Year end
As 2020 draws to a close, there are a few things we can do
to ease into the new year. I like to make a folder or large envelope labeled
“2020 taxes.” In the next few weeks, we will be getting W-2s, 1099-INT,
1099-Misc, 1099-SSA – Social Security statements, charitable giving receipts,
and a brand new one this year – 1099-NEC.
1099-NEC stands for “Non-employee compensation.” If you got
paid for work where you are not an employee, you will likely get a 1099-NEC. All
of these things go into the folder for 2020 tax prep. When we are confident
that we have everything, it is time to do the tax returns.
If we are reasonably competent and all of our income is
reported on W-2’s, we work and live in the same state, and we have minimal
deductions, we can probably do our own taxes online.
If there are complications that add to the complexity of the
return, we may want to consult a tax professional. Typical complications are
multi-state income, K-1 income, self-employment income, retirement account
roll-overs or unusual distributions, and so forth. Don’t fret over taxes. There
are H&R Block and other retail taxes services all over the country that do
millions of tax returns just like yours every year. Don’t wait until April 13
to begin looking for the papers you will need to complete your return.
In addition to preparing to do the tax return, my wife and I
have our annual planning meeting on January 1 of each year. We bring our dreams
and plans, as well as the net worth or balance sheet from this year as well as
the past few years to see how they compare one year over another.
We forecast, as best we can, what major expenses we will
have. This year we bought a new car, last year it was a furnace, and few years before
that, an air conditioner. Mainly we make sure we are still on the same page as
far as hopes and dreams are concerned. One of us doesn’t want to be dreaming of
a new house while the other is digging in to stay forever.
The January 1st planning day is when we plan
vacations, determine days off, as well as any other major decisions. This year
will be different because most of 2020 plans got cancelled or rolled into 2021.
Plan, but be flexible is what we learned this year.
If you are a “family of one”, this exercise is still
valuable. If there are children in the family, include them in the planning meeting
to hear their hopes and dreams for the year ahead. Vacation planning and family purchases should
include everyone involved. Everyone should have a voice and a vote.
Most of us will be glad to see 2020 go, but we should still pack
it up neatly and put it away in an orderly manner so we are ready for an
exciting new year of life.
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