An informational return is a tax form a business fills out telling the IRS and state governments that a taxpayer earned a type of income and certain types of expenses/payments. Types of income can range from dividends, interest, wages, self-employed income, rental income, income from education savings programs, cancellation of debt and more…. Some of the payments can be mortgage interest and real estate taxes, payments for education, health insurance from the marketplace.
Enter in the IRS matching program: These informational returns are then sent to the IRS and state. The government can now see what types of income you were paid, and this also gives them an idea of what income they can expect to see on your return. The IRS then matches what they have on file with the information you put on your tax return. When there is a mismatch, that will generate a notice asking for a correction and/or explanation. Then the appropriate steps can be taken.
These informational returns also help reconstruct tax returns when you haven’t filed in several years and you have lost the forms for a variety of reasons. All I do is log into your account at the IRS, with a Power of Attorney (POA) and pull copies of the informational returns that were filed with the IRS.
So, when tax time comes, it is important you give all these informational returns to your tax preparer so the information can be put on your return to avoid the mismatching.
Some of the forms include but not all inclusive are the 1099 series: DIV, INT, B, C, A, MISC,
NEC (new in 2020), Form 1098 from mortgage companies, K-1’s from S-Corps, partnerships and estates
DON’T FORGET: Several years ago, we offered an IRS Transcript Monitoring Plan (TMP), and I spent this year revamping it and now I am offering it again, but much more comprehensive than in the past. With a signed Power of Attorney (POA), we can access your transcripts at the IRS and see what they see on a daily basis. The beauty of the TMP is that we will be immediately notified of any change to your IRS account, often before a notice arrives in the mail. If you have any questions about the program, feel free to reach out. This is a good program if you have current issues with the IRS or just want peace of mind
Ancient taxes from around the world
Taxes from England:
- Playing cards were taxed as early as the 16th century, but in 1710, the English government dramatically raised taxes on cards and dice. This led to widespread forgeries of cards to avoid paying the tax. The tax wasn’t removed until 1960.
- In 1660, England placed a tax on fireplaces. The tax led people to brick up their fireplaces to conceal them and avoid paying the tax. It was repealed in 1689.