Don't rush to E-File your 2010 Form 1040 Federal Tax Return

Time to start gathering all your important tax documents to file your 2010 Federal tax return by Monday, April 18, 2011.  Yes, we have an extra weekend this year because Emancipation Day, a holiday observed in the District of Columbia, falls this year on Friday, April 15th.  Many taxpayers will need it.  Do you own mutual funds, stocks, and bonds outside of a retirement account?  Do you have a brokerage account?

In the coming weeks, your broker, i.e. TD Ameritrade, Charles Schwab, etc., will be mailing out a Consolidated Form 1099 which is an all-inclusive statement which reports all income and transactions for the entire year like dividends, interest, and capital gains.  These financial institutions have until February 15, 2011 to mail out consolidated Form 1099; unlike your employer and mortgage lender who will mail out your W-2 and Form 1098 by January 31st. 

Moreover, you may also be sent a corrected Consolidated Form 1099 if you held an investment trust that reclassified income after your original form was sent out to you.  I have seen taxpayers received up to 3 corrected consolidated statements all the way into mid-March.  If you receive a corrected Consolidated Form 1099 after you e-Filed your tax return, you may have to file an amended tax return and mail it in.  Your investment advisor may know if your account will be part of any corrected mailings.

My suggestion is to prepare your tax return and then just wait to submit your return electronically.  This will save you time and money, if you pay to have your tax return prepared by a Registered Tax Preparer, and avoid filing an amended return.   


Oh wait, there's more!

Tax law changes enacted on December 17th means some taxpayers will need to wait until mid-to-late February to file their tax returns allowing the IRS time to reprogram its processing systems.  Taxpayers   impacted by these late year tax changes include taxpayers that:

• itemize deductions on Form 1040 - Sch. A, and/or   
• claim the higher education tuition and fees deduction, and/or
• claim the educator expense deduction.

So if you're expecting a tax refund, be prepared to wait a little longer for it.  E-File and utilize direct deposit of your refund to help off-set the wait.

Need help preparing your tax return, email me at advisorana@cfl.rr.com.  I have been preparing tax returns since 2002.