Oh The Tax Blues

Stuck Inside of New England with Those Tax Blues Again*

Oh, the tax man draws circles

Up and down the block

I'd ask him what the matter was

But I know that he don't talk

And the ladies treat me kindly

And furnish me with red tape

But deep inside my heart

I know I can't escape

Oh, Mama, can this really be the end?

To be stuck inside of New England with the Tax Blues Again

Isn't putting together your tax return one of those things that you hate to do and put off and dread it worse than cleaning the garage? I bet you spend more time worrying about putting the information together than you do actually sitting down and putting together the information. I'm going to try and make it as simple as I can for you.

By the end of January your employer, mortgage company, investment institutions, and colleges are required to mail out the W-2s, 1098s, 1099s, Social Security Benefits, Unemployment Compensation, State Tax Refunds, & K-1s for you to prepare your tax return.  Please be aware that the IRS also gets a copy and later in the year matches them up to your tax return so it's important to have all the information so you don't get a not-so-friendly notice guaranteed to ruin your day.  As the first step, I suggest that you take a big envelope and stuff all this tax information inside when it is received so none of this information gets misplaced.  When you complete this step, you are more than half way done!

The W-2s, 1098s, and 1099s for the most part don't require additional information for tax preparation. One exception is the 1099 brokerage information upon selling securities.  When you sell stocks, bonds, etc. we have to determine the profit or loss on the sale and whether it's long or short term.  Sometimes it's on the brokerage year-end statement included with the 1099.  Often we have to have to contact your stockbroker or sometimes we have to go to your old records and occasionally we have to make the best guess.  If the purchase information is not included with the 1099, the easiest thing to do is to contact your broker and let them know your accountant will be calling them.  Let me add a word of caution. Capital gains are a little tricky and the biggest source of IRS notices. You may not want to attempt these yourself.

Usually on your 401k, 403A, Simple IRA, and SEP retirement plans we have all the information we need from your W-2s and 1099s but if you contribute to an individual IRA we will need those amounts. As a side note you have until April 15th to make an IRA contribution and the dollar limit is $5,000 if you are under 50 and $6,000 if 50 or over.

Get all those items together and you've just completed your income side of things.  I'll talk more about deductions in my next post.  This should keep you busy for a couple of days....

* Apologies to Bob Dylan