The 2021 tax season is underway… just a tad bit later than usual! We’ve been through this process a time or two and have shared our answers below to the most common tax-reporting questions we receive from clients this time of year.
WHEN SHOULD I EXPECT MY INVESTMENT RELATED TAX FORMS?
Taxable Accounts - If you haven’t already received your Consolidated Form 1099 from Schwab or Pershing, you should receive it in the next few weeks. This form is produced for each of your taxable investment accounts and reports the income earned in the account during the year (interest, dividends, and sales proceeds).
If you have not received your Consolidated Form 1099 in the mail or electronically by early March, please let us know and we will help track it down for you.
Retirement Accounts - If you made a distribution in 2020 out of any retirement account (401k, 403b, IRA, etc.), you can expect to receive a 1099-R from the account custodian reporting the amount distributed.
The deadline for custodians to send these forms out is January 31st, so it is likely to have already arrived.
Private Placements - If you have invested in private placements, you should receive one or more additional investment-related tax documents that you will need to report on your return.
If any of your private placement investments are in a partnership, you will receive a Schedule K-1 and can usually expect it from the partnership by the end of March.
WHAT ELSE SHOULD I KEEP IN MIND FOR FILING MY TAX RETURN?
Roth Recharacterizations – In the past, you had the opportunity to “undo” a Roth conversion up until the final filing deadline of October 15th. This is no longer an option, so any Roth conversions made in 2020 are final and must be reported as income on your return.
Qualified Charitable Distribution (QCD) – A QCD is a charitable gift made directly from your IRA that does not have to be reported as taxable income on your return. However, the full distribution is still reported on the tax form (1099-R) and it is your responsibility to remove the QCD amount from the taxable portion on the return.
Tax-Favored Account Contributions (IRA, Roth IRA, HSA) – If you already contributed to one of these accounts for 2020, please make sure it is reported on your return. The contribution deadline is April 15, 2021, so you still have time to fund these accounts for the 2020 tax year.
We know that tax filing time can be stressful as you gather documents and records in order to file your tax return before the deadline. We hope this is helpful and alleviates some of the stress, but please let us know if you have any further questions. We're here to serve!