Checklists for Tax Day

The basic steps for preparing taxes ahead of Tax Day, whether you’re still working or retired, should include:

1. Gather all necessary tax documents, such as W-2s and 1099s
2. Determine your filing status and exemptions
3. Ensure that you have the necessary forms and supporting documents for any deductions or credits you plan to claim
4. Input all data and answer the necessary questions in the tax software you use
5. Alternatively, schedule time with a tax professional to prepare your return
6. Double-check your return for accuracy before submitting it
7. Make sure that you submit your return by the deadline to avoid penalties (or file a request for extension prior to Tax Day)

Being granted an extension for filing your taxes does not actually delay when your tax payment is due. If you would have owed $15,000 in taxes had you completed and filed your taxes, you still owe that $15,000 by tax day. The IRS suggests you estimate your tax and pay it to avoid penalties. Delayed payment (regardless of whether your filing extension was granted) will result in late penalties and interest.  

Forms

Every tax filer’s situation is unique to their income, losses, deductible expenses and potential tax credits. However, there are a handful of particularly common forms you may need for completing your taxes. These often include:

Form W-2: Provided by your employer and shows the wages you earned, and the taxes withheld from your pay.

Form 1099: Provided by various payers, such as banks, investment firms or contract employers. A 1099 should show the amount of income you received from them. There are several types of 1099 forms, for example, 1099-INT for interest income, 1099-DIV for dividend income, 1099-MISC for miscellaneous income, etc.

Form 1098: Provided by your mortgage lender and shows the amount of interest you paid on your mortgage during the year.

Form 1095: Provided by your health insurance provider. Shows the months you had health insurance coverage during the year.

Schedule A: Used to itemize your deductions, such as charitable contributions, state and local taxes and home mortgage interest.

Schedule C: Used by self-employed individuals to report business income and expenses.

Schedule E: Used to report rental income and expenses. This form may be particularly important for retirees who are relying on rental properties for supplemental income in retirement.

Form 8880: Used to claim the credit for retirement savings contributions.

Receipts and Other Documentation

The documentation you need to provide to the IRS to justify tax deductions or credits will vary depending on the specific deduction or credit you are claiming. Some common types of documentation that may be required include:

• Invoices
• Receipts
• Cancelled checks (vital for confirming expenses and charitable contributions were real)
• Proof of payment documents for property taxes

In many cases, the documentation and level of evidence you need will vary based on your situation and the level of scrutiny your deductions or credits receive. You may not need additional context if you’re not being audited or there aren’t questions about your eligibility to receive the tax credits or deductions you claim.

However, it’s a good idea to have those documents at hand in the event you are audited. The burden of proof is always on you – the taxpayer (or business) claiming the deduction.

Receipts or cancelled checks aren’t necessarily all the IRS will want to see. You may need to show proof of things like material improvements, casualty losses or depreciation.

This type of documentation will not be relevant to every retiree, but those with certain types of supplemental income (like owning and operating rental properties) might require additional documentation and evidence to justify deductions for rental management expenses.

Looking for Ways to Simplify Your Taxes in Retirement?

There’s something to be said for having a straightforward job where you get a W-2 and take the standard deduction. It makes filing taxes far simpler and more affordable (especially if you can use low-cost tax software).

Retirees are eligible for a variety of deductions and credits that may not be available to workers. It’s not uncommon for your taxes to get more complicated in retirement, especially if you’re beginning to itemize, which is why many retirees consult with experienced tax preparers and financial planners.

If you’re looking for tax planning help, contact Fullerton Financial Planning at (623) 974-0300.