It’s tax time, you’re digging through your records… and your preparer or tax software asks about tax payments you’ve already made. Um, was I supposed to track those?
Lots of small business owners pay what are known as “quarterly estimated taxes” to the IRS and their state department of revenue throughout the year — as a replacement or in addition to W-2 withholding, in order to pay tax on their self-employed or pass-through company’s profit. But what happens if you didn’t keep notes on these payments? No worries — the IRS did.
“What is an IRS Account Transcript and Why Do I Need One?”
During the pandemic, we began requiring all clients to submit a copy of their IRS Account Transcript along with their Tax Organizer and other annual tax prep documentation. Initially, this was to confirm the amounts of stimulus payments and child tax credit payments. But what we found was that it was a great way to confirm how much the client paid to the IRS for quarterly estimated taxes — and to make sure we credited the payment to the correct tax year. As such, we now always require a copy of this particular transcript — and wish we’d done so all along! It’s free, reasonably easy, and reliable. In the end, it saves the clients (and us) a load of potential headaches.
It’s important to note that there is more than one type of transcript, and each meets a different need. For example, if you’re trying to prepare a tax return for a prior-year and need a list of all the informational documents filed with the IRS that are associated with your SSN, you’d want a Wage & Income Transcript. For more info on how to do that, and the various types of transcripts out there, please see the comprehensive article I wrote for MSN on the topic.
An Account Transcript lists information on payments and credits posted to your account throughout the year, such as quarterly estimated tax payments. The best news where downloading any transcript is concerned? All you need is a photo ID, a mobile phone with a camera, an email address, and an Internet connection.
Keep in mind that the IRS will not email you a transcript; you must go online and create or log in to your account and download it. There are email scams out there that entice folks to click on a link or attachment with the promise of an IRS Online transcript – don’t fall prey.
“How Can I Download My IRS Transcript?”
1. From the IRS website, you’ll need to create an ID.me account. (This is the most involved of the steps, but thankfully you only have to do it once; moving forward, you’ll simply sign into the same account each time.) The ID.me website uses facial recognition to confirm your identity, so you’ll need your phone to take a selfie.
If you need help creating your ID.me account, the ID.me Help Center spells out the process very clearly. You can also watch this video or review these written instructions if you want to review the process first.
One note: if you were using the old IRS account system, you won’t be able to log in with your previous IRS username and password anymore — the IRS sunsetted that program in early and now you need to use the ID.me system. At this point, most of our clients already have ID.me set up, but this may be new to you if you’ve never downloaded a transcript before.
2. Once your account is created, log in, go to the IRS’s Get Transcript page and click the “Sign into your online account” button (or the “Get Transcript Online” button, depending on which version of the screen you see).
3. You used to have to select the reason you need a transcript. This seems to no longer be a part of the process, but I’m leaving the screenshot here just in case the workflow is not consistent from one login to the next. If you are prompted, it’s fine to just select “Other”.
4. Once on the “Transcripts” page, you will see an expansion arrow at the top for “Customer File Number”. Unless you were directed by a third-party to enter something here, leave this section collapsed so that the Customer File Number field is blank.
5. The rest of the screen will display all four (or five, if you have non-filing years) transcript options and the available years.
If you have not made any quarterly tax payments and have no other credits on your account (such as an amount paid/applied forward from the prior-year tax return), there will be an N/A noted where the year would normally be listed.
Make sure to have your spouse download their transcript as well, because quarterly estimated payments and amounts paid forward from the prior-year tax return may be associated with their SSN instead of yours.
6. Under “Account Transcript”, click the tax-filing year (the top line of the upper-left box — “2024” in this example).
Make sure you are selecting the right kind of transcript — in this case you want an Account Transcript. For other types of transcripts, please see the comprehensive article I wrote for MSN on the topic.
7. Click the tiny arrow on the right, and like magic, a PDF will pop up in a new tab of your browser with all the information you need. Here’s what the header looks like:
8. Save or print the file to PDF and put it somewhere safe, along with the rest of your tax season documents.
(And if you want to get deep into the weeds, NASFAA has an amazing “Tax Transcript Decoder” that compares the fields on a tax return to the fields on a tax return transcript, and Saving To Invest had fun with highlighters when creating a legend for each row on an account transcript. Tax nerds unite!)
“What About State Information?“
Each state has its own idiosyncrasies, and many have their own system — but quite a few states are using the same software company, so they often look and act similar. Our firm is located in Chicago, so to get a list of the estimated tax payments you’ve made to the state of Illinois, go to https://mytax.illinois.gov/?link=1040EPy (without logging in) and enter your SSN, Name, and the tax year in question.
If you also made payments from a corporation or partnership, you’ll need to log in to your company’s MyTaxIllinois business account to get those.
“Now What Do I Do With These Files?”
Seriously? You make sure to use your accountant’s secure file transfer system to send them your PDFs. Please do not ever email sensitive documents. It puts both you and your CPA at risk.
Done! Let the tax return preparation (or extension payment calculation) begin!
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