Key tax forms you should receive soon — and what to do with them

By: Kimberly Lankford

This is the time of year when you’ll start receiving key paperwork you need to file your 2019 income-tax return. Keep an eye on your mailbox or email for important documents reporting earnings, deductions and expenses. Most of these forms must be sent to you by January 31, although a few have a February 15 deadline. Review the forms for any errors as soon as they arrive, and keep them in your tax files so you can report your income accurately and get credit for all of the breaks you deserve (the IRS gets copies of most of these forms, too). Here’s what these forms mean, what to do with the information when you file your income-tax return, and how long to keep the records.

W-2: Reports income you received as an employee. Also shows the amount of money withheld for federal, state, Social Security and Medicare taxes, as well as retirement plan contributions and the value of some employee benefits. You need to file this form with your income-tax return and keep a copy in your tax records.

1099s report income you received from sources other than an employer.

1099-MISC: Reports freelance income and other nonemployee compensation. You should receive a 1099-MISC from everyone who paid you $600 or more in 2019, and you report the information on Schedule C if you are self-employed. You usually don’t file this from with your tax return, but you need to keep it with your tax records. See the IRS’s Self-Employed Individuals Tax Center for more information.

You may receive several kinds of 1099s from banks, brokerage firms, mutual fund companies or other financial institutions. Some may be combined in one form. You usually report interest and dividends on Schedule B and investment sales on Schedule D. Keep these forms in your tax records, too.

1099-INT reports interest income, such as from a bank account, CDs or savings bonds.

1099-DIV from your brokerage firm or mutual fund company reports dividends paid from stock you own and capital gains distributions paid from mutual funds.

1099-B from a brokerage firm reports investment sales if you sold stocks or mutual funds in 2019. You’ll use this information to determine any capital gain or loss.

1099-R reports distributions from retirement accounts, such as 401(k)s and IRAs. Also reports other transactions, such as Roth IRA conversions and direct rollovers from a 401(k) to an IRA. Not all of this is taxable — for example, a qualified rollover from one IRA to another, or from a 401(k) to an IRA, will be tax-free. Review the codes to make sure the information is accurate.

1099-G Reports government payments, such as state or local income tax refunds and unemployment compensation.

1099-SA reports distributions from a health savings account. This form shows how much money was withdrawn, but doesn’t specify whether or not the distributions were tax-free withdrawals for eligible medical expenses. You’ll need to file Form 8889 specifying how much of the withdrawal was for eligible expenses and how much was used for non-eligible expenses, which will be subject to taxes (and a 20% penalty if you’re under age 65). Keep records of the eligible expenses in your tax files to prove that those withdrawals should be tax-free.

1099-Q reports distributions from 529s and Coverdell Education Savings Accounts. This form shows the total distributions and breaks out which portion is from the basis (contributions) and which is from earnings. The form doesn’t specify whether or not these withdrawals should be tax-free; keep receipts in your tax records showing that the withdrawals were for eligible expenses. For more information about calculating the taxable portion of any withdrawals that were not for eligible expenses, see Reporting 529 withdrawals on your federal tax return at Savingforcollegecom.

Form 1098 reports how much mortgage interest you paid in 2019, which can be tax-deductible if you itemize your deductions. See Instructions for Schedule A for more information about itemized deductions.

Form 1098-E reports interest paid on student loans, which may be tax-deductible depending on your income. You can deduct up to $2,500 paid in student loan interest in 2019 if your modified adjusted gross income was less than $140,000 if married filing jointly, or $70,000 if single. You can take a partial deduction if you earned more than that as long as your income was less than $85,000 if single or $170,000 if married filing jointly. For more information about qualifying for the student loan interest deduction, see IRS Publication 970 Tax Benefits for Education.

Form 5498: This form comes after the tax-filing deadline — usually in May — and reports any IRA or SEP contributions, rollovers or conversions you made in 2019. You don’t need this form to file your income taxes, but you should keep it in your tax records until you withdraw the money from the accounts. If you made Roth IRA contributions, for example, you can withdraw your contributions without taxes or penalties at any time, but you usually can’t tap the earnings tax-free until after age 59 ½. Form 5498 shows how much you contributed to the Roth and how much you can withdraw without taxes or an early-withdrawal penalty.

How long to keep tax records

You don’t need to submit most of these forms when you file your tax return, other than the W-2, but you should keep them with your tax records for at least three years after the tax-filing deadline, which is the amount of time the IRS generally has to begin an audit.

It’s a good idea to keep your income-tax returns indefinitely (you can keep digital copies) because you may need the information in a variety of situations — for example, if you apply for disability insurance or a mortgage, if you need to correct mistakes in your Social Security earnings record, or if you’re trying to figure out how much of your retirement-plan contributions were tax-deductible. You can generally toss your supporting documents after the three years, although it’s a good idea to keep them for six years or longer if you have income from a variety of sources — such as any freelance or self-employed income — because the IRS has up to six years to initiate an audit if you neglected to report 25% or more of your income. Some states have longer time periods for initiating an audit — check with your state department of taxation for its records requirements.

It’s a good idea to keep records related to property — such as paperwork showing the date and purchase price of stock or mutual funds in a taxable account, and records of your home purchase and any home improvements — for as long as you own the property and for at least three years after you sell.

For more information about tax records to keep and toss, see the IRS.gov’s How long should I keep records? If you’re looking for help with your income taxes, you can find an enrolled agent who is authorized to represent taxpayers in front of the IRS through the National Association of Enrolled Agents. You can find a CPA in your area (and find helpful information about taxes) through the American Institute of CPAs and can search by city or the types of services offered by using the CPA map.

Thanks for reading! Enjoyed this article? Share it with others and sign up below to get articles like this delivered to your inbox weekly.

Saturday Insurance Services, LLC (“Saturday” or “Saturday Insurance”) is a licensed, digital insurance advisor. All tools, quotes, and information provided by Saturday are for educational purposes only and based on the limited information, if any, provided by you. We urge you to consult with your financial and tax advisors before making any purchase decisions. All quotes and estimates are non-binding and are not to be construed as a guarantee you will be able to purchase insurance. Availability of insurance and final pricing is determined solely by our insurer partners and subject to their review and acceptance of a completed application. All product guarantees are subject to the claims-paying ability of your insurer.