Hello Tax Season

So fun fact, my dad, who is also my mentor and inspired me to pursue a career in financial planning started off his career as an accountant.

Another fun fact, I was born April 16th which was the day after tax season wrapped up the year I was born. Can you think of a better way to celebrate the end of tax season like welcoming a child into the world!? I’ve been told he was on the golf course when my mom called him frantically to tell him I was on the way.

Mom, feel free to fact check this.

Anyway, we are not here to talk about my birth story. That would be disgusting. Instead we are talking about tax season! I’m not sure which one is worse if I am being completely honest.

I put together this post to share some tax time reminders, provide of list of documents and forms that you need to pull together for your account (or yourself if you self prepare) and wrap up with some planning opportunities for 2020 tax year.


The biggest reminder is that your tax return is due April 15, 2020, if you don’t plan on filing an extension. Between now and then it’s important to begin gathering all the materials you need to file your taxes, more on that in a minute, and make any IRA contributions still outstanding for 2019.

Traditional IRA

This is not the first time we’ve talked about Traditional IRAs on the blog. As a refresher, Traditional IRAs are funded with pre-tax dollars, meaning you receive the federal tax deduction on the contribution. For the year 2019, individuals under the age of 50 can contribute up to $6,000 for tax year 2019. If you are over the age of 50, you get an extra $1,000 catch-up contribution for a total annual contribution of $7,000. For both account holders under 50 and over 50, you have until April 15, 2020, to make this contribution to get credit on your 2019 tax return.

The defining characteristic of a Traditional IRA is that pre-tax dollars grow tax-deferred and are later taxed in retirement at the account owner’s marginal tax rate. This is a great savings vehicle for retirement but you are prohibited from getting a tax deduction on the contributions if you make more than the income limits below.

Traditional IRA Income Limits for 2019 and 2020

Table from nerdwallet.com

Roth IRA

A Roth IRA is the “new” kid on the block, relatively speaking, and is funded with after-tax dollars. There is no tax deduction up front like with the Traditional IRA but your dollars will contiue to grow tax-deferred. The hallmark of the Roth IRA is that funds withdrawn in retirement are tax free.

The same contribution limits for Traditional IRAs also apply to Roth IRAs. Individuals under the age of 50 can contribute up to $6,000 and those over the age of 50 can make a $1,000 catch-up contribution for a total contribution of $7,000.

A Roth IRA is another fantastic savings vehicle for retirement but there are also income limits like the Traditional IRA. If you make over the income limit based on your tax filing status, you are prohibited from making contributions directly into a Roth IRA.

Roth IRA Income Contribution Limits

Table from nerdwallet.com

Backdoor Roth Conversion

I already dedicated a full blog post to the backdoor Roth conversion so I won’t bore you all with the details again. What I will say is that you don’t need to complete the full backdoor Roth conversion process by the tax filing deadline to get credit for 2019 but you do need to make the non-deductible IRA contribution by April 15, 2020, if its for tax year 2019.

Things to Share with an Accountant

  • Form W-2 – if you are a W-2 employee this will given or sent to you from your employer.
  • Form 1099 -R – generated when funds are distributed or rolled out of an IRA or 401(k). Think 401(k) rollovers and backdoor Roth contributions.
  • Form 1099 – INT – if you opened up a high yield savings account during 2019 or already have one, be on the lookout for this form.
  • Form 1099 – DIV – generated on taxable investment accounts that have paid out a dividend or income payment.
  • Form 1099-B – will be generated by your investment custodian if investments were sold during the year.
  • 1099 -MISC – reports miscellaneous income that came from employment as a contractor or from a side hustle.
  • Form 8889 – If you have a Health Savings Account (HSA) and have funded it and/or taken distributions you will need to include this with your taxes.
  • Form 1095-A – statement that shows proof of insurance throughout the year. If you switched jobs this year or your employer switched health care providers be on the look out for multiple forms.
  • Form 1098 – report of mortgage interest
  • Form 1098-C – report of student loan interest
  • 529 contributions – especially if they qualify for a state tax deduction
  • Backdoor Roth Contribution – your accountant will need to track and file your non-deductible IRA contributions.

Plan Ahead

Once your taxes are done and filed, use this opportunity to plan ahead for the next tax season. There are some simple changes you can make if you find yourself with a tax refund or writing a check to cover your taxes.

Tax Refund

If you find yourself in the fortunate position of having a tax refund, congratulations (sort of)! While yes, it’s nice to have an unexpected windfall, having a refund means that you over paid (over withheld) your taxes throughout the year. In this scenario, the government has been holding onto your earned income, interest free. Let that sink in for a moment…

You are entitled to feel however you want about a tax refund. Some people get excited to have the bonus and other people are angered and frustrated. If want to change the outcome for next year and not loan out your money to the government for free, now would be a great time to run a tax withholding estimator for 2020 and zero in on the perfect amount of withholding from your paychecks.

Writing a Check

If you find yourself writing a check for taxes, one reason might be that you have the opposite problem and didn’t withhold enough in taxes throughout the year. Again, take this time when the sting of writing that final tax bill is still fresh and run a tax withholding estimator for 2020. Remember that big life events like getting married and having children will have a impact on your tax situation. It’s always a good idea to revisit the estimator each year.

The other remedy to having a high tax bill is understanding all the options to defer taxes. We are talking legal ways to defer taxes so don’t get the wrong idea! I listed the more common tax deferral opportunities for income earners below:

A combination of deferring more income into tax-deferred accounts coupled with adjusting your withholding should get you on track for next tax year.

Wishing you the best as you navigate this tax season. Any questions on the items above or questions on starting your own account, feel free to reach out.

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