Are you beginning to think about your tax preparation and what you need to submit to your CPA in order to file your tax return? Today I wanted to discuss a few things to make sure you’re considering when gathering all of your information.
Number one: most income you receive is taxable. This includes wages paid on your W2 and compensation paid as an independent contractor on form 1099. Any unemployment benefits you received, some annuity or insurance payments that you may have received, Social Security benefits or interest dividends or capital gains from brokerage accounts.
Number two: as I mentioned 1099, I wanted to make you aware that you may receive a new 1099 form this coming year. the 1099-NEC for non-employee compensation is what used to be reported on the 1099-MISC box seven for work performed by an individual who is not an employee.
The IRS has now separated out the forms 1099 into two forms; one for the non-employee compensation and one for other things such as legal payments or rent. So you might receive this new form and need that for your tax prep as well.
Number three: you might have received notice 1444. If you had an economic impact payment from the government due to the Cares Act that was passed in 2020, you’ll need to show this to your CPA. Anyone who did not receive an economic impact payment may be eligible for a recovery credit on their tax return. So it’s important to know if you qualify or not using this document.
It’s also important if you file with an ITIN number to know if it is still valid, or if it’s expired. If you haven’t used your ITIN number on a tax return in three years, it will expire in December. If it’s already expired, you’ll need to submit a new W-7.
It’s also important to be aware that if you receive non-employee compensation or other types of income that’s not taxed through your paycheck, you may need to make estimated tax payments. These payments are due every year in January, April, June, and September. Be aware that if you have not made your payments throughout the year, you might be subject to interest and penalties for not paying your tax throughout the year.
And if you’ve changed your name or moved, it’s important for you to update your information with the IRS and the Social Security Administration. Failing to do so, especially with the Social Security Administration, might end up with a name mismatch and they won’t be able to tie your tax return to who you are reported to the Social Security Administration or the Internal Revenue Service.
Be sure to chat with your CPA regarding any of these issues to make sure that you are meeting all of your filing requirements, have your paperwork ready to go, and you’re filing appropriate numbers.
And of course, if you need any help with your bookkeeping, reach out to us at 310-534-5577 or [email protected]. We’re glad to help you.
