Happy New Year, the countdown to April 15 has begun, and it’s time to start collecting information and documents for your returns. There are many moving parts to federal taxes, and income can come from a wide variety of sources. Here is what you need to collect:
By the end of January, many of your income sources are required to send or otherwise provide you with a formal record of the income you generated from them. Employers will send a W-2, and many other sources will send one of the many types of 1099. Look out for a new and changed 1099 forms this year, with slightly different reporting of income. Finally, if you have an ownership interest in certain types of companies, you will receive a K-1 to report that income.
Sources of Income
Income is more than your wages. Any retirement pay or unemployment compensation counts as income. For interest earnings, most sources, like banks, investment and retirement accounts, will provide a form, but you should make sure to double check the accuracy. In addition, you will need to report capital gains from sale of property (e.g. your home, stocks, etc.). Finally, don’t forget that gambling winnings (including lottery) are taxable.
Look out for Hidden Income
If the past year has included a transaction that involves money, check with your accountant to make sure you are reporting it accurately. For example, loans, particularly between family members may have income tax implications. In addition, beware of the myth that you don’t need to report or pay taxes on income of less than $600. Even though these lower amounts may not generate a form from the source, the source will be reporting the expense, so it can be traced.
At the McGruder Group, we provide our clients with a detailed list of possible income sources that need to be reported. If you have any questions, or you want to get started on your tax preparation, contact us today.