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Hello All-
Just checking in with a few important reminders for your 2023 tax filing.
First, if, in 2023, you had self-employed/1099 income (separate from W2), and would still like to make additional tax-deferred retirement contributions to a SEP IRA, or Solo 401k (for 2023), please let us know ASAP. If these accounts have not yet been established, only the SEP IRA is available to you for 2023, not the Solo 401k (Solo 401k’s have to at least be established by 12/31 of the tax year). You can contribute up to 25% of your net earnings from this self-employed/’side hustle’ income (to limit of $66,000, or $73,500 if you’re 50 or older, for 2023). Please consult your tax advisor on allowable contribution amount before making your contribution.
Second, Fidelity 2023 tax forms can be found by following these steps:
· Go to Fidelity dashboard/homepage
· Under ‘All Accounts’ heading @ top/center of page, select ‘Documents’
· On top left side of next page, under ‘Statements’ select ‘Tax Forms’
· Primary form you’ll be looking for is ‘Consolidated Form 1099’
If you made any withdrawals from a retirement plan or insurance policy (including rollovers, Roth conversions, etc.), you’ll also need to collect Form(s) 1099-R and ensure your tax preparer is aware of any special circumstances (e.g. after-tax basis, rollovers, charitable donations, insurance policy exchanges, etc.) For those over age 70.5 doing Qualified Charitable Distributions (QCDs) from IRA, keep in mind these amounts are EXCLUDED from Form 1099-R.
For back-door Roth conversions, Form 8606 is the key to successful reporting on this strategy. The tax form, which is filed as part of your overall return, reports to the IRS that the Traditional IRA contribution you made to start the process of the backdoor Roth IRA was not a deductible contribution. In other words, you are not taking a tax deduction for the Traditional IRA contribution. In essence, this maintains the ‘after-tax’ status of those dollars and allows the conversion from the Traditional IRA to the Roth IRA to be a non-taxable event. As a reminder, if we haven’t yet proposed a back-door Roth IRA for you, it is likely because you have other pre-tax/tax-deferred IRA accounts (e.g. Rollover IRA, Traditional IRA) which preclude us from being able to implement this strategy. In any case, let us know if you would like to revisit this.
If you paid interest to borrow against the value of your non-qualified/brokerage/trust account (typically referred to as a ‘margin loan’), you can deduct the interest from your taxes by itemizing your deductions and subtracting margin interest costs from your net investment income. Tax law limits how you can apply margin interest deductions. Specifically, you can never deduct more than your investments earn in any given tax year. However, any margin interest you don’t deduct from taxes can apply to future years. Be sure to make it clear to your tax preparer that you paid margin interest in 2023. If the borrowing was done through one of our external lending partners, either US Bank or Tristate, these entities send separate year-end interest statements. If the borrowing was done with Fidelity as intermediary (this was the case for most clients in 2023), you have to go a little deeper into the 1099 to find that interest figure. This Fidelity webpage will help guide you: Understanding your 1099 tax form. The investment (margin) interest deduction is then claimed on Form 4952 Investment Interest Expense Deduction and the allowable deduction will flow to Schedule A (Form 1040) Itemized Deductions, Line 9 to be claimed as an itemized deduction, up to the amount of your investment income.
Of course, if you have any difficulty finding these forms, just let us know and we will assist you and/or simply send the documents in a secure, encrypted email.
Here are a some useful documents -
Employees - What Issues Should I Consider when Reviewing 2023 Tax Return
Retirees - What Issues Should I Consider when Reviewing 2023 Tax Return
Any other questions, just fire away.
Charlie
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