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If you lose a W-2 form or 1099 form or can’t seem to locate some of the other documents that you need to complete your income tax return, you’ll need to deal with delays in your ability to file and with possible penalties if your filing ends up being incomplete.
The month of April can be unforgiving when it comes to filing your taxes with the IRS.
However, how much hassle you will need to put up with depends on the events of the months prior.
From January to March each year, income tax filers receive and maintain essential documents such as bank interest statements, business expense receipts, 1099 miscellaneous income statements, K-1 partnership statements, and so on.
The IRS Prescribes Penalties.
Losing a 1099 or other necessary document required for preparing returns is a common problem.
Large numbers of business and individual filers often lose something or the other. Nevertheless, when a return is filed without every required document, the IRS considers the return incomplete, even if it is filed in time and is accepted.
If your business’s gross annual revenue exceeds $1 million, you pay a penalty of $100 for each day that you’re unable to complete your return, with the maximum penalty capped at $50,000.
The penalty drops to $10 a day and a cap of $5,000 if your annual revenue is under $1 million.
It’s essential to keep in mind that late filings attract a penalty worth 5 percent of what you owe in taxes. This penalty can be significant — usually more than the penalty involved in making an incomplete filing.
For this reason, if your return is incomplete, it still makes sense to file it by the due date. You can file and then look for ways to get replacements for the documents that are missing.
Finding Replacement Documents
If you lose a document or never received it, the best way to obtain a replacement is to get in touch with whatever organization sent you the document to begin with.
For example, if an employer withholds tax payments from your pay, but you don’t have your W-2, all you need to do is to apply to your employer for a duplicate.
If you’re a self-employed consultant and don’t have a 1099 form to report income from a consulting job, you need to contact the customer who paid you to get a replacement.
Many times, people cannot get hold of their 1099 because the issuer sent it to the wrong address.
If your 1099 doesn’t arrive by the second week of February, then you should contact the issuer, make sure that they have the right address, and apply for a duplicate.
When you have no 1099 for the interest you’ve earned from a bank deposit, you need to call the bank for a duplicate or check out the bank’s website to see if they have downloadable 1099s.
If you apply for a duplicate of a document of some description, but the issuer doesn’t seem to respond, you can always apply to the IRS.
All information to do with returns needs to be filed with them. They can issue copies to taxpayers when they receive applications.
It would help if you usually had returns from past years to fill out your current return.
For example, if you bought equipment in a previous year, and claimed depreciation on it, you’ll need the depreciation information that you filed in that year to know how much to claim in the current year.
If you’ve lost your return from the past, you get to apply to the IRS for a copy.
The website of the IRS has a Get Transcript tool that you can use to download any past return that you want.
However, there’s no simple way to obtain copies of receipts and other supporting documents that you may have lost.
If you’ve lost them, you may offer as proof of an expense an entry on your credit card or bank account statement. If you need a cash receipt, the business that initially issued you the receipt may be able to give you a duplicate.
If you aren’t sure what vendor or business you made a purchase from, however, the IRS can be understanding and accept reasonable estimates in place of actual proof, in the form of past bank records and financial statements.
Given the kind of paperwork that businesses need to keep track of, it is inevitable that something will always go missing around tax time.
One of the best ways to keep yourself from losing paperwork is to make sure that you maintain digitally scanned copies on cloud-based storage at all times. With digital documents, you’ll always have access to the information that you need to file a complete return.
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