The IRS is still working through millions of tax returns from 2020, because it is experiencing employee shortages and underfunding. The agency has also been working on implementation of new pandemic-related programs, such as the Advanced Child Tax Credit payments. As the IRS tries to catch up on 2020 returns, you can begin the process of filing your 2021 tax return.
Four tax documents you might need to file your tax return:
Form W-2
If you made employee contributions to your Servant Solutions retirement account (via salary reduction), those contributions will be listed on Form W-2 issued by your employer. If you made pre-tax contributions, they will be reported in Box 12E. If you made Roth contributions, they will be reported in Box 12BB. Do you know about the Saver’s Tax Credit? If you made contributions to your account, you might be eligible for up to a $2,000 credit on your tax return (claimed on Form 8880). For more information on the Saver’s Tax Credit, review our website at: servantsolutions.org/saverstaxcredit
If your employer made contributions to your Servant Solutions retirement account (as a fringe benefit above and beyond your salary), those contributions are not taxable and are not reported to the IRS.
Form 1099-R
If you withdrew funds from your Servant Solutions retirement account, you will receive a Form 1099-R from Principal. This document will help you report the taxable income related to your withdrawal (if any). If you are credentialed and retired, you can claim housing allowance toward your withdrawal. Do you have questions on how this process works? Visit the Credentialed Toolbox on our website at: servantsolutions.org/toolbox-series. A letter explaining Form 1099-R is included under Tax Resources.
Letter 6419
If you are eligible for the Advance Child Tax Credit, you will receive Letter 6419 from the IRS. This letter will help you reconcile and receive all the 2021 child tax credits to which you are entitled. The letter will include the total amount of advance child tax credit payments you received in 2021 and the number of qualifying children used to calculate the advanced payments. Be sure to keep this letter and provide it to your tax preparer (or use it to prepare your tax return).
Letter 6475
The IRS will issue Letter 6475, Your Third Economic Impact Payment (EIP), to EIP recipients. If you are an EIP recipient, this letter will help you determine if you are entitled to and should claim the recovery rebate credit on your tax return. Again, be sure to keep this letter and provide it to your tax preparer (or use it to prepare your tax return).
Servant Solutions is your trusted financial partner, and we are here to help. Let us know if you have any questions; we’d love to hear from you!