This article has been updated to reflect 2024 deadlines and filing protocols.
With the holidays behind us and the new year officially off and rolling, we have entered the time of year when we must start prepping for another important season -- tax season. As a critical and impactful component of an individual’s financial planning, tax planning often causes varying degrees of stress and anxiety for people, especially as the April 15th tax filing deadline looms. To help relieve some of this tension, we have put together reminders of the key materials to assemble and crucial dates to note as you prepare to file.
Paper versus e-delivery
In past decades, people had to wait for institutions to mail paper copies of their tax materials to them. However, in our digital age, these documents can be accessed by customers instantaneously within online portals, as soon as institutions make them available. For this reason, e-delivery has become the preferred delivery method for tax documents. In addition to usually receiving your materials faster than you would via postal service, e-delivery ensures you do not overlook or lose any items. If you haven’t already, go online or call your institution to elect e-delivery. This will save time, energy, and headaches.
Once you have begun receiving your documents, send them to your tax preparer as soon as possible. Many people mistakenly believe that they need to send everything together as a completed batch, but this isn’t true. If you have already prepared the bulk of your tax documents and are waiting on your 1099’s, your tax preparer can begin your filing and incorporate the 1099’s once they become available.
IRA Distributions (1099-R's)
If you took any IRA distributions during the past year or if you converted assets from an IRA to a Roth IRA, you will be receiving a 1099-R from your IRA custodian. Many of these tax documents are already available, as institutions have a deadline of January 31st for sending these to clients and customers.
If you are over age 70½ and chose to make a charitable donation out of your IRA (known as a Qualified Charitable Distribution), please be sure to let your tax preparer know and provide all supporting documentation. This is incredibly important to note because unless you provide documentation and make your preparer aware, the 1099-R will not reflect what you had paid directly to the charitable organization(s).
Non-qualified brokerage accounts (1099-composite)
If you have a non-retirement account (e.g. Trust, Individual or Joint account), you will receive a 1099-Composite & Year-End Summary Tax Statement. This report indicates the dividends, interest, and realized capital gains or losses for the year and will be prepared in mid-to-late February.
Institutions occasionally have to revise 1099’s, often due to reporting requirements associated with certain types of mutual funds, and it’s not a cause for alarm. But if you do receive a revised 1099, make sure to send it to your tax preparer as soon as you get it.
Charitable From Non-Qualified Brokerage Accounts
Over the last year, many people have gifted securities to support causes they care about and to support their communities. Charities and organizations must issue you a receipt if you would like to claim the tax benefits. If you gifted securities (stocks or mutual funds) from a non-qualified brokerage account, meaning an account that does not qualify for tax-deferred or tax-exempt status, to a charitable organization or into a Donor Advised Fund, let your tax preparer know. You will also need to provide your preparer with all of the supporting documentation showing evidence of the donation. If you did not receive a receipt or you have misplaced it, reach out and ask for one. This is a common request.
Contributions to a Donor Advised Fund (DAF)
A Donor Advised Fund is an account overseen by a charity or foundation, which maintains legal control as the sponsoring organization. Similar to other gifting guidelines, it’s important to have documentation to verify your contribution. If you made any contributions to a Donor Advised Fund, be sure to provide your tax preparer with the letter from your DAF, and request documentation if you do not.
529 Plan contributions
If you made a contribution to a 529 plan during 2023, be sure this is accounted for when preparing your State tax return. Depending on your income and state of residence, you may qualify for a deduction or tax credit.
retirement plan contributions
Sometimes, we get so caught up in the present that we can overlook the importance of planning for the future. Depending on the type, retirement accounts may have yearly limits, and maximizing contributions today can often make a significant impact in the future. Keep in mind you have until the tax filing date to make a contribution for the past year to your IRA, Roth IRA, or SEP IRA (the deadline for SEP contributions is later if you file an extension). We recommend using tax planning as a time to check in on your longer-term financial goals and whether you’re preparing yourself for the retirement that you want to have.
Tax planning can feel intimidating, especially when you factor in tracking down data across financial accounts on top of your many other commitments and responsibilities to yourself and those around you. However, remember that planning and organizing goes a long way to helping reduce the stressors of tax planning. Tax planning season might never become your favorite season, but following these pointers can grant confidence and security today and in years to come. Of course, we encourage you to consult your tax advisors before taking any actions and remember this isn’t something you need to do alone.
We are not affiliated with or endorsed by the Internal Revenue Service or any government agency.