Financial Documents: Make Your List and Check it Twice

checklistSometime in late December, a flurry of financial documents will begin arriving via the U.S. Postal Service – or, in some cases, appear in your e-mail in-box. This small blizzard of annual statements, required notifications and transaction reports may continue through early February.

Many of these documents are required to complete your 2012 tax returns, especially if you itemize, so make a plan to collect and organize them as they arrive. You’ll save yourself time and frustration if you have a designated file, box or drawer where all of your tax-related documents are kept.

Here is a list of the most common year-end statements:

W-2s. These statements detail your earnings and deductions from an employer in the past year. Depending on the nature of your employment, you may want to cross-check the totals against the cumulative information shown on your last check stub. (For example, if you made contributions to a qualified retirement plan, you can verify the amount by comparing the difference between the Box 1 and Box 3.)

Form 1098. IRS Form 1098 is issued from your lender(s) and specifies the mortgage interest you paid in the past year. You need this information to claim the mortgage interest deduction on your income tax return.

Your mortgage lender is responsible for providing you with a Form 1098 by February, but many lenders will include it in the January mortgage statement or notify you that it is available on-line – so pay attention to your January statement. If you have more than one mortgage, make sure you collect all 1098s.

Form 1099. Form 1099 reports all types of taxable non-wage compensation. This covers everything from commissions and interest earnings to long-term care benefits and canceled debts (see list). While 1099s don’t have to be attached to your tax return, the IRS uses them to cross-reference your reporting of non-W-2 income. Discrepancies can occur at year-end, where the payer records a disbursement as an expense for 2012, while the recipient doesn’t receive the payment until after January 1, 2013, and wants to exclude it from 2012 income tax calculations.

Form 5498 or year-end IRA account statement. Form 5498 is a report of annual contributions to an IRA. If there have been no contributions, many custodians/trustees simply add a notation to the IRA owner’s year-end account statement, stating the December 31 fair market value will be reported to the IRS. This information is important for calculating required minimum distributions once the IRA holder reaches age 70½.

Since IRA contributions for a calendar year can be made up to April 15 of the following year, Form 5498 does not have to be mailed until May. However, Form 5498 can also be used to report the fair market value of an IRA account as of December 31. If used for this purpose, the form must be issued to the IRA owner by January 31.

Statements of Charitable Giving. In order for cash contributions to charitable organizations to be deductible, you must have documentation. For contributions less than $250, canceled checks, bank or credit card statements, payroll deduction records, or written statements from the charity (including its name, contribution date and amount) fulfill the record-keeping requirement.

Amounts greater than $250 require a written statement from the charity stating the amount of cash donated and that no goods or services were provided in exchange. Most charitable organizations will issue these statements by January 31, 2013.

Receipts for Donations of Clothing, Household Goods, and Other Items. Did you donate clothing and other goods to charity and receive a blank “receipt” that you must then fill out yourself? Always get in the habit of writing exactly what you donate. Then you can use It’s Deductable, TurboTax’s easy online tool, to estimate the value of items. It’s free and there is no purchase required. Just enter the items and print out the estimated value of your donations to put with your other tax documents.

Make sure that the charities you choose for donations are 501c organizations. These are the only nonprofit groups that can provide a tax deduction for your donation.

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