Simplify Your Tax Filing: Key Information and Common Mistakes to Avoid

Tax season is upon us! Whether you're excited or dreading it, we want to help make the document and filing process smoother for you. Here are some important details about your tax documents, as well as some helpful tips to ease your filing experience. Additionally, I’ll touch on some nuance related to Back-Door Roth Conversions, and some trends that I’ve seen in hopes of preventing potential ugly letters from the IRS, needs for amendments, etc.

Tax Form Publication/Mailing Dates

On January 28^th, you should have received an email from Mia Salomon titled “Tax season information inside.” This email is jam-packed with dates of tax form publication, how to access your tax documents on Client Access (with photo tutorial!), and some relationships that we have with tax preparation software companies. I will re-state some of the key information because of the importance.

• January 31 – Mailing of Form 1099-Q and Retirement Tax Packages and Raymond James Bank year-end bank tax packets

1099-Q is distributions from 529 plans, 1099-R is distributions from IRAs or other retirement accounts.

• February 15 – Mailing of original Form 1099s

These are your primary consolidated 1099s for taxable brokerage accounts. They contain several 1099s, including 1099-DIV, 1099-INT, 1099B, etc.

• February 28 – Begin mailing delayed and amended Form 1099s
• March 15 – Final mailing of any remaining delayed original Form 1099s

If we find out that your 1099s will be delayed for any reason (usually as a result of particular underlying holdings delaying their reporting), you should receive an email notice, and we will reach out to you directly.

Tax Form Access

Again, please refer to the email from Mia on January 28^th for the photo tutorial. To summarize, on Client Access you can follow the tab tree of MY ACCOUNTS > Documents > Tax Reporting.

You can sort by account grouping, individual account, and year.

Tax Software Partnership

Raymond James has partnered with TurboTax, H&R Block, and TaxACT to make document upload easier. Here is a link with additional information specific to each vendor.

Using TurboTax as an example, I’ll orient you on the information you need to import 1099s:

When you are entering income, and 1099s, the software will ask you where your accounts are held. You’ll type “Raymond James.” It will then ask you for your account number, followed by a Document ID. This data is found at the top of page 3 of your Consolidated 1099s, and in the top right of your 1099-R. Below is a snip from a Consolidated 1099 from last year as an example. The Document ID is case sensitive, so ensure to use ALL CAPS.

Lastly, the Document ID does not change from year to year for each account. If you enter the account number and Document ID, it will pull the most recently published year’s information. For instance, if 2024 forms are already published, it will pull those numbers. If you ever find yourself needing to file an amended return for a previous year, you have to either scan those previous years’ 1099s into your software, or manually enter the data.

Back-Door Roth IRA Conversions

As a disclaimer, always defer to your tax professional or tax software for further information.

A common mistake is clients misfiling Back-Door Roth IRA Conversions on their tax software, or mis-communicating a Back-Door Roth IRA Conversion with their tax professional.

If your income is too high to contribute directly to a Roth IRA, and if you currently have no current Traditional (pretax) IRA balances, you may fund a non-deductible IRA and then convert it to a Roth IRA. Your IRA will produce a 1099-R to reflect the distribution, and your Roth IRA will produce a Form 5498 showing receipt of the converted balance.

Here's the key nuance: It's important to understand that you are not directly funding a Roth IRA. If your tax software or tax professional asks if you directly funded a Roth IRA, the answer should be "no." What you’re actually doing is funding an IRA and then converting it to your Roth IRA. This distinction is crucial to avoid penalties.

If you mistakenly report that you directly funded a Roth IRA, the software or your tax professional will flag it, indicating that you made too much money to be eligible and therefore made excess contributions. These excess contributions are required to be removed, and you could face a 6.5% annual penalty until those excess contributions are removed.

Trends

I haven’t seen everything, but I’ve seen a lot! Here are some common mistakes and trends I’ve seen that I’d like to try to prevent for your sake and ours.

• Clients not downloading 1099s at all: For a variety of reasons, some clients haven’t downloaded their 1099s or uploaded them to their software or given them to their CPA. Sometimes it’s miscommunication between spouses with separate accounts, sometimes it’s filing taxes before forms are published, and a variety of other reasons. Either way, ensure you access them, and provide them to your tax filer.
• Clients not downloading all 1099s: If we’ve opened any new accounts for you this year (such as expanding your brokerage account structure), there will be new 1099s that you hadn’t downloaded the previous years. Software or a tax professional will ask for the ones they are accustomed to receiving, so ensure you get everything.
• Clients mis-entering data: This is simply human error. I’ve done it to myself, honestly. Using the Account Number and Document ID to digitally import information prevents this type of error.
• Clients mis-reporting Back-Door Roth Conversions: See above for the topic.
• Clients under-withholding on Pension Income: If you are retired military, ensure you go into DFAS and adjust withholdings to reflect your new overall tax bracket. This will help avoid under-withholding, owing a startling amount due at filing, and penalties from the IRS.

If you have any questions or need assistance, please don't hesitate to reach out. We're here to help make this tax season as smooth as possible for you!