By Frank Legan

After dealing with high inflation rates over the past year, the thought of paying taxes might be the last thing you want to prioritize. However, tax season is upon us, and being well prepared can help alleviate stress in the long run while freeing up time for activities you enjoy. 

To avoid the frustration of discovering missing documents at the last minute, we’ve crafted a tax-preparation checklist to help you stay organized and feel confident all your necessary paperwork is in order.

Organize Your Personal & Income Information

You’ll start receiving various tax documents virtually or in the mail soon, so instead of letting them sit in a pile on your counter, create an organized system for the following.

Income Information

• Form W-2: These are issued by employers and show your wages and tax withholdings. They are supposed to be mailed by January 31.
• Form 1099-MISC: These report income you have received as an independent contractor or freelancer. You should receive one from each person or company that pays you.
• Form 1099-INT: This form will show any interest you have earned.
• Form 1099-R: This form reports income received from annuities, IRAs, or pensions.
• Form 1099-DIV: Any dividend income you earn is reported on this form.
• Form 1099-B or 1099-S: You will receive these if you have any income from the sale of property or stock.
• Form 1098: You will get this from your mortgage company reporting the interest that you paid.
• Form 1098-T: This reports payments of qualified tuition and expenses.
• Form 1095-A or 1095-C: These forms report your healthcare coverage for the year and your premium tax credit, if applicable.
• Schedule K-1 (Form 1065, Form 1120S, or Form 1041): This reports income for a partner, a shareholder, or an income beneficiary of an estate or trust. The Schedule K-1 normal deadline can be as late as April 15th.

Income-Reduction Documents

• Form 1098-E for student loan interest paid, or loan statements for student loans received
• Form 1098-T for tuition paid or receipts from the institution you or your dependents attend
• Receipts for any qualifying energy-efficient home improvements
• Records of IRA contributions made during the year
• SEP, SIMPLE, and other self-employed pension plan information
• Records of medical savings account (MSA) contributions
• Moving expense records
• Self-employed health insurance payment records
• Alimony you paid if your divorce was finalized before December 31, 2018

Personal Information

If you want your tax-filing experience to be painless, you’ll also want to make sure you have all of your and your dependents’ personal information available, such as: 

• Social Security numbers and birth dates
• Copies of last year’s tax return (helpful, but not required)
• Bank account number and routing number, if you wish to have your refund deposited directly into your account

Gather Documents for Itemization

If you’re planning to itemize your deductions this year, you’ll need records to include your totals and provide proof. 

Deductions and Credits

• Childcare costs: provider’s name, address, tax ID, and the amount paid
• Education costs: Form 1098-T, education expenses
• Adoption costs: SSN of the child; records of legal, medical, and transportation costs
• Form 1098: Mortgage interest, private mortgage insurance (PMI), and points you paid
• Investment interest expenses
• Charitable donations: cash amounts and official charity receipts
• Medical and dental expenses paid
• Casualty and theft losses: the amount of damage, insurance reimbursements
• Records/amounts of other miscellaneous tax deductions: union dues; unreimbursed employee expenses (uniforms, supplies, seminars, continuing education, publications, travel, etc.)
• Records of home business expenses

Taxes Paid

• State and local income tax
• Real estate tax
• Personal property tax

Updates for the 2023 Tax Year

There are some important changes to keep in mind when filing your 2023 tax return. Depending on your filing status, some taxpayers may receive significantly smaller refunds due to these changes.

• The Child Tax Credit is worth a maximum of $2,000 per qualifying child.
• The Earned Income Tax Credit moved up to $600 for eligible taxpayers with no children.
• The Child and Dependent Care Credit allows you to claim from 20% to 35% of your care expenses up to a maximum of $3,000 for one person, or $6,000 for two or more people. 

Stay on Top of Tax Changes

Those lists cover the details of what you’ll need in front of you to thoroughly fill out your tax return. But there are also a few things to think about that could impact how you file, such as any changes that have occurred this year. Did you add another child to your family? Did one of your children start college? Did you start taking withdrawals from a retirement account? All these changes need to be reflected on your tax return but won’t show up on prior returns.

Specifically, you should stay on top of annual changes to retirement plan contribution limits. For the 2024 tax year, you can put up to $7,000 in any type of IRA ($6,500 for the year 2023). If you are over age 50, that amount goes up by $1,000 with the catch-up contribution. 2024 annual contribution limits for 401(k)s, 403(b)s, and most 457 plans are $23,000. If you are 50 or older, your yearly contribution limit goes up to $30,500. And if you are eligible to contribute to an HSA, you can save $4,150 if you have single medical coverage and $8,300 if you are covered under a qualifying family plan in the year 2024 (up from $3,850 and $7,750 for the 2023 tax year, respectively). If you are 55 or older, those limits go up another $1,000. Keep in mind that for IRAs and HSAs, you have until April 15th, 2024, to contribute for the 2023 tax year. 

A knowledgeable financial professional can help you understand any tax law changes and how they affect you.

Plan for the Future

Despite the current challenges, it’s essential to file your 2023 tax return correctly and with precision. Equally important is taking a broader perspective on taxes so you leverage all available tools to minimize your tax burden.

Navigating taxes can be a complex process, which is why partnering with a knowledgeable professional can be an invaluable resource for maximizing opportunities. An experienced financial advisor can assist with tax planning that’s tailored to your overall goals and financial strategy.

If you’re proactive about tax planning and don’t yet have a trusted advisor, our team at Cedar Brook Group is here to build confidence in every aspect of your financial plan. And because we believe in the “Humanity Factor,” numbers are second to our clients’ needs and wants. Schedule an appointment today by contacting us at 440-683-9213 or flegan@cedarbrookfinancial.com or schedule a complimentary introductory call online!

About Frank

Frank Legan is Partner, Financial Advisor, and member of the Forward Look Committee at Cedar Brook Group, one of the largest independent wealth management firms in Northeast Ohio. Frank spends his days designing and implementing personalized financial planning strategies for corporate executives, closely held business owners, artists, families, and retirees. He focuses on lifetime income strategies, investment advice, and estate planning services. He also works with businesses to develop strategic and succession planning strategies. Frank has a Bachelor of Arts in Political Science from the University of Dayton, as well as a Master of Public Administration focused on municipal management from Cleveland State University. Prior to joining Cedar Brook Group, Frank was a financial advisor in the private client group at Merrill Lynch and with NatCity/PNC Investments. Frank is active in his community, serving on various councils, boards, and committees. Frank serves as Chairman Emeritus of the Board of Directors for Catholic Charities Diocese of Cleveland. When he’s not working, you can find Frank spending time with his wife, Laura, their daughter, Reese, and their beloved collie, Charlie. Frank and his family are volunteers at St. Francis of Assisi church in Gates Mills. To learn more about Frank, connect with him on LinkedIn.

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