With April 15th approaching, it is that time of year when you gather your files to find the documents needed to file your taxes. Additionally, financial, educational, and other institutions are sending out tax forms of their own that you will need. You might feel overwhelmed by the volume of documents to collect or need help navigating what paperwork is relevant for filing your taxes. Fear not! Below, we walk you through some common instances that trigger tax considerations and the documents needed to tackle your taxes with confidence.
Income-Related Documents to Collect
If you received a salary or wages as an employee... your employer should have given you a Form W-2. This form shows how much income you earned for the year from that employer and how much taxes were withheld from your paycheck.
If you received income as an independent contractor or self-employed individual... collect your 1099 forms. Depending on the entity structure of the business and in what capacity you worked, there may be different 1099 forms to collect (i.e., 1099-NEC, 1099-MISC, 1099-K, etc.). Also, be sure to gather documentation of all income and expenses related to business activities. If you have questions about which forms relate to you, talk to a financial advisor, tax preparer, or your company's human resources department.
If you have taxable investment accounts and/or interest-bearing accounts (checking or savings account, high-yield savings account, etc.)... and there was activity in that account over a certain minimum amount, the financial institution will issue a consolidated (or composite) 1099 tax form. This usually includes Forms 1099-DIV, 1099-B, and 1099-INT. Depending on the holdings in your investment account, you may also receive a 'Corrected 1099' later on before taxes are due. Additionally, if you received an inheritance or your spouse passed away in 2023, it may be a good idea to verify that your cost basis and holding period details are accurate.
If you made any withdrawals from your retirement account(s) and/or insurance policy... the financial institution or insurance company will send you a Form 1099-R, which you will need to collect for your taxes. Also, inform your tax preparer of any special circumstances (e.g., penalty exceptions for early retirement plan withdrawals, insurance policy exchanges, etc.)
If you performed a direct or indirect rollover of funds from an employer retirement plan (401(k), 403(b), 457, etc.) to a different retirement account... the plan administrator for the employer retirement plan will send you a Form 1099-R. You will need this for your tax return.
If you did a Roth conversion... you will be issued a Form 1099-R by the financial institution. Be sure to save that for your taxes.
If you received retirement income from a pension, annuity, or Social Security... collect Form 1099-R for pensions and annuities and SSA-1099 for Social Security. These tax forms list the income received and any withholdings and will need to be reported on your tax return.
If you received or exercised equity compensation... depending on the type of equity compensation you receive through your employer, you may receive a Form 3921 and/or 3922. It may also be reported on your W-2. You will want to collect any documents related to your equity compensation and be mindful of any adjustments that may need to be made (cost basis adjustment, employee discounts, holding period requirements, etc.).
If you sold a house or other real estate... depending on your situation, you may need to gather your Form 1099-S. Talk to your tax preparer to see if this applies to you. Also, collect any documentation of your cost basis (i.e., purchase/sale statements, receipts from previous improvements, depreciation claimed, etc.). It is also good to talk to your tax preparer about exclusions that may apply to you based on your ownership and property usage.
If you received alimony from a divorce finalized before 2019... divorce decrees finalized on or before 12/31/2018 have special tax treatment compared to those finalized after that date. For divorces in 2018 or earlier, alimony received from a former spouse is included in your overall income for tax purposes. Be sure to collect documents that outline relevant details (i.e., alimony received, date of the divorce agreement, etc.).
If you received money from any other sources not listed above (i.e., gambling winnings, unemployment compensation, jury duty pay, etc.)... be sure to gather any relevant tax forms and other details that may apply. You can find a more comprehensive list of additional sources of income on IRS Schedule 1, Part 1.
Documents Needed to Maximize Your Deductions
If you have a mortgage, home equity loan, or home equity line of credit (HELOC)... your mortgage lender will send you a Form 1098 Mortgage Interest Statement. Be mindful that there are limitations on these deductions, which you can read more about on the IRS page for the Home Mortgage Interest Deduction.
If you paid interest on qualified student loans... you may be able to deduct some or all of the student loan interest you paid. Your student loan company should issue you a Form 1098-E if you paid more than $600 in interest for that year.
If you paid significant medical expenses... depending on how much you paid, it may be enough to make it worthwhile to itemize your deductions rather than claim the standard deduction. However, the total amount of medical expenses must exceed 7.5% of your adjusted gross income.
If you are self-employed or an independent contractor... gather any documents related to deductible business expenses (i.e., home office use, vehicle use, health insurance premiums, business insurance, office supplies, etc.).
If you contributed to a retirement plan (i.e., 401(k), 403(b), 457, IRA, etc.) or other tax-advantaged accounts (i.e., health savings account, flexible spending account, 529, etc.)... collect any documentation that outlines contributions you made to these accounts. Also, if you made excess contributions to any of these accounts, be aware of any deadlines to remove those funds to avoid penalties.
If you made charitable donations... have with you any information about the donations, including valuation details for non-cash gifts.
If you itemize your deductions and paid state and/or local taxes... the SALT (State and Local Tax) deduction allows you to deduct certain state and local taxes up to $10,000.
If you paid alimony from a divorce finalized before 2019... divorce decrees finalized on or before 12/31/2018 have special tax treatment compared to those finalized after that date. For divorces in 2018 or earlier, alimony paid to a former spouse can be deducted. Be sure to collect documents that outline relevant details (i.e., alimony received, date of the divorce agreement, etc.) as well as the alimony recipient's social security number.
If you are wondering about other adjustments to your income that are available... check out a more comprehensive list on IRS Schedule 1, Part 2.
Documents Needed to Take Advantage of Potential Tax Credits
If you have children or other dependents... gather relevant information to substantiate the costs paid for the dependent (i.e., childcare, education, adoption expenses, etc.). To learn more about this credit, check out the IRS page on the Child Tax Credit. The IRS also has an interactive tax assistant questionnaire to help determine if a dependent qualifies for the child tax credit or the credit for other dependents.
If you made estimated tax payments or applied a tax overpayment from your 2022 tax return to this year's tax liability... gather the documents demonstrating your payments made. If you made payments online, the IRS and/or state tax agency will typically send you a confirmation/receipt to your email.
If you, your spouse, or your dependents incurred qualified education expenses... collect Form 1098-T (if you made tuition payments to an education institution), 1099-Q (if you paid for school expenses from a 529 plan), receipts, etc.
If you purchased an electric vehicle (EV) in 2023... you may qualify for a clean vehicle tax credit of up to $7,500. The vehicle must be a qualified plug-in EV or fuel cell electric vehicle (FCV). To see what vehicles qualify, the maximum your modified adjusted gross income can be, the maximum manufacturer-suggested retail price (MSRP) of the vehicle, and more, check out the IRS page on Credits for new clean vehicles purchased in 2023 or after. Upon buying the EV, the seller should have provided you documentation with specific information about the vehicle. Be sure to have this documentation with you when preparing your taxes.
If you made energy-efficient improvements to your home... you may qualify for a tax credit of up to $3,200. If so, gather all relevant documentation (i.e., receipts, reports, certifications, etc.). To see a list of qualified expenses and credit amounts, check out the IRS page on Energy Efficient Home Improvement Credit.
If you believe there may be other credits you qualify for... check the IRS page on credits and deductions for individuals and collect any relevant details and documents needed for those credits.
Other Things to Consider
If you own a rental property... record the time spent on rental activities. Also, collect details about income received and expenses related to the rental property.
If you own a business... be mindful of any business tax returns you need to file, and gather the relevant income and expense reports to complete those tax returns.
If you made a gift above the annual gift exclusion amount ($17,000 for 2023)... talk with your tax preparer about any gift tax reporting requirements, as well as any elections you can make to reduce that gift tax liability (i.e., gift-splitting, super funding a 529 plan, etc.).
If you made a qualified charitable distribution (QCD) from your IRA... gather some form of acknowledgment from the charitable organization showing that they received your donation, as well as the 1099-R you received from your financial institution showing the distribution from your IRA.
If you own any business partnerships, master limited partnerships (MLPs), have an interest in LLCs or S corporations, or received money from an estate or irrevocable trust... certain entities and partnerships issue K-1 tax forms, which report any amounts that are passed onto any party that has an interest in the entity. Depending on the entity, the tax form may include income, losses, deductions, and credits that the taxpayer is responsible for reporting on their personal tax return. Note that since K-1s typically need to be received by March 15th, these forms have a tendency to arrive late and can be one of the last tax documents you receive.
If you have a Solo 401(k) with a balance of $250,000 or more as of 12/31/2023... gather the December monthly statement from the financial institution holding your Solo 401(k) and talk to your tax preparer about whether you need to file Form 5500-EZ.
If you have any other complicated tax considerations or state-specific tax issues talk with your financial advisor and tax preparer about what documents you need to collect.
If you need help with tax planning for future years or are looking for a financial advisor to help you with other financial planning matters, check us out! You can schedule a complimentary, no-obligation call with us here.
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About the Author
Holzberg Wealth Management is a family-owned and operated financial planning and investment management firm based in Marin County, CA. As your financial advisors, we serve you as a fiduciary and are fee-only, so we never receive commissions of any kind. We help individuals and families like you in the greater San Francisco Bay Area and virtually nationwide with the financial decision-making process to organize, grow, and protect your assets.
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