W2s, 1099s and other Tax Documents Needed to File

Individuals preparing to file their taxes need to first ensure that they have gathered all the tax documents required to accurately file. Taxpayers who fail to include certain tax information on their tax return could risk a delay to any tax refund they may be owed and may have to work with the IRS to correct errors on their return.

Income

Arguably the most important documents needed to complete a return are income documents. Usually these are W2 Forms and 1099 Forms.

W2 Forms: This is the most common income reporting form issued to typical wage-earners. In addition to showing your annual earnings, it also shows the amount of taxes withheld from your paycheck, including taxes for Medicare, Social Security, and state taxes, if applicable. Employers are required to issue out your W-2 by January 31. Taxpayers should be on the lookout for a physical copy that is sent in the mail as well as an electronic copy.

1099 Forms: There are various types of 1099 forms that can be distributed to an individual based on the type of work or service they provided. For example, 1099-NEC forms are known for contract work. If you received credit or debit card payments, or you received 200 or more payments totaling $20,000 or more through a third-party payment processor such as PayPal or Amazon, then you should receive a 1099-K form from the third party that handled your payment processing.  If you earned at least $600 in rent, prizes, royalties or other qualifying income sources, then you will be issued a 1099-MISC. Individuals who have investment earnings will receive a 1099-INT form for interest,1099-DIV for dividends, and 1099-B forms for broker-handled transactions.

Tax Documents

In addition to income statements, taxpayers will also need to collect the following information for their tax return to be prepared and filed correctly:

Prior years federal and state tax return: In some cases, it may not be necessary to utilize past year returns to file. However, if you are struggling to complete your return, referencing your return from the year before may help remind you how you filed and what you qualify for.

Social security numbers for you, your spouse, and any dependents. In addition to children under 19, elderly parents, certain students, adult children with disabilities, and others can qualify as dependents on your tax return.

Tax Considerations for Individuals, Corporations, Partnerships & LLC

Depending on the individual, business, or entity filing, tax preparation can become quite complex. Covington Tax Solutions is experienced in helping customers navigate the tax code.

Standard C corporations are taxed on the corporate level based on their reported profits, while their shareholders are taxed on any after-tax profits the corporation distributes to them in the form of dividends.

Profits produced by partnerships, sole proprietorships, S corporations and limited liability companies (LLCs) are not directly taxed. Instead, they’re considered pass-through entities, where taxes on profits are assessed only at the individual level to owners/shareholders who are required to report their share of the business’s profits (or losses) on their personal tax returns.

Although not directly taxed as separate taxable entities, most partnerships and S corporations are still required to file an annual federal return at the entity level.  Sole proprietorships and LLCs, however, are not required to file a federal return at the entity level. Instead, the owners of sole proprietorships and LLCs report their share of the organization’s profits and /or losses as part of their personal tax return. 

LLCs have the additional option to be taxed as a sole proprietorship, partnership, or corporation. Limited liability partnerships (LLPs) on the other hand, are required to file as a partnership.

How to File Your Taxes

If you work with us, Covington Tax Solutions will prepare and submit your tax returns. Those filing on their own have two options:

Electronic Tax Filing

The IRS has done quite a bit of work in recent years updating itself for the digital age. In fact, the IRS now recommends that taxpayers “e-file” (meaning, file their returns online) rather than mailing in traditional paper forms. And according to the agency, taxpayers filing online will often receive their tax refunds faster than those filing via regular mail. The IRS has a terrific resource page that provides information on their official free e-filing program as well as on independent tax professionals and software that are authorized by the IRS for e-filing at https://www.irs.gov/filing/e-file-options.

Filing a Paper Tax Return

Taxpayers still have the option to file their tax return on paper and mail it to the IRS. However, the processing time is much longer – with refunds on paper returns taking up to eight weeks or more, while e-filers usually receive their refunds in three weeks or less. And be sure to double-check that you’re mailing your return to the correct IRS office. The IRS has scores of offices across the country, and each office is set up to process specific kinds of returns. The proper office for mailing your return to depends on your state of residence, the type of return you’re filing, and whether your return includes a tax payment. Also, remember that you may be mailing your return to a different address than in the past because the IRS does occasionally change the locations of its processing centers.