Understanding Tax Forms: From A Financial Advisor

Tax forms serve as a summary of your financial activities over the past year, shared with the IRS. Even if you work with a tax professional to file your return, knowing the basics of these forms can help you stay informed. Let’s break down the most common tax forms and how they apply to different income sources. Always consult a tax professional for guidance on your specific situation.

What Tax Forms Do You Need?

The tax forms you’ll need depend largely on how you earned income during the year. Whether it’s through employment, self-employment, investments, or account distributions, each income stream requires specific documentation. For example, if you’re an employee, your forms will differ from those of a freelancer or someone with multiple income sources, like a side hustle or investments. Additionally, you may need forms related to deductions or tax credits you plan to claim.

Here’s a guide to some of the most common types of tax forms:

Forms for Employees

If you worked for an employer, you’ll likely need Form W-2. This document provides a summary of your wages, taxes withheld, and contributions to retirement plans such as a 401(k) or 403(b).

Forms for Freelancers and Self-Employed Individuals

For contractors, freelancers, or independent workers who earned $600 or more, Form 1099-NEC is essential. If you processed payments through online platforms or sold goods on marketplaces, you might also receive Form 1099-K. For miscellaneous income like royalties or prize money, Form 1099-MISC may apply.

Keep in mind that while the entity paying you generally files these forms with the IRS and sends you a copy, you’re responsible for reporting all income, even if you don’t receive a form. Multiple income sources can complicate reporting, so consult a tax professional if needed.

Forms for Investment and Savings Income

Income from investments and savings accounts also requires specific forms:

●      Form 1099-INT: Reports interest earned from savings accounts or bonds.

●      Form 1099-DIV: Summarizes dividend income.

●      Form 1099-B: Tracks capital gains or losses from selling investments.

Some financial institutions consolidate these forms into a single tax reporting statement for convenience.

Forms for Retirement Accounts

If you received distributions from pensions, IRAs, annuities, or other retirement accounts, Form 1099-R will document that income. For contributions to IRAs, Form 5498 serves as a record but doesn’t need to be filed with your tax return.

Bottom Line

Understanding the tax forms relevant to your financial activities is a vital step toward accurate and efficient tax filing. Whether you’re an employee, freelancer, investor, or retiree, these forms provide the information needed to comply with IRS requirements. While this guide outlines common tax documents, consulting a tax professional can ensure your unique financial situation is handled correctly, helping you maximize deductions, avoid errors, and achieve peace of mind during tax season.

Sources:

https://www.fidelity.com/learning-center/smart-money/tax-forms

Disclosures:

This information is an overview and should not be considered as specific guidance or recommendations for any individual or business.

This material is provided as a courtesy and for educational purposes only.

These are the views of the author, not the named Representative or Advisory Services Network, LLC, and should not be construed as investment advice. Neither the named Representative nor Advisory Services Network, LLC gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information.