There are two situations in which you might use bank statements to help you file your tax return: if you have interest income that you must report, and if you failed to receive documents such as Form W-2 and Form 1099-MISC because they were never sent to you. In the latter case, it is acceptable to use bank statements to prepare your return.
Form 1099-INT is a statement that your bank is required to send you if it paid you at least $10 in interest during the tax year. Use this form to report interest income on Form 1040, because the bank will send a copy to the IRS and the IRS will compare their copy with the amount you reported on your Form 1040. Keep Form 1040-INT for your records.
Forms W-2 and 1099-MISC
If you are employed, you should receive a copy of Form W-2 from your employer by February 1 of the following tax year. If you are self-employed, each client who paid you $600 or more for services must send you Form 1099-MISC by January 31 of the following tax year, unless you are an attorney or an accountant. If you receive the appropriate form on time, you won't need to prepare your tax return using bank statements, because they report all payments made to you along with any tax withheld. If you don't receive them, contact your employer or client. If you don't receive the appropriate form by February 15, contact the IRS and they will try to assist you.
Estimating your Income and Withholdings
If you don't receive the appropriate form on time, you may use bank statements to estimate your taxes if your income was regularly deposited directly into your bank account. You can use IRS withholding tables, available on the IRS website, to calculate how much your employer withheld for income tax, Social Security and Medicare. If you are self-employed, it is almost certain that your clients withheld nothing from your pay. You must submit Form 4852 along with Form 1040 if you are missing Form W-2. You don't have to submit your bank statements with your tax return, but you should keep them for your records.
Filing an Amended Return
If you receive your income documents after filing your tax return and discover that you made errors, you need to file an amended tax return, Form 1040X. Form 1040X requires you to list your original entries along with any amended entries. You must also include an explanation of your amendments. If your inaccuracies caused you to underpay your taxes, the IRS may assess penalties and interest on the overdue amount. The IRS may waive these amounts if you can show that you exercised reasonable care in preparing your tax return.
David Carnes has been a full-time writer since 1998 and has published two full-length novels. He spends much of his time in various Asian countries and is fluent in Mandarin Chinese. He earned a Juris Doctorate from the University of Kentucky College of Law.