Why Every US Taxpayer Should Request an IRS Transcript Annually
As a Certified Public Accountant (CPA), I strongly recommend that every US taxpayer take a crucial step each year: request an IRS transcript. This simple action can save you from potential financial pitfalls and ensure your tax filings are accurate.
What is an IRS Transcript?
An IRS transcript is a record of your tax-related information that the IRS has on file. By visiting the IRS website, you can order different types of transcripts, but the most relevant for most taxpayers is the Wage and Income Transcript. This document lists all income reported under your name for a specific tax year.
Why is it Important?
Pulling a transcript allows you to verify that you have reported all income that the IRS already knows about. Common income people forget to include on their returns include things such as:
Taxable Retirement Distributions: Ensure you haven’t missed reporting any distributions from retirement accounts.
Interest Income: Confirm that interest from high-yield savings accounts or other investments is accurately reported.
Avoid Costly Mistakes
I’ve heard horror stories where individuals faced hefty fees and penalties, sometimes amounting to tens of thousands of dollars, simply because they forgot to report income that was already on the IRS’s radar. By regularly checking your IRS transcript, you can avoid these costly mistakes.
Timing is Key
It’s important to note that the most recent year’s wage and income transcripts are typically not available until July. Plan accordingly to ensure you have the most up-to-date information when preparing your tax return.
How to Get Your Transcript
Visit the IRS Website: Go to the IRS transcript request page.
Order Your Transcript: Follow the instructions to request your wage and income transcript.
By taking this proactive step, you can ensure your tax filings are accurate and avoid unnecessary penalties. It’s a small effort that can make a significant difference in your financial well-being.
