Tips About Tax Forms: In this video and in the article below, Philip Herzberg, CFP, CTFA, AEP with Team Hewins offers tips for filing tax forms: Form 1099, 1099r, QCDs, RMDs, Rollovers, Distributions, Form 5498,Form W-4, traditional IRAs. Roth IRAs, and Simple IRAs are discussed.

Article: Must-Know Tax Tips About Four Tax Forms

by Philip Herzberg

Before it’s time to file your taxes, it’s time to gather all the information you need to prepare your return. The 2021 tax reporting season is upon us!

Here are essential planning insights for the following key tax forms:

Form 1099-R. At year-end, your Individual Retirement Account (IRA) custodian or provider issues Form 1099-R, which reports the amount of money you withdrew from your retirement, pension, or annuity accounts in 2021. If you made IRA Qualified Charitable Distributions (QCDs) or gifts directly to qualified charities, they will also be included in the 1099-R totals. Be sure you notify your qualified tax preparer of the details of any QCDs from your account. IRA Custodians are not required to identify transactions as QCDs on the annual 1099-R form, and it may be reported as an RMD. Even though qualifying gifts made directly to charity from your IRA are reported on your return, they will be excluded from your taxable income.

Form 5498. You should expect to receive Form 5498, which is an informational return sent by your IRA account custodian to the IRS, only if you made contributions or rolled funds into a Traditional, Roth, SEP, or SIMPLE IRA in the preceding tax year. Although Form 5498 contains important information that you should review carefully for accuracy, you do not need to file the form with your taxes or do anything with it.

Be mindful that this form cannot be generated until after April 18th, since you have until the upcoming April 18th tax filing deadline to finalize new contributions to your Traditional or Roth IRA. Similarly, if you did a Roth conversion in 2021 and moved funds from your Traditional to your Roth IRA, you will be receiving a separate Form 5498 after April 18th reporting this transaction. Note that Form 5498 reports total contributions to your SIMPLE IRA account, whether funded with employee or employer contributions.

Form 1099. Form 1099 reports income, dividends, and gains and losses into many separate categories. You can expect to receive your initial Form 1099 around mid-February. Late or corrected 1099s frequently occur when companies and funds reclassify income. It is not convenient but often unavoidable. As companies close their books after 2021 year-end, income and gains can get shifted from one category or quarter to another, altering your Form 1099 totals. If you own securities that tend to generate corrected 1099s, you should seek the guidance of your qualified tax professional about whether you should hold off on your final return until closer to the filing deadline.

The beginning of the year, especially when filing your taxes, is a pivotal opportunity to review your current year’s withholdings. Workers can adjust how much employers withhold from each paycheck for federal and state taxes by completing an updated Form W-4.

Some of the common reasons to adjust tax withholding may include family changes, such as marriage, divorce, or having children. Starting a side business or second job may lead to higher tax levies. You may consider increasing the withholding at your primary workplace to cover the projected difference in taxes. Similarly, retirees receiving income from Social Security, pension, or retirement accounts may need to think about increasing withholding amounts or quarterly estimated payments to avert an unexpected tax bill.

About the author: Philip Herzberg, CFP®, CTFA, AEP® is a Lead Financial Advisor at Team Hewins, a wealth management firm with offices in South Florida and the San Francisco Bay Area.

For more free videos to help you with tax planning, please visit the finStream Tax Planning Center at this link: https://www.finstream.tv/videos/tax-planning/