7 forms critical to maxing out your tax refund

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Trashing your finances

Have you ever thrown away money?

It’s not a good feeling.?

One of my earliest memories with money is my dad giving me $10 every week for school lunches.? Ten dollars went pretty far back then.?

The standard school lunch consisting of mystery meat, soggy vegetables, and canned fruit set me back $1.50.? This meant I had 50 cents left over every day to indulge in the snack corner.? My treat of choice back then was an orange creamsicle or one of those Little Debbie brownies.?

One random Tuesday, after finishing lunch, I dutifully took my tray up to the washing station.? I put my plate and utensils in the water tub, dumped the trash from my tray, and put it in the rack to be washed.? With my civic duty done, I strolled over to the snack corner to blow the rest of my money on sugar.?

As I walked towards the snack corner, I searched my pockets for my two quarters.? As I got closer, I started to panic.? I couldn’t find my money.?

I frantically dug into my front pockets, turning them inside out, but to no avail.? I walked back to my seat, to see if I might have mistakenly left my money behind on the table or if it fell on the floor while I was eating.? No luck.?

And then it hit me.?

I had left my two quarters on my tray and had inadvertently dumped them into the trash.? I had thrown my money away.? My ticket to sugar-town was somewhere in the bottom of the trash can with dirty napkins and half eaten elementary school lunches piled on top of it.?

Resigned to my fate, I wallowed in misery for the rest of lunch while the kids who didn’t throw their money away enjoyed the spoils of their responsibility.

Clearly, I survived this minor setback, but the lesson stayed with me.?

Throwing away money – whether it’s literally or figuratively - stinks.? ????

The PGA pro who threw away $1,350,000

Not all tales of throwing money away are as innocent as my elementary school mishap.?

One of the most egregious cases happened in 2010 at the PGA Championship.? That year’s contest was held at Whistling Straits, a links-style course situated on the western shore of Lake Michigan in Kohler, Wisconsin. ?Known for its 1,000-plus bunkers, the course’s abundant hazards played a crucial role in one golfer throwing away his chance at a seven-figure payday.?

Dustin Johnson came into the final hole of the weekend with a one stroke lead over Martin Kaymer and Bubba Watson.? He needed par to clinch victory, but he didn’t get off to a great start.?

His tee shot on the 18th veered 75 feet wide of the fairway, landing beyond the designated gallery areas.? After clearing the spectators from the area, Johnson took his approach shot from within the gallery, surrounded by trampled grass, debris from the day’s festivities, and spectators.

His second shot missed the green, and with a chip and two putts, Jonson salvaged a bogey five. This score should have been enough to clinch a tie with Kaymer and Watson, setting the stage for a sudden-death playoff.

However, an unexpected turn of events unfolded.

Upon holing his bogey putt, Jonson was approached by a PGA Tour rules official. It was then revealed that Jonson's drive at the eighteenth had landed in a bunker.? His drive had ventured so far off course into the gallery that he failed to recognize the sandy hazard area.

The local rules had been posted in the player’s locker room all week and they were reviewed with the players ahead of the tournament.? The local rules explicitly stated that all areas designed as bunkers should be played as such, regardless of whether they were raked.

Johnson's ignorance of this rule led to his fatal mistake.?

Johnson treated the bunker like any other area and in the process violated Rule 12-b in the Rules of Golf.? This rule specifies that touching sand during the backswing in a bunker results in a two-stroke penalty.? After viewing the replay, rules officials determined that Johnson had grounded his club while he was setting up for his shot, which earned him a two-stroke penalty.?

The two-stroke penalty dropped Johnson into a 5th place tie, effectively throwing away his chance at the title.? Kaymer would go on to defeat Watson in the playoff and take home the $1,350,000 payday that came with it.?

Money in your mailbox

It’s highly unlikely that you’ll ever be in a position to throw away a chance at winning the PGA Championship, or $1,350,000 for that matter.?

However, this time of year you might be throwing away $100s or $1,000s.

If you file a tax return (and you better if you live in the U.S.) there are some important documents that will probably be mailed to you that you need to keep an eye out for.

Without them, you won’t have all the documentation you need to maximize your tax refund. Here's a few of the most important forms you should be watching your mailbox for:

Form 1098 - you'll receive one of these if you paid interest or points on your mortgage during 2023. Your mortgage servicer will send it to you. Look out, because if you refinanced during the year you might get more than one. Now, a lot of mortgage is not deductible like it was before because there are higher standard deductions. However, it's still a good idea to provide it to your tax preparer so they can determine if it makes sense for you to itemize your deductions or just take the standard.

Form 1098-E - you'll get this one if you paid any student loan interest. This one is super important because student loan interest is an above the line deduction, meaning it doesn't matter if you itemize or take the standard deduction, you'll still be able to deduct it from your income which is a big win.

Form 1099-INT, DIV, MISC - you will probably get a whole lot of 1099 with various letters after them. 1099 INT covers any interest paid to you. 1099-DIV reports any investment income like dividends capital gains that you earned in a taxable brokerage account. If you realized any investment losses last year, they'll be reported on your 1099-DIV. This is HUGE because those losses can help offset taxable income.

1098-T - you'll get this one if you paid any tuition during the year, and if you did, you might be eligible for the American Opportunity Tax Credit or Lifetime Learning Credit. Just a reminder, tax credits are WAY more valuable than just deductions. Credits are actual dollars you get back, whereas deductions just reduce your taxable income.

1095-A - you'll get this one if you were covered by health insurance you received through the ACA marketplace. It includes any premiums you paid, which might be deductible, and any tax credits you received.

Form 1099-SA and form 5498 SA both relate to Health Savings Accounts or HSAs. The 1099 will show you how much money you spent out of your health savings account. This money is a tax-free distribution provided you spent it on approved medical expenses.

Form 5498 shows the amount of money deposited into your HSA for the tax year. This one is important because you might have made an after-tax contribution that you didn't receive a deduction for yet. You'll need this form to claim that deduction when you file your taxes.

These are just a few of the most important documents you'll need to MAXIMIZE your tax refund this year.

Do taxes have you stressed out?

Taxes are one of the most overwhelming aspects of personal finance. It's one of the reasons what I spend so much time writing about them.

If you want to trade complexity for clarity on taxes, check out these previous editions of Master the Green -

Master your tax return

Is a Roth IRA or Traditional IRA right for you

What is "tax planning"

Tax deductions