Once Christmas and New Year’s holidays have passed and you have moved on from wondering where 2023 went, one of the first rituals you will embark on is your tax returns. For many travel healthcare professionals, this can be a headache gathering the info, making sure you have all the documents, and then getting the return done. If you have many oars in the water, there is work to do.
Gathering your documents – the most common
W2s and 1099NEC
These are the basic forms that report income as employees and contractors. Travelers can frequently forget all the agencies and employers they worked with (remember the last two weeks of December 2022 that you were paid for in January 2023?) If you worked in more than one state, you want to make sure that your W2s show every state unless the one did not have an income tax or was a reciprocity state to your home state. This is where many travelers realize that they forgot one basic task during the year- checking the first pay stub of a new contract. If you worked in, say, Oregon and there is no Oregon withholding, then something is wrong. Always check the first pay stub of each contract. W2s and 1099NECs are supposed to be sent by the end of January. You should receive a W2 or 1099NEC from each agency you worked with in the 2023 tax year.
1099 INT, 1099DIV, 1099B
If you have a bank account with interest, own stocks with dividends, or buy/sell stocks, then it will be recorded on these forms. Many brokerages will issue a 1099 Composite to include all of these in one report. These 1099s come LATER than the W2s and 1099 and are not required until February 15. There are often corrections to these documents or delays that can mess up your tax return. Also, remember that just because you didn’t take money out of your brokerage account doesn’t mean you are not taxed. If the interest, dividends, or sales of stocks generated cash flow, you are taxed on these distributions. Also, if you have a 1099 Composite, don’t ignore the gobbledygook after the first few pages. There are possibly reportable transactions or deductible interest buried in those pages. Your tax professional will know what to look for.
1099R, 5498
Retirement statements. The number one thing travelers forget to give their tax preparer are 1099R or 5498s for retirement transactions. Did you contribute to a retirement account that was NOT managed by your employer? Then, likely you have some report for that that shows how much and to what type of account it was for. Did you withdraw, rollover, characterize, or convert funds to a different type of account? You will probably have a 1099R for that. The amount contributed to an employer’s plan will show on your W2s, so you don’t need anything for that.
1099G
This is an odd form used to report state refunds paid to you during the year and unemployment compensation. It’s used to report payments from the Federal or State governments. Unemployment is taxable at the Federal level, but many states exempt it.
W2G
Gamble? Did you win? It gets reported here and, in some cases, on a regular 1099MISC. Gambling winnings are considered income, and there are at least 2 methods of determining how much is taxable, but most people who gamble do it a LOT. We have seen clients with over 50 W2Gs, and making sure you have all of them can be a challenge.
K1s
If you are involved in any partnership, a shareholder in an S-Corp, or a beneficiary of a trust /estate, you are bound to receive one of these. If you had a relative die recently and received an inheritance, there is a very strong chance that you will get one. These can take FOREVER, especially when dealing with the competing interests of relatives when they bicker over a deceased person’s estate. Some investments are actually partnerships where you own a certain percentage of the investments.
1099K
This is the form that everyone was scared of – the new rules required every 3rd party payment system like PayPal, Venmo, etc., to issue 1099Ks to each person who received more than $600 during the year. The IRS has delayed this till the 2024 tax year, so that is a problem for next year. When implemented this can affect everyone sharing the cost of a meal or reimbursing a friend.
1099MISC
This form reports many miscellaneous items, but the most common for travelers are rents (for renting your home out) and Royalties. If you use a property manager for your rental, they will often report your gross rent on a 1099MISC. Sometimes, gambling winnings show up on a 1099MISC as well.
Tax Law Changes, Opportunities and Bummers
IRS Personal Account
All taxpayers should open an Online Account with the IRS. You can see all of your statements and items reported on your behalf, make payments, and communicate with the IRS. It is simple to sign up. https://www.irs.gov/payments/your-online-account
Home Energy Credits
Credits for energy improvements to your home were greatly expanded for the 2023 tax year. There are no longer any lifetime limits like there were before. Only annual limits. That new HVAC system, windows, insulation, or doors are worth a lot more credit now.
EV Credit Transfers
If you purchase an EV, you can request that the credit offset the purchase price of the vehicle. Since there are income limitations, you can now use the income from the year of the tax return or the previous year to qualify. Transferring credit can be tricky if you exceed the income limits during the year unexpectedly. If the previous year’s income does not allow you to qualify, you will have to pay the credit back on the tax return. Credit transfers can only be done through dealers, not private sales.
Beneficial ownership reporting
Do you own or are a part owner of an LLC, Corporation, or any entity formed in a state? You are now required to disclose all owners of 25% or more annually, 30 days after any changes, and 90 days after forming a new one. The penalty for not filing is steep and can be as high as 10K or imprisonment if the lack of disclosure is willful. The report does not go to the IRS but to FinCEN (Financial Crimes Enforcement Network). Information can be found here https://www.fincen.gov/boi-faqs
