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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 2020 tax returns.

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 the newly revised Form W-4 which indicates your filing status, whether your spouse also works (or whether you have more than one job), number and types of dependents, and other adjustments that could impact your withholding such as other income, itemized deductions, and additional withholding desired.

  • 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
    • If all or part of your distributions went directly to charity as qualified charitable distributions (QCDs); the distributions should be tax free but the 1099-R will not provide this information, so it is important to provide the QCD amount with any related 1099-R
  • Rental property income/expense—profit/loss statement, capital asset information
  • 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—Form 6252, principal and Interest collected during the year, SSN and address of payer
  • Other miscellaneous income—jury duty, gambling winnings, Health Savings Account (HSA) statements, 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
  • Student loan interest
  • Health Savings Account (HSA) contributions
  • Self-employed health insurance payments
  • Keogh, SEP, SIMPLE and other self-employed pension plan information
  • Alimony paid according to agreements executed prior to 2019
  • Educator expenses
  • In 2020, even if you don’t expect to itemize, charitable contribution information such as 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

 

Itemized tax deductions and credits:

While itemized deductions are 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
  • Medical and dental expenses (including miles driven)
  • Casualty and theft loss information if caused by a federally declared disaster
  • Education expense information (including Form 1099-Q related to 529 distributions)
  • Energy credit information
  • Amount of Economic Impact Payments received in 2020 (Notices 1444 and/or 1444-B)

 

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 payments made during the year, prior year refund applied to current year, and any amount paid with an extension to file

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Annex Wealth Management
12700 W. Bluemound Rd.
Suite 200
Elm Grove, WI 53122

Call: (262) 786-6363
Fax: (262) 792-8930

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