocket expenses
- Be sure to have proper documentation from the charity prior to filing your return
- Medical and dental expenses
Taxes you’ve paid:
Keep track of the taxes you’ve already paid so you can prevent overpaying.
- State and local income taxes paid
- Real estate taxes paid
- Estimated tax payment made during the year, prior year refund applied to current year, and any amount paid with an extension to file.