With Tax Season among us, The Internal Revenue Service is reminding taxpayers that organizing tax records is an important first step for getting ready to prepare and file their 2020 tax return.
Taxpayers should keep all necessary records, such as W-2s, 1099s, receipts, canceled checks, mortgage statements, and other documents that support an item of income, or a deduction or credit, appearing on their tax return.
Taxpayers should develop a system that keeps all their important information together, which could include a software program for electronic records or a filing cabinet for paper documents in labeled folders. Having records readily at hand makes preparing a tax return easier.
To avoid refund delays, taxpayers should be sure to gather all year-end income documents so they can file a complete and accurate 2020 tax return.
Most taxpayers will receive income documents near the end of January including:
- Forms W-2, Wage and Tax Statement
- Form 1099-MISC, Miscellaneous Income
- Form 1099-INT, Interest Income
- Form 1099-NEC, Nonemployee Compensation
- Form 1099-G, Certain Government Payments; like unemployment compensation or state tax refund
- Form 1095-A, Health Insurance Marketplace Statements
Remember unemployment compensation is taxable
Millions of Americans received unemployment compensation in 2020, many of them for the first time. This compensation is taxable and must be included as gross income on their tax return.
Taxpayers can expect to receive a Form 1099-G showing their unemployment income. Taxpayers can elect to have federal taxes withheld from their unemployment benefits or make estimated tax payments, but many do not take these options. In that case, taxes on those benefits will be paid when the 2020 tax return is filed. Therefore, taxpayers who did not have tax withheld from their payments may see a smaller refund than expected or even have a tax bill.
Individuals who receive a Form 1099-G for unemployment compensation they did not receive should contact their state tax agency and request a corrected Form 1099-G. States should not issue Forms 1099-Gs to taxpayers they know to be victims of identity theft involving unemployment compensation.
Taxpayers who are victims of identity theft involving unemployment compensation should not file an identity theft affidavit with the IRS.
Why to file with an Accountant
The best way to file a complete and accurate return is finding a trusted tax professional. They can help navigate your tax return seamlessly and help you maximize the most out of your tax return. Our trusted experts at Loeffler Financial Group continually take courses and seminars to learn the ever changes tax laws. Covid-19 and the vast amount of unemployment has made this years tax filing a little more tricky. Loeffler Financial Group is here for you for all your financial needs and will help educate you on your individual or business circumstances and needs.
Book your virtual appointment today, or take advantage of our contactless drop-off services we offer!
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