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Rose Hansen

Welcome to Selfmade Finance School, our new money series with Block Advisors to help small business owners with their tax, bookkeeping, and payroll needs year-round. This week, we break down 10+ common tax forms and what they mean for you. Oooohh how I love a good checklist! And what could […]

Welcome to Selfmade Finance School, our new money series with Block Advisors to help small business owners with their tax, bookkeeping, and payroll needs year-round. This week, we break down 10+ common tax forms and what they mean for you.

Oooohh how I love a good checklist! And what could possibly be more glamorous than a TAX CHECKLIST?!!? But before I start down this fun-filled path, I want to point out a few things worth noting. We all can agree that 2020 was epically weird. Along with that weirdness, we have to remember that there have been many tax code changes in 2020 that pertain to all types of things from loan forgiveness to IRA loans to student loan deferment. As I have been doing all along with this series, I would highly encourage you to consult with a Block Advisors tax pro if you are even remotely unsure of some of the funky 2020 tax changes. And with that, I present the Ultimate Tax Checklist:

Get Organized: This seems rather obvious, doesn’t it? But what does this actually mean? First create a physical folder for your tax forms that will come in the mail (if you file jointly, you and your partners should both know about this folder). For the forms that you can download electronically, you should park them in some kind of drop box so that they are all in the same place (again, share this drive with your partner).

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What To Look For In the Mail and Email:

There are all kinds of tax forms you need to accumulate from January until the time you file. Here is a decent, but not comprehensive, list:

W-2 — This is provided to you from your employer that includes your wages in the past year and your withholdings.

1099-NEC — This will be provided to you from any entity that has paid you $600 or more for independent contracting work done in the past year. You have likely filled out a W-9 prior to this form being sent out.

Tax forms from investments — This could come as a 1099-B (reports capital gains and losses); 1099-DIV (for dividends and capital gain distributions); 1099-INT (interest income); 1099-R (reports distributions from retirement accounts). Depending on your situation, there are some other 1099 forms that may also be provided. All of these forms are provided to you by your financial institution and usually roll out between January and mid-March. If you have multiple financial institutions or you changed institutions throughout the year, expect these forms to come from all institutions.

Mortgage Interest — This will be sent by your mortgage lender and will indicate how much mortgage interest you paid in 2020. NOTE: If you refinanced your mortgage in 2020, be on the lookout for forms from both lenders.

Gather Up Your Deductions:

If you run your own business, you should already have your deductions outlined. Deductions can range from things like payroll, to employee healthcare costs to printer paper. Some people prefer to use sophisticated software to help them track their deductions throughout the year so the expenses are readily available come tax time. If you don’t have software, build a spreadsheet and make sure you list the date of the transactions and the reason for the expense. This will be helpful if you are ever subject to an audit. It is helpful to run your expenses by a Block Advisors tax pro to make sure it’s a legitimate write-off. Also, you should make a list of all of your charitable deductions as well. Other deductions can include things like medical and dental expenses and state and local income taxes. Again, if this is overwhelming, get help.

“Tracking your expenses and knowing if they qualify for a deduction takes time and expertise. Especially in this changing environment, you need to know what’s allowable and where you might be missing out on a valuable deduction for your business,” said Cathi Reed, Block Advisors Regional Director. “Business owners know the burden of paperwork and staying up-to-date. Luckily, working with a Block Advisors small business certified tax pro means you have an experienced partner who knows the details inside and out and can take the heavy lifting off your plate.”

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Special Forms for Business Owners:

Form 1120S — If you run an S-Corp, you will fill out IRS Form 1120S for your business income tax return. This informs the IRS of your total taxable earnings in a tax year and will be used to determine an S-Corp’s business’ income, gains, losses, tax credits, and deductions.

Form 1065 — If you run a partnership, you will file one partnership return for information purposes on Form 1065. In fact, one partner is designated to sign on behalf of the partnership. Each partner will then report their share of the partnership income and deductions individually on their Form 1040.

K-1 — This is issued to partners and S corporation shareholders to show your taxable information as part of a business partnership or S corporation. This means that if the business has income, deductions, credits to “pass through” to you, you’ll likely receive a K-1 to report this info on your own tax return. Keep in mind that K-1s can often be delayed which could cause a delay in filing. If you are due to receive a K-1, find out the timeline as it may make sense to file an extension.

Form 4562 — If you’ve acquired or bought real or tangible property used for business purposes, you will file IRS Form 4562 which is the depreciation and amortization form. If you are claiming a deduction for amortization or depreciation, making an election to expense business property, claiming bonus depreciation, or providing information to the IRS about the business use of automobiles or other listed property, you need Form 4562.

The IRS loves forms. The above list, by no means, should act as a comprehensive list so make sure to engage with a tax professional to make sure you have the correct forms to meet your personal and business needs.

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regards to your individual situation. Comments concerning the past performance are not intended to be forward looking and should not be viewed as an indication of future results. Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. O’Keeffe Financial Partners and any other entity listed herein is not affiliated with Kestra IS or Kestra AS Investor Disclosures:

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