New Tax Documents Needed to File Your 2021 Return

Many of you are already gathering your 2021 tax documents in hopes of filing as quickly as possible in anticipation of a refund. But be patient. I know you've heard that before. But it's true again this year.

So before you file, let’s review the tax documents we need to properly file your 2021 tax return.

New Tax Documents for 2021

The IRS identifies two new documents as Letters 6419 and 6475.  Both are issued in connection with some COVID-19 relief created by the American Rescue Plan Act (ARPA) that became law last March 2021.

Letter 6419

This letter is on the way to families who got half of the enhanced Child Tax Credit (CTC) amount last year. 

The credit for qualifying dependents for the 2021 tax years was increased to $3,600 for younger children and $3,000 for older children, also as part of the ARPA. In addition, that new law instructed the IRS to send eligible families half of the credit amounts early as monthly payments from July through December 2021.

To get the balance of the CTC, which could be as much as $1,800 per each child age 5 of younger or $1,500 for dependent children ages 6 to 17, you must claim it when they file their 2021 taxes. Letter 6419 will help you calculate the correct remaining credit you're due.

You'll need to file Schedule 8812, Credits for Qualifying Children and Other Dependents, with your Form 1040 to claim the credit.

Letter 6475

This letter will help you know whether you received the maximum COVID relief amount that was authorized by the ARPA. If you got the previous two EIPs, then this latest letter will not be new to you.

EIP payments of up to $1,400 person were delivered to individuals who were eligible based on their prior 2020 or 2019 tax return information. Taxpayers also got $1,400 for each qualifying child.

Shortly after ARPA became law last March, the third EIPs started going out, and were distributed throughout 2021.

The IRS said that most eligible taxpayers got the money. But most is not all.

If you didn't get the maximum 2021 EIP, Letter 6475 can help you get additional coronavirus relief for which you qualify when you file your 2021 tax return. You'll use the information in the letter to claim the Recovery Rebate Credit on your taxes.

Since the COVID relief payments technically were credits, any amount you are due as the Recovery Rebate Credit on your 2021 tax return can help reduce any tax you might owe. Even better, the credit is refundable.

This means that if you have more of the credit than you owe Uncle Sam, or you don't owe any tax, then you'll get the credit amount as a refund.

Familiar Tax Documents

Now here's a listing of the more popular tax information documents that you can find online, in your inbox or mail box in the next coming days or weeks.  Most of these are due to be mailed by Jan. 31.

W-2 — This is the tax form that everyone eagerly anticipates. It's the wage statement from your that details how much money you made, how much income tax was withheld, the amounts taken out for Social Security and Medicare, and contributions to workplace benefit programs, such as 401(k) and similar retirement plans, medical accounts and child care reimbursement plans.

W-2G — This form is specially designed to report gambling winnings, hence the appended G. It's sent to winners who get:

• $1,200 or more from bingo or slot machines,
• $1,500 or more in winnings (reduced by the wager) from keno,
• More than $5,000 in winnings (reduced by the wager or buy-in) from a poker tournament,
• $600 or more in gambling winnings (except winnings previously noted) and the payout is at least 300 times the amount of the wager, and
• Any other gambling winnings subject to federal income tax withholding.

1095 form series — These forms were originally created to report Affordable Care Act data. However, there have been some changes along the way.

The Tax Cuts and Jobs Act (TCJA) eliminated the individual mandate penalty at the start of the 2019 tax year. That penalty was the amount that previously was added to your taxes if you didn't have what was deemed adequate insurance coverage. However, the TCJA did not do away with the associated Obamacare reporting requirements. By law, the forms still must be issued.

That meant you might get at least one of the 1095 series insurance coverage tax statements listed below even though you didn’t need it for federal filing purposes to document your 2021 tax year medical coverage and avoid the federal penalty.

Note, however, that while the federal enrollment mandate and penalty is gone, some states still require their residents to get medical coverage or pay a penalty.

Due to the TCJA changes, the IRS has extended some of the deadlines for issuing these forms. State deadlines, however, could be different.

So, just keep your eyes open for these forms. You'll need the A version to reconcile or claim any ACA premium tax credit (PTC) you got in advance or are eligible to file for on your return. The B and C versions are informational, and you can simply store them with your other tax records for the year.

• Form 1095-A, the Health Insurance Marketplace Statement, debuted for the 2015 tax year. It is sent by the exchanges where individuals purchased their medical coverage. As noted, use its data in connection with PTC claims.
• Form 1095-B is issued by health care insurance issuers or some smaller companies that provide coverage for employees. It confirms that you had workplace-provided healthcare that met the ACA's acceptable minimal health insurance coverage standard. It also shows how long you were covered and which family members also were on your policy.
• Form 1095-C is the same as B, but is issued by large employers.

1098 — This form lists how much mortgage interest a homeowner paid on the loan. In most cases, this amount is fully deductible. The IRS has an official 1098 form, but most lenders tend to use a substitute document that contains the same data.

This form also includes another key itemized tax deduction, the amount of real estate taxes on the property that the mortgage lender paid on your behalf the previous tax year. The cap of $10,000 is still in effect, regardless of what's shown here.

1098-E — The interest paid on your student loan is reported on this form and is sent by your lender if the interest paid is at least $600. You may be able to deduct this interest and possibly other loan-related amounts, such as origination fees and capitalized interest.

1098-T — Universities issue this tuition statement to students. It shows the amount of qualified education expenses the student paid. The information is needed to help in the claiming of education-related tax benefits, such as the American Opportunity or Lifetime Learning tax credits.

1099-INT — You'll get one of these forms for each savings, CD or other investment account in which you earned more than $10 in interest. Even if you reinvested the interest instead of receiving it as a cash payment, it is still reported as taxable income.

1099-DIV — Earnings from stocks and mutual funds are reported here, including dividends and capital gains distributed that are more than $10. If you used the dividends or distributions to buy more shares, you still have to report the income and pay taxes. However, the distributions and certain, qualified dividends are taxed at the lower capital gains rates.

1099-B — If you sold stocks, bonds or mutual funds, you will receive a 1099-B from your broker or mutual fund company. It will detail the number of shares sold, when sold and the amount of the sale. Since 2011, brokers also have been providing information on the basis (the cost of an asset plus some adjustments) of sold stock. This information, along with the date you bought the shares and the amount you paid for them, will help you figure your taxes on your profit. 1099-B forms are due to investors by Feb. 15.

1099-G — When you get a refund of state or local taxes, you'll get this form. If you claimed those taxes as an itemized deduction on your previous year's federal tax return, you must report the 1099-G amount as income in the year received. And millions of people will get 1099-G forms this filing season for the unemployment benefits they received from job losses caused by the COVID-19.

1099-K — Payments you received via credit or debit cards or from third-party payment processors, such as PayPal, Amazon and eBay, will be reported on this form. There are triggers for amounts ($20,000) and number of transactions (200), so not every person who receives such payments will get a 1099-K. This income, however, is taxable and should be reported even without issuance of a 1099-K.

1099-MISC — In 2020, this form changed from the document used to report payments for contract work (now 1099-NEC), to being used to report rent or royalty payments or prizes and awards, such as winnings from television or radio show contest. Form 1099-MISC will also go to some other payment types, such as crop insurance proceeds. When a 1099-MISC is required, it will be issued when the payment amount is $10 or more in royalties, or $600 or more in other types of miscellaneous income during a calendar year.

1099-NEC — This form primarily reports contract work performed by self-employed individuals (non-employee compensation). You should get one if you earned $600 or more from a job. You also should get a separate 1099-NEC from each client that paid you that much. This form is the self-employed equivalent of a W-2 only without any taxes paid via withholding. Even if you don't get a Form 1099-NEC for a job because the amount paid to you was less than $600, that $1 to $599 payment is still taxable income.

1099-R — If you received a pension or a distribution from an individual retirement account or workplace retirement plan, you'll get a Form 1099-R with those details. The form is issued by your broker, pension plan manager or mutual fund company. Even if you rolled the retirement money into another employer-provided 401(k) plan or an IRA, you'll still get a 1099-R. The form has several boxes that differentiate any taxable amount from the gross distribution amount. You'll also get a 1099-R if you converted a traditional IRA to a Roth IRA. Again, a rollover usually is not a taxable event, but a pension payout may be.

5498 — Any contributions you make during the tax year to any individual retirement account are reported on this form. The 5498 shows traditional IRA contributions that might be deductible on your tax return, as well as any rollovers made during the last tax year. It also reports amounts that were recharacterized from one type of IRA to another. 5498 forms with information on your contributions to such accounts are not due to you until May 31. The IRS also says, however, that the issuer should make the retirement account's fair market value (FMV) and, if applicable, required minimum distribution (RMD) information, available by Jan. 31.

5498-ESA — This account reporting form has details on contributions to Coverdell Education Savings Accounts, formerly known as Education IRAs. The child named as beneficiary of the Coverdell should get a copy of this document by April 30. This information is important if you went overboard last year in contributing to this educational savings vehicle. If your total contributions made to all your Coverdell ESAs for 2021 exceeded $2,000, you must withdraw the excess, plus earnings, by June 1, 2022, or you may owe a penalty.

Schedule K-1 — If you received money from an estate, trust, partnership or S corporation last year, you should get a Schedule K-1. However, because of the complexity of many of these financial arrangements, account managers tend to send out K-1s later in the tax season, often not until well after the April tax return filing deadline.

That's why filers who get K-1 forms usually file Form 4868, Application for Automatic Extension of Time to File. This gets you six more months to get your K-1 and any other tax statements you need to fill out your Form 1040.

Whew, that was a LOT!

If you have any questions about the information discussed here just drop us a line.

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