All These Forms are Rather… Taxing

We all know the saying that nothing is certain in life except death and taxes, and I would certainly rather talk about taxes! It’s that time of year again – the IRS is now accepting returns and the worry about this year’s “damage” may have started to creep in. On the other side of the fence, tax preparers have bought up all the coffee pods and are kissing their loved ones goodbye as they hunker down for the busy season.

 You’re likely wondering which tax forms you’ll receive and where  they are - I believe that tax season needs more guiderails. A prescriptive approach to tackling your taxes, with or without the help of a tax preparer, will alleviate some of the stress of the season.

 A new year presents another opportunity to be intentional about making this process easier for yourself in the future. Think about making this the year that you update your document delivery preferences (digital or mail) for all tax documents! Also, go ahead and create a system for storing and tracking these documents each year – consider using a physical folder, a folder on your computer, or using the Vault on your Personal Financial Website to save everything in a secure place.

 Here are the basic steps to prepare to file:

1. Gather Tax Documents

Common documents you’ll need include W2’s, 1099’s (from your Investment and IRA accounts, Social Security Benefits, and your bank), and a 1098 from your mortgage lender. You may also have a 5498 for your IRA account but these are not required to file so don’t wait for the 5498.

 Less often you may need a 1098-E (student loan payments), 1095-A (Marketplace Health Plans), 1099-MISC (rental income, royalties, etc.), 1099-NEC (nonemployee compensation), 1099-Q (529 and ESA distributions), and K1’s (limited partnerships).

 These documents are generated and released at different times throughout the year, as shown below:

If you had TD Ameritrade accounts that were transitioned to Schwab last year, please expect two tax documents per account – one from TD Ameritrade and one from Schwab

2. Gather Supporting Documents

In addition to the formal tax reporting forms, you’ll want to gather the document necessary to calculate and support the deductions you may be claiming. Often, these are related to the “big three” deductions: medical, charitable, and state and local taxes (SALT). If you know you’ll be claiming the standard deduction in 2023, these documents are unnecessary. However, if you had a year with particularly high medical expenses or made larger charitable gifts, it’s worth reviewing your receipts.

3. Engage the Right Preparer

For some, the right preparer is themselves. If your taxes are traditionally simple and you feel like you possess the knowledge, time, and desire to file your own taxes – go ahead!  

 However, many of our clients have made the decision to engage a professional tax preparer, offloading much of the work and reducing the likelihood of errors. If you’re interested in working with a preparer for the first time or are interested in making a change, please let your WFA advisory team know. While many preparers have stopped taking new clients for the 2023 tax season, some are still accepting new clients and we’re happy to refer you to someone we trust.

 Written by Alex Richani, CFP®