What to Know About Tax Prep

The IRS is offering some help to taxpayers in getting organized so the filing season can be as easy as possible for everyone. “Having all needed documents on hand before taxpayers prepare their return helps them file it completely and accurately,” says the IRS. This includes:

  • Forms W-2. Each employer you worked for must send this to you.
  • Forms 1099 from banks, issuing agencies, and other payers including unemployment compensation, dividends, and distributions from a pension, annuity, or retirement plan.
  • 1099-MISC or another income statement for workers in the gig economy. Note especially the new Form 1099-NEC, used for freelancers.
  • Form 1099-INT for interest received.
  • Other income documents and records of virtual currency transactions.
  • Form 1098 for mortgage interest paid.
  • Schedule K-1s received.

These documents are about more than checking boxes. Income documents can help you determine whether you’re eligible for deductions or credits. For example, people who need to reconcile their advance payments of the child tax credit and premium tax credit will need their related 2021 information.

Other documents you may need include:

  • Letter 6419, 2021 Total Advance Child Tax Credit Payments, to reconcile advance child tax credit payments.
  • Letter 6475, Your 2021 Economic Impact Payment, to determine eligibility to claim the recovery rebate credit.
  • Form 1095-A, Health Insurance Marketplace Statement, to reconcile advance premium tax credits for marketplace coverage.

Tidy up other areas

In addition to gathering papers, now is a good time to confirm mailing and email addresses and report name changes. Make sure that each employer, bank, and other payer has your current mailing address or email address.

You can report address changes by completing Form 8822, Change of Address, and sending it to the IRS. If you have moved, you should also notify the postal service to forward your mail by going online at USPS.com or visiting your local post office. Also, notify the Social Security Administration of a legal name change.

Review proper tax withholding

Taxpayers may want to consider adjusting their withholding if they owed taxes or received a large refund in 2021. Changing withholding can help individuals avoid a tax bill or let them keep more money each payday. Life changes—getting married or divorced, welcoming a child or taking on a second job—may also be reasons to change withholding. Taxpayers might think about completing a new Form W-4, Employee’s Withholding Certificate, each year and when personal or financial situations change. Also, you may want to fill out an equivalent state withholding form, depending on where you live.

If you received a substantial amount of nonwage income like self-employment income, investment income, taxable Social Security benefits and, in some instances, pension and annuity income, you should make quarterly estimated tax payments.

Work with your R&A advisor so when you sit down to go over your return, everything proceeds as smoothly as possible. And, to ensure the smoothest tax preparation process possible, we strongly advise our clients to prepare and submit paperwork as early as possible.

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About this Author

Adam specializes in international tax planning and analysis. Since 2012 he has coordinated offshore compliance submissions, international tax training relating to foreign pension plans, foreign investment in US property, and general foreign compliance. In addition, in conjunction with legal counsel, he assists international families regarding planning, entity structure, and transaction analysis.