5 Annual Tax Forms That Keep You Out of Trouble

Every year, we encounter tax forms that determine how many taxes are collected out of our wages and therefore how much tax is owed at the end of the year. Some forms may only be filled in annually but should be reviewed often as life events happen. When is the last time you really examined the following tax forms?

1.       Form W-2 Wage and Tax Statement – Employers are required to report your annual wages on Form W-2 each year by January 31 so that taxpayers can complete their tax returns. This wage statement should be reviewed annually for accuracy to ensure wages are properly classified and that all wages are reported. W-2 wages are used to determine annual tax amounts but also social security and Medicare benefits.

2.       Form W-4 Employees Withholding Certificate – Most people only complete a W-4 at the beginning of their employment with a new employer. This tells the employer your filing status (single or married) and number of dependents so that they can determine your tax withholding. Too little tax withheld means taxes owed at tax time. Too many taxes held ensures the government withholds your money that could have been used for other purposes. Form W-4 should be reviewed anytime there’s a change in marital status or dependents or if you’ve determined that you will owe at the end of the year.

3.       Form 8879 IRS E-file Signature Authorization – Before a tax return can be electronically filed, your tax preparer is required to get your signature that you have reviewed and approve filing the tax return as it was presented. Form 8879 not only gives your tax preparer permission to file your taxes but also certifies that you have reviewed and take full responsibility for the accuracy and information contained within. Taxpayers should review their return carefully prior to signing Form 8879.

4.       Form 8821 Tax Information Authorization – This form gives an individual or company permission to receive your written confidential tax information for specific tax years. This is specific to your tax transcripts and does not give permission for the individual to act or negotiate on your behalf.

5.       Form 2848 Power of Attorney and Declaration of Representative – This form gives your EA or CPA permission to act on your behalf when speaking or negotiating with IRS representatives. This form is typically signed for tax resolution services where your tax preparer needs to review prior tax records, negotiate payment plans or respond to an IRS notice.