We get it. Tax time is stressful. But you know what can make it even more taxing, for you and your preparer? Forgetting to bring along all the documents you’ll need to file.
Tax docs that arrive late or go missing in action represent the fourth-largest concern among enrolled tax agents, according to a new survey of such preparers by the National Association of Enrolled Agents (NAEA). Enrolled tax agents are tax pros that the government authorizes to represent people in matters before the IRS, like audits and appeals.
The survey uses the word “forget” to allow for all the many reasons why a document is not filed, says Robert Kerr, executive vice president of the NAEA. The biggie: Many people just aren’t great record-keepers.
Specialized tax forms can also trip people up, especially if it’s the first time you have to handle that doc. “It’s a new form for them, so they don’t know what do with it,” Kerr says. “In some cases, the form is late and the client is early.”
OK, but how big a deal is it to file without a forgotten document?
That depends on what you’ve forgotten, how much money is involved, and other elements of your tax situation. Potential consequences could include facing an audit, incurring penalties or fines, or having to file an amended return. Or you could just miss out on claiming a valuable break.
Take a look at some of the documents tax agents say tax filers are most apt to forget—and whether omitting them could actually hurt you.
1. Form 1099
If you’ve ever earned income outside a 9-to-5 job, you’ve probably encountered a 1099. There are several flavors of 1099s taxpayers could receive, says Kerr.
Here’s the simple reason you could lose track of a 1099: You might not actually have it. Businesses are only required to issue you a 1099 if they have paid you more than $600. But you’re still required to report the income.
The IRS automatically gets a copy of every 1099, says Kerr. If there is a difference between the figures you file in your return and those the IRS has on hand, you’ll likely run into trouble. Expect the IRS to reach out with questions.
2. Form 1098
Like 1099s, there are several types of 1098 forms you might receive, says Amy Wang, senior manager of tax policy and advocacy for the American Institute of CPAs. For example, if there’s a college student in the family, you can expect a Form 1098-T for tuition statements. Other versions detail interest paid toward student loans and mortgages.
You’ll need those docs to claim associated tax breaks. So that 1098-T for tuition determines eligibility for education tax incentives including lifetime learning credit, tuition/fee deductions, and the American opportunity credit, says Wang. If you’re repaying student loans, that statement is key for a tax deduction of up to $2,500 in interest paid.
“Not all forms from the IRS can be harmful to you,” she says. “Most can be helpful.”
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3. Proof of Health Insurance
To prove you had health coverage throughout 2018, the IRS requires you to provide a Form 1095. (Depending on your coverage, your insurer or your employer might be sending you this form.)
But there’s good news here for those who forget. Under the new tax law, taxpayers are no longer penalized for not having health coverage, Kerr says. The form is for informational purposes. Still, tax agents would rather have the document at the time you file.
4. Proof of Charitable Contributions
If you’ve made donations to charity—cash or noncash—you may be able to deduct it from your taxes. You’ll need a receipt for proof of gifts worth $250 or more.
But there’s a catch. You can only claim charitable donations if you’re itemizing—meaning you have deductions that add up to be more valuable than the standard deduction. That’s less likely under the new tax rules. If you are taking the standard deduction, forgetting your file of donation receipts won’t make a difference.
“If you are itemizing and you forget one of your check contributions or credit card contributions,” says Kerr, “it has a direct impact on your taxes and a direct impact on your refund or balance due.”
5. Form W-2
You won’t get far on filing your taxes without your W-2, says Kerr. (That could be why only 3 percent of filers fail to provide a copy to their preparer.) Every employee receives this key document to track income for the year as well as taxes and other payments withheld, like Social Security and Medicare.
If you are ever questioning which tax-related documents to keep or throw away, Kerr says to err on the side of keeping an item. It’s better to bring your tax agent more documents you may not need, than to forget a key form.
March 20, 2019