Even though electronic tax filing season will begin January 20th this year, January 31 is the deadline for many of your “Important Tax Information” reports to be mailed to you. You may even have received some of them early. They truly are important for you, but they are a goldmine for identity thieves. That being said….get them out of your mailbox and into a safer place right away.
The reason we are getting them in the first place is that they are also important to the IRS. The IRS gets copies of these forms too. If you happen to forget to include income on your return, don’t worry, the IRS will certainly be contacting you.
A W-2 is the key form for employees. You need to report the wages you earned from each employer you worked for during the year. This form also reports the income taxes withheld from your earnings and other important information.
A 1099-MISC is the key form for independent contractors or business owners. Much like the W-2 for employees, this is the form that businesses report total yearly payments of $600 or more to workers who are not considered employees. If you think you are an employee and get a 1099-Misc instead of a W-2, I’d like to consult with you. If your business has taken the steps to become a corporation or partnership, you may receive a W-2 or a K-1.
Form K-1 is used by various entities to report earnings and other tax return related information. S-Corporations, Partnerships, Trusts and Estates use this form to “pass through” income and expenses to owners, partners and heirs. Your tax return cannot be completed until this K-1 is reviewed. If the business has filed an extension of time to file the business return, you may not get this form until close to, or even after, the April filing deadline for individual returns. If this is the case for you, you will need to file an extension for your individual tax return.
A W-2G is used to report Gambling Winnings. There are different reporting requirements depending on the type of game you won. Just because you were the WINNER does not mean you are ahead “of the game” and had a profit. It means you had a WIN. To avoid an IRS inquiry, report ALL gambling winnings, whether or not you received a W2G. Be sure to keep a log of your Gambling Activity. See my blog on Gambling Winnings and Losses for more information.
1099-G is issued by states when you receive a tax refund of state or local taxes. This refund may or may not be fully taxable to you. Consult with your tax advisor. A separate form of this same number will also report unemployment benefits paid to you. Unemployment benefits received are income taxable and must be reported on your tax return.
Next week we’ll cover more of the 1099 series of forms you need to watch for. We will also cover the newest of forms, the 1095A which has to do with the Affordable Care Act (Obamacare) and your MarketPlace Premium Discount.
The US Tax Code states all income is reportable except that which is specifically exempt from tax. Protect yourself from IRS audit by reporting all of your income.
0
I’m not talking vinyl music platters…I’m talking receipts. I’m talking about saving your business butt. I’m talking about saving your personal assets.
I was shocked when training with the Internal Revenue Service to find out that you (and me, too), the taxpayer, are considered GUILTY until you PROVE YOURSELF innocent. That was so against what I had grown up with in this great country of America, the land of Superman and Perry Mason.
Do you have what it takes to prove yourself innocent? How do you do that? Well, it’s very simple. It can also be considered boring drudgery, but it is your best defense. It’s called record keeping.
Did you know that thermal paper receipts will fade over time. It is guaranteed! That printed strip of paper showing the date, the place of purchase, the item purchased and the amount you paid is so clear when you first get it. But when you look at it later it has begun to fade. And if you need it to show the IRS one or two years later, it could be completely blank.
So how do you protect yourself with this paper that you need so badly? Put it in a copy machine and make a photocopy. Or scan it into your computer. If you have a paper copy, you will want a file folder or envelope or box to organize your papers. If you use a scanner, you will want to set up a folder on your computer so you know how to go back and find what you need later.
Is this necessary for everyone? Yes. If you own a business or are self-employed you have a business tax return to file. And every person who owns a business must also file a personal tax return.
It is important to keep your business records separate from your personal records. It is important to keep the records for one year separate from the records for another year.
Did you know that the biggest gangster in Chicago during the Roaring Twenties, the 1920s, did not go to jail for moonshining, or drug running, or gambling or prostitution? Elliott Ness of Untouchables fame, was really an IRS Agent. This famous gangster, Al Capone. went to jail for tax evasion. He did not keep track of his income and expenses. Or did he? He just didn’t put all of the right numbers on his tax return.
Years ago, on the 10pm TV news they used to say, “It’s 10 o’clock. Do you know where your children are?” And today I submit to you, It’s the last quarter of this year. Do you know what your numbers are? Do you know where that receipt is?
I’ll be asking my clients for all their numbers come tax season. Get a jump on it. Catch up on what you could have done earlier this year. I’ll be asking you for your true numbers and I want you to be ready. They are your best audit defense. 
