10 Tax Return Surprises You’ll Want to Avoid, Ep #213

After working with hundreds of our clients to prepare their tax returns, we’ve discovered some new tax surprises that if preparing beforehand, could be helpful when completing your tax return this year.

10 Tax Return Surprises

Tax planning and preparation are important to us here at Financial Symmetry, which is why we have a tax team devoted to preparing hundreds of our clients’ tax returns each year. Do you have a tax preparer or are you on your own? Either way, you’ll want to make sure you have all the documents you need.

  1. Inheritance surprises: If you have recently inherited brokerage accounts or property, you may be in for some tax surprises. These could include capital gains, state taxes, or even RMDs.
  2. Credit card rewards: This is the first time we have had a client that received a 1099 from cash back from credit card rewards
  3. Interest income: This year interest rates went up so you may have interest income that is higher than in years past.
  4. Income from other states: Since the work-from-home, work-from-anywhere model started during the pandemic, companies have employees working from different locations. This may mean that you need to file different state taxes.
  5. 1099Ks: If you have sold items using Venmo or received payments over $600 you will receive a 1099K. Don’t forget to include it on your tax return.
  6. Underwithholding from your W4: You may owe more than you think because you don’t have enough withheld from your paycheck. Fill out a new W4 so that you won’t owe so much next year.
  7. Forgotten statements: Whether they get lost in the mail or you forget you had them, 1099s and mortgage interest statements need to be filed on your tax return.
  8. Double taxation: If you use a backdoor Roth make sure you don’t get taxed twice. Make sure you are using form 8606 to avoid double taxation.
  9. Underpayment penalty: You may not have realized that you were going to owe so much this year and when you realize that you owe more than you thought you may also be hit with an underpayment penalty.
  10. K1 for small business owners: Small business owners may not realize that they need to fill out a K1 form.

Nobody likes tax surprises, but understand the people preparing your return are doing the best job they can for you. The best thing you can do is verify that everything is correct so that you don’t have to go back and amend your tax return. Learn steps you can take to prepare for surprises like these when you file your taxes

Outline of This Episode

  • [0:42] The Slott Report
  • [2:39] Surprises for those who have lost family members
  • [6:51] Credit card rewards
  • [8:10] Interest income
  • [10:54] Income earned in different states
  • [12:32] 1099Ks
  • [14:14] Underwithholding from your W4
  • [15:56] Forgotten statements
  • [17:32] Double taxation on the Backdoor Roth
  • [19:49] Underpayment penalty
  • [21:14] The K1 for small business owners

Resources & People Mentioned

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