Tax Season Made Simple: Key Documents High-Income Earners Need

In this episode of the Retire Early Retire Now podcast, host Hunter Kelly from Palm Valley Wealth Management dives into all things taxes to help you prepare for the 2024-2025 tax season. Learn how to organize and manage essential tax documents including W2s, 1099s, K1s, and more. Discover common income-related documents, tips for staying organized, and the importance of communication with your CPA and financial advisor. Whether you're a high-income earner with complex tax situations or someone filing simple returns, this episode is packed with valuable insights to minimize errors, avoid penalties, and optimize your financial planning.

00:00 Welcome to the Retire Early Podcast

01:14 Importance of Tax Organization

02:28 Common Income-Related Documents

08:50 Business and Real Estate Tax Documents

11:52 Tips for Staying Organized

14:32 Conclusion and Final Advice

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Transcript

0:00

And welcome to the retire early retired out podcast. I'm your host hunter Kelly owner of Palm valley wealth management. And today we're going to talk all things taxes. Uh, getting ready for the 20 24 20 25 tax season. I want to make sure that you have all your documents organized and ready to go so that you're not fumbling, uh, at the end of, uh, or middle of April, trying to get all your tax documents to your CPA, or if you do it yourself, trying to figure out, um, where things go, what you should have. Um, and having to file, like sension things of that nature, maybe just missing something that's super important. And then somehow we ended up with penalties and audits and things of that nature. So. You got to get you organized for today, but before we get started, go ahead. In like, and subscribe this video on YouTube. Uh, and then follow us on your favorite podcasting app. Uh, so share this with a friend. Uh, this, this one out of all of them as probably one of the top useful. Uh, podcast, you could find, uh, get you all organized for your taxes. Keeps the tax man. Um, out of your bank accounts and out of your house. Uh, for those audits and extra inspection, because you have everything tie-dyed up. And so really, um, That's what we want to talk about today is getting you organized, right. Uh, it is important and it matters. It helps you minimize errors, avoid penalties and ensures opportunities. It gives you time, especially if you start now gives you time for, uh, those tax savings strategies, things of that nature. Um, that you can take advantage for 20, 24 and then plan. Uh, for 2025. And so. Uh, you, you may be one of those high income earners that have complexity. So some common complexities that I see. Uh, in my practice. Would be, uh, multiple income streams. Uh, different types of investments, business ownership. Things of that nature. And so if you have a complex tax situation, you're probably hiring a CPA. And generally speaking, uh, if you have a CPA, you may have a financial advisor and having communication between all three parties is key to your success. Key to, uh, eliminating headaches. Um, and keeping everybody on the same page so that you can, uh, optimize your situation and help you reach your financial goals much quicker and efficiently. So. Let's hop right in. So section one, we're going to hop into common income related documents. Uh, these, you may have heard before. Uh, so if you are an employee of a company, you'll receive a W2. From your employer, which just shows. Uh, all of your income from that employer in that year, it details your wages and your withholdings. And so, uh, the biggest thing here is that you should receive this by January 31st. You may receive it at your place of employment, or they could end up mailing it to you, whatever that may. B for their process. And then, so a couple of different things you want to do when you receive this W2. You just want to verify it quickly. You can cross check your in your pay stub, so your most, uh, current pay stub, and just make sure that your year to date reflects, uh, your total wages, taxes, withheld, other deductions, 401k contributions, things of that nature. Confirm your social security wages, make sure that, uh, your W2, uh, social security wages does not exceed that a wage base for social security, which for 2024. Uh, is$168,600. Um, so after that amount of money, you stop paying into social security. So. Uh, just to make sure that that is correct. Check your state and local taxes. Make sure that is withheld correctly. Um, and then check your employer information. A lot of times this can be done electronically, especially if you're using, um, things like Quicken. Uh, TurboTax things of that issue may just be able to plug in their employer ID and then the. The ID of the item or the W2, and it may, uh, Uh, just automatically upload the information in there, but still verify, make sure that that is correct. So that's the most common one that we'll see is that W2. Uh, the next form of income type tax documents or your 10 99 form. So 10 99, NEC 10 99, miscellaneous 10 99. K. Um, and then you should generally expect this again. Uh, by January 31st. Sometimes there is a delay with some of these, um, and you may get ended up getting them mid February. Um, but what are these forms? So 10 99 NEC. As for any non-employee compensation consultant, side gigs, things of that nature. A 10 99 miscellaneous for other types of income, such as rents and royalties. Uh, 10 99 K is for online transaction. So, uh, if you're getting paid through Venmo, PayPal, things of that nature, they may end up sending you a 10 99. K. So remember, you'll get these four, uh, R by January 31st, generally, sometimes a little bit later. But you want to keep that in mind? Um, and that'll help you file. Things like your schedule C um, if you own a business, things of that nature so that you can maybe write some things off. If you have business expenses based off that income. Uh, the next form of, uh, tax forms that you'll receive from income could be a K one. So if you're involved in any partnerships S corporations trust or states, Uh, you should receive this by March 15th. Um, and so generally what I see, especially for larger businesses, this will require you to file an extension because a lot of times he's getting late or later. Um, and the CPA doesn't have time. Uh, with their, uh, whole client base that they're working on to get that filed in a timely manner. So they'll generally file an extension. Um, But you'll receive that. K one, if you're involved in any partnerships as corpse, things of that nature. And then the last form. Uh, of income would be things from like brokerage accounts. So a 10 89 N E T. So interest income tenant on dividend D. Uh, income. And then tonight, M B for any gains or losses in your brokerage accounts? Uh, generally the brokerage custodian. So like fidelity, Vanguard. Um, all the big ones that you've heard of before, and then obviously smaller brokerages. Uh, generally try to get this done by January 31st, but often, uh, it'll arrive in mid February or so because they have reckless processes and things of that nature. Um, so generally what I tell my clients is if you have a brokerage account, Um, That is not a retirement account. You're going to receive those a little bit later. Um, so don't go ahead and follow your taxes because you have one or two more tonight. Now. However many of those accounts you may have. Um, And so just kind of add on to that, you'll receive those tax documents for those investments. So the other type of, uh, investment account, you may receive a 10 99 for. Would be things like your 401ks IRAs, if you take any distributions or you do any Roth or Roth conversions or rollovers. Uh, you'll receive, what's called a 10 99 R um, and then there'll be codes on there to mark the, the specific type of distribution that you had. So if you had a distribution and you're under 59 and a half, and there's no exceptions or anything, Obviously, they're going to want to know why, and then you'll be assessed that 10% penalty. Uh, if you're over 59 and a half, it would just be a normal distribution. And then you'll have to either withhold for taxes or pay that out of pocket. Come April 15th. And so, um, Tonight are for those retirement distributions. And then if you have any FSA or HSA, Uh, you'll receive, what's called a 54 98 S a. Uh, you received that in mid-May, but she'll need a file. That's just for, uh, your record. Um, and any time you do contributions to IRAs, Uh, you'll also receive a 54 98 for those IRA contributions. Again, you don't need to file it. Um, but it's good for, uh, reporting like your basis. And understanding how much maybe you've put into your Roth IRA, because if you need to take out the contributions before you're 58, 59 and a half. Um, that'll allow you to take that out, right. Um, and show proof that, Hey, I've already put in 60 grand into this account. I can take. Uh, up to 60 grand out without any penalties. Section three. If you have business, uh, or real estate. Uh, in your portfolio. So if you're a business owner, Um, and maybe you're the only business owner, uh, you'll have to obviously generate a profit loss statement for your schedule C or if you're filing it as S-corp you have to do. Uh, all of that and have your K one. Uh, put yourself as an employee, so on and so forth. Um, uh, you'll have to file. Any 10 99. Forms. Uh, for the contractors that you used. Um, so that, that the IRS knows that, Hey, you've issued a 10 99 for X. Uh, contractor or employee, whatever. You want to call that? Um, and so you should expect. Um, to have those district distributed or received by January 31st. Um, real estate investors. So any mortgage interest statement you'll receive a 10 98. Um, So whether your investor or it's your primary residence, you'll receive that to 98. Whether you're going to take the itemized deduction or not. Uh, generally, if you're just a homeowner with one home and that's your primary residence, you're not going to itemize, like we've talked before because the standard deduction is so high, but you were, you will receive that tax document. Uh, you may need depreciation schedules. If it is a rental. And then rental income documentation. Um, and then documentations about your expenses, things of that nature. Um, and then those mortgage interest statements, those 10 90 eights. Uh, would re again, be received by January 31st. Other documents that you'll need. Uh, to look at and maybe expect to come in charitable contribution. So just receipts that you are knowledgement that you're taking that deduction you've given. Um, to that charity or, um, any donor advise fund. Uh, distribution. So the organization generally provides donation receipts by the end of January. Uh, medical and dental expenses. So any sort of, uh, medical expenses or dental expenses that you've had, you just want to make sure that you're keeping record of Those invoices that you've paid for those expenses. And if you meet the thresholds, uh, per the IRS to get that itemized deduction, you'll just want to have record of that. Tax credits and deductions. So keep, uh, if you have children that are, uh, still in required childcare, you want to keep a record of that as well. Uh, any education credits you'll receive a form 10 98. Tea. Um, and then any, uh, Energy efficient home improvements. Uh, there's some tax credits there as well. So all these tendinitis. Most of your 10 90 nines and definitely your W2, you received. Uh, bye. January 31st. And so the biggest thing I want to, I don't want to just say, Hey, this is what you need. Uh, we need to have tips to help you stay organized. If you file your own taxes, maybe you have a simple situation where you just have a W2, maybe a couple. A brokerage accounts where you can upload your. Your 10 99 that you received from those accounts? Um, a lot of this will already be in TurboTax or quick in whatever software you use. So you can start to create a checklist. So use digital tools such as tax software or cloud storage. And keep them in files and say, okay, well, in 2023, I had all of these documents. My situation has not changed. I just need to make sure I get the updated. 20 22 4 version. Uh, this 10 99 W2, whatever, uh, document that you're looking at. Um, maybe you're looking at your situation. Like on 20, 23, I didn't have a brokerage account, but I opened one up in 2024. I need to add that to my checklist for, um, 2024 to receive, is that. Not 10 99. So create a checklist that is specific to your situation. Um, and then the biggest and most important thing, if you do hire a CPA or you work with a CPA and a financial advisor, um, make sure that you're communicating with them, make sure that they are very clear on what they need. You're very clear on your situation. If you've added income, you've added brokerage accounts that maybe the CPA didn't know about things of that nature, so that there's no miscommunication. Um, that's where I see the biggest issue. Uh, with CPAs. Um, and client communication is client communication. Uh, making sure that you get all the right documents to that CPA so that they can. Not prepare that that tax return properly. Um, they don't know what they don't know. Right. Uh, they don't know that you open a brokerage account over at Schwab. Um, and, and didn't tell them. So making sure that, uh, you're communicating with your CPA and if you also have a financial advisor, Uh, get an agreement with that financial advisor and CPA, where they can send documents back and forth to each other so that now you can take some of that off of your plate. The financial advisor can send all the 10 99. So your broker counts or whatever that may be, um, and, and send that to the CPA. Now you don't have to worry about that. Maybe you just have to send her a W2. Um, Create an efficient way to get all this stuff. Uh, done in a timely manner. So again, you can start focusing on that tax planning. Uh, Aspect of it versus just getting documents and, uh, filing the tax return. You can actually spend time on planning and getting ready for your 2025. And so. Uh, short one today, hopefully that was helpful. Create your checklist. Uh, communicate with your, your tax advisors, uh, your financial advisors, make sure that you have everything that you need to have sort of looking out for those tax documents. W2's 10 99 is K ones. Whatever that may be. Um, Sorry, start gathering those documents early. Um, and then if you have questions about your specific situation, Uh, obviously this is not tax advice. But if you need help, if you don't have someone that you've hired any how a lot of questions, maybe your situation has gotten more complex over the last couple of years and you need help. Uh, feel free to go to my website, Palm valley, wm.com. Schedule a call. And when you start to take a look at your situation and then help you out where we can. So. Uh, hope you enjoyed this quick episode and we'll see you in the next one. This podcast is for educational purposes only. It is not meant to be tax advice, financial advice, legal advice. Uh, investment advice do not make decisions solely based on this podcast alone. Please seek a professional when considering your own situation. Please see Palm valley wealth management in mind when making those considerations.