Sometime in the next week or two, you should receive the last of the third-party tax reporting forms for last year: W-2s and 1099s, mortgage interest statements and various other documents that come in envelopes which say "Important Tax Information Enclosed." All of these are legally required to be mailed by Jan. 31. That means you should have them by about Feb. 10, even taking into account the deadline being a Saturday, the legendary slowness of the post office and the possibility that some payers might backdate the postage meter imprint. All this has two important implications.

First, you should have a pretty good idea who should be sending you these forms, particularly W-2s and the 1099s for dividends and interest. (Payers of fee income are not required to send forms 1099 unless the annual amount exceeds $600, and smaller ones in particular often fail to do so even when they should.) If you do not receive them on time, or if they are wrong, call the payer immediately. W-2s for residuals, where the check itself comes via SAG or AFTRA, tend to be a particular problem, and the payment companies are swamped with calls as April 15 approaches. Unless you get some perverse satisfaction out of hearing insipid music punctuated by announcements that "your call is important to us, please stay on the line," make the calls now.

Second, it means you have no one else to blame if you wait until the last minute to do your income taxes and then discover that you lack vital information. Those payers don't know you did not receive the form unless you call, and only you can organize your other data.

What Other Data?

For most people, there are really only two sets of other data. First, and most common, are your deductible expenses. Those, in turn, divide into business expenses and the "big five" of itemized deductions: medical, charitable, property taxes, state and local income taxes, and home mortgage interest. Except perhaps for medical, the big five are easy. Charities send receipts, mortgage lenders send annual statements (which also cover property taxes if paid from escrow), and the others are a few checks per year at most.

Business expenses take more thought and care, if for no other reason than that they must be divided into numerous categories. Don't think that the year-end summary from your credit card does it for you; their typical classifications of airlines, restaurants, hotels, car rentals and "all other" are oriented towards employees' expense reports rather than income taxes.

The second set of "other data" involves stocks and mutual funds. If you sold any during the year, you need to figure out when you bought them and what you paid for them. Most mutual fund companies now keep track of this for you, as will many brokerage firms if you bought the investments through them (or gave them the information when you transferred your account).

Do It Now

Even those who must root through old boxes of paper to find stock purchase records or have to wait for replacement W-2s should be able to prepare their income tax returns by early March. The only exception would be those few of you who are the beneficiary of a trust, or who own part of a business organized as a pass-through entity that is a partnership, limited liability company or S corporation. Those entities have to complete their own tax returns before they can provide the information to you, and those forms (Schedules K-1) are often received at the last minute. But nothing prevents you from having all the other information to your tax accountant, in his computer, ready to process when these last data arrive.

Why, then, are people often stacked like firewood in my reception area in early April?

Open A Little Wider, Please

Dealing with income taxes seems to be a lot like going to the dentist. It's one of those routine, not-much-fun things that we all have to do. Some people maintain a routine with both. Others postpone both till the last possible minute, apparently fearful they would look stupid or be chastised, or have some terrible, unpleasant result. And in both cases, putting it off can make that terrible, unpleasant result worse. You might have only needed a filling instead of a root canal if you hadn't waited to see the dentist. You wouldn't owe any less in taxes if you come in early, but at least you'd have time to put the money together before mailing the returns and check on April 14. And if you have a refund coming, you want it in your bank account sooner rather than later.

Tax return preparation is like dentistry in one other important way: Most people expect a worse outcome than what actually occurs. I frequently find myself telling people they have a refund coming when they expected to owe, or that they owe far less than they thought--not every time, of course, but more often than not. And while I would love to take full credit for that happy result, I can't. Mostly, people hear horror stories and assume that their experience will be even worse.

First Time Offered This Year

Confused about what the numerous categories of deductible business expenses are? Each year, I update and offer my "Checklist of Potentially Deductible Items" for those in the performing arts, and I offer it free to PerformInk readers. Just call, write or e-mail me, and we'll be happy to send one out to you.

Are there money or tax questions you would like to see discussed in this column? Let me know, at 2835 N. Sheffield, Suite 311, Chicago, IL 60657, or call 773/525-1778 (888/525-1778 toll-free outside the Chicago area) or e-mail greg@gregmermel.com.
Greg Mermel is a certified public accountant whose clients in the arts range from individual performers to major theatre companies and suppliers. He also sometimes produces theatre.