After end of the tax year there are several types of documents that arrive in mail that taxpayers are required to claim on their income tax returns. Those documents include forms that report the income, which for most part is taxable. Other documents report expenses that can be claimed as deductions, which in essence reduce taxable income. And then there are lots of other documents that taxpayers should collect on their own during the tax year, but this is probably the most neglected part or income tax preparation.
The most common form received by taxpayers is the W-2 Form, which reports employment income and taxes deducted from that income. Income can also be reported on a form 1099-MISC, for example when the individual was not on a payroll but was paid for some services. This is however less common. If applicable to the taxpayer, income is also reported for gambling winnings, retirement, social security and unemployment benefits.
Financial institutions report earned interest, such as from savings account, which is also considered part of taxpayer’s income. This is reported on a form 1099-INT. On the other hand, interest that taxpayer paid is an expense and can be claimed in itemized deductions on the income tax return. This is reported on Form 1098, most commonly for mortgage or home equity loans. Interest from personal loans or credit cards is not reported and it’s not deductible.
My advice is not to rush into filing tax return and wait for all documents that you expect to receive; otherwise the taxpayer may need to file an amendment or risk penalty for not filing all of the income. Not including all of the expenses in a tax return results in smaller tax refund or larger amount that needs to be paid to IRS. Also note that taxpayers will not receive forms and documents that do not apply to them. But in case an expected form or document is missing, contact the appropriate institution to reissue a copy. If for any reason there is not enough time to file a return before the deadline, file Application for Automatic Extension of Time To File Income Tax Return - Form 4868. Then once the return is complete, send the right tax return.