7 Common Missing Tax Return Items
Want your tax return filed quickly and without error? Then double-check this list of items that are often overlooked. These missing items often cause delays in getting your tax return filed:
- Forms W-2 and 1099. Using last year’s tax return as a checklist, make sure all your W-2s and 1099s are received and applied to your tax return. Missing items will be caught by the IRS mismatch program. All these forms are required to be in the mail to you on or before Jan. 31. If you are missing a form, contact the company responsible for issuing them.
- Form 1095-A. If you have health insurance through the Health Insurance Marketplace, you will need this form to complete your taxes and potentially claim the Premium Tax Credit. The deadline for employers to distribute other versions of Form 1095 is March 4.
- Dependent information. If you add a new dependent in 2018, provide the name, Social Security number and birth date to have them added to your tax return. If you have a dependent that shares time with someone else, discuss the plan for who is going to claim them. Your tax return cannot be filed if there is conflict in this area.
- Cost/basis information. If you sold any assets (typically investments or real estate), you need to know the cost/basis amount to calculate your taxable capital gain. Check your investment statements to ensure that your broker includes the required information. Often times it’s hard to find on the Form 1099-B summary, but it might be listed later in the statement details.
- Schedule K-1s. As an owner of a partnership or S-corporation, you will need to receive a Form K-1 that reports your share of the profit or loss from the business activity. Because of the new qualified business income deduction (QBID), businesses are required to report more information this year. When you receive your K-1, pay special attention to box 17 (codes V through Z) for S-corporations and box 20 (codes Z through AD) for partnerships. This is where QBID information is included. Without this, you cannot file your tax return.
- Forms or documents with no explanation. If you receive a tax form, but have no explanation for the form, questions will arise. For instance, if you receive a retirement account distribution form it may be deemed income. If it is part of a qualified rollover, no tax is due. An explanation is required to file your information correctly.
- Missing signatures. Both you and your spouse need to review and sign the e-file approval forms before the tax return can be filed. The sooner you review and approve your tax return, the sooner it can be filed.
By knowing these commonly missed pieces of information, hopefully your tax filing experience will be a smooth one.
Oh No! Your Tax Refund is Now a Bill
If you are anticipating a nice refund this year, it may be a good idea to prepare yourself for a possible letdown. Many taxpayers will receive a smaller-than-expected refund and might even owe taxes to be paid by April 15. If this happens to you, here are some of the likely reasons:
- Higher take-home pay. Look at last year’s W-2 and see how much was withheld for federal income tax. Now check this year’s W-2. If it is lower, you will need a corresponding reduction in your tax obligation to get the same refund as last year. The good news? You’ve had more of your income available to you throughout the year. The bad news? Paying less tax each pay period can result in a lower refund or tax due at tax filing time.
- Withholding tables are not always accurate. To help employers calculate the tax to withhold from each paycheck, the IRS revised withholding tax tables in February 2018 with a forecast of the impact of new tax legislation. While the IRS did its best to apply the tax law changes to the withholding tables, it did not correctly estimate every individual tax situation. Now, according to the U.S. Government Accountability Office (GAO), as many as 30 million taxpayers may not have had adequate withholdings for 2018.
- Lower itemized deductions. If you have similar itemized deductions this year as you did last year, they might not go as far as you think. This is because the state/property tax deduction is limited to $10,000 and many other itemized deductions are no longer available. While standard deductions are now higher, those with unreimbursed employee expenses, or those living in high-tax states could see a negative impact on their tax obligation. These changes coupled with the repeal of the personal exemptions could lead to a surprising change in your tax obligation for 2018 and going forward.
- Your state takes a different path. Depending on the degree to which a state incorporates recent federal tax changes, you could see a big tax surprise on your state tax return. As a result, the nonprofit Tax Foundation is anticipating that many taxpayers will experience an increase in state taxes for 2018.
- Good news for families with kids. The expansion of the Child Tax Credit will help offset the loss of the personal exemptions and could actually create a nice refund. The credit is now double at $2,000 per child and the income limit is raised to include most taxpayers.
With the uncertainty regarding whether you will receive a refund, hold off on major purchases and plans until your tax return is finalized. If possible, create a cash cushion to lessen the financial burden on you and your family. This is especially true if your withholdings are lower than last year.
Businesses: File on Time or Pay the Price!
March 15 is the tax-filing due date for calendar year S-corporations and partnerships. While this filing deadline does not require making a tax payment, missing the due date could cost you a hefty penalty.
The penalty is calculated based on each partial month the tax return is late multiplied by each shareholder or partner. So a tax return filed 17 days late with no tax due could cost a married couple who jointly own a small S-corporation $800 in penalties!*
Here are some ideas to help you avoid penalties:
- File on time. If you are a partner or shareholder of an S-corporation or partnership, file your company’s tax return on or before March 15. In addition to the penalties, filing late shortens the time you have to file your individual tax return and pay the taxes due by April 15.
- Consider an extension. If you cannot file the tax return in time, file an extension on or before March 15. An extension gives you six months to file and you do not owe the tax until your Form 1040 tax return due date of April 15.
- Your personal tax return may be delayed. Do not file your Form 1040 tax return until you receive all your K-1s from each of your S-corporation and partnership business activities. Be prepared — If the business files an extension, it’s possible you may need to extend your personal tax return while you wait for the K-1. This does not extend the due date for paying taxes owed.
- Challenge the penalty. While you may not be successful, it doesn’t hurt to try to abate the penalty. This is especially true if you file and pay your personal taxes on time. Kindly remind the US Treasury it is still receiving the taxes owed to them in a timely manner.
If you haven’t filed your S-corporation or partnership return for 2018, there’s still time to get it done or file an extension. Please call if you need assistance.
* The penalty calculation for 2018 S-corporations is $200 ($210 for partnerships) per calendar month late, multiplied by the number of shareholders. So a S-corporation or partnership return filed on April 1 is considered two months late!