Early Retiree Tax Return Review Checklist

By Tom, CPA · Updated October 25, 2026

TL;DR: Before filing, gather every 1099, check cost basis on Form 1099-B, confirm Form 8606 tracks Roth conversions and nondeductible basis, reconcile marketplace credits on Form 8962, match estimated payments to IRS records, and check state items such as residency and retirement exclusions.

Educational only, not tax, legal, or investment advice. Examples are illustrations, not predictions. Rules and limits change; verify current figures and talk to a qualified professional about your situation.

A checklist so April feels less like a horror movie. An early retiree's return has more moving parts than a working person's: several 1099s instead of one W-2, Roth conversions, marketplace insurance credits and estimated payments. Most errors are not exotic. They are missing forms, wrong basis and numbers that do not tie out.

Use this list after your software produces a draft return and before you hit submit.

CPA Warning Label: Tax software only knows what you type. A missing 1099-B basis or an unfiled Form 8606 can quietly double-tax money you already paid tax on.

Income documents to collect

• Form 1099-R for every IRA, 401(k) or pension distribution and every Roth conversion. Check the distribution code in box 7: code 7 is a normal distribution, code 1 an early distribution, code 2 an early distribution with a known exception, code G a direct rollover.
• Form 1099-B and the consolidated 1099 from each brokerage, including accounts that only had dividends.
• Form 1099-DIV and 1099-INT, including tax-exempt interest (1099-INT box 8, 1099-DIV box 12), which must be reported even though it is not taxed (IRS Publication 550).
• Form SSA-1099 if you collect Social Security.
• Form 1095-A if you had marketplace coverage.
• Form 1099-NEC or 1099-K for side income, and Form 5498 for IRA contributions and year-end values (often arrives in May).
• Form 1099-SA and 5498-SA for HSAs.

Check corrected forms. Brokerages often issue corrected 1099s in March after funds reclassify distributions. Waiting until mid-March to file avoids amending.

Basis and 1099-B checks

For each sale, confirm the cost basis. Stocks bought in 2011 or later, and most mutual fund and ETF shares bought in 2012 or later, are generally "covered," meaning the broker reports basis to the IRS. Older or transferred shares may be "noncovered," with basis missing or blank. If basis is blank, software may treat the entire sale as gain.

• Look for sales with $0 basis and fix them from your records.
• Check that reinvested dividends were added to basis.
• Confirm holding periods: short-term vs long-term.
• Look for wash sale adjustments (code W) and make sure they are correct across accounts.
• If you harvested gains, confirm the realized amount matches your plan; an extra fund distribution can push you past the 0% threshold.

Form 8606 and Roth basis

Form 8606 does three things: tracks nondeductible traditional IRA contributions (basis), reports Roth conversions, and figures the taxable part of nonqualified Roth distributions (IRS Publication 590-B).

• If you converted, Part II should show the conversion. Without it, the IRS has no record of the conversion's basis.
• If you ever made nondeductible IRA contributions, the basis from your last 8606 (line 14) must carry forward; otherwise you pay tax twice.
• For a Roth conversion ladder, keep a ledger of each conversion year and amount. Each conversion has its own five-year period for the 10% additional tax.
• The pro rata rule uses year-end balances of all traditional, SEP and SIMPLE IRAs; confirm the year-end value on line 6.

Credits and ACA reconciliation (8962)

If you had marketplace coverage with advance premium tax credits, you must file Form 8962 to reconcile. The form compares the credit you received with the credit you qualify for based on actual household income.

• Use the 1095-A amounts: monthly premium, second-lowest-cost silver plan premium and advance payments.
• Household income for the credit is modified AGI, which adds tax-exempt interest and nontaxable Social Security to AGI (IRS premium tax credit FAQs).
• As of Oct 2026, for tax years after 2025 there is no cap on repaying excess advance credits, and households above 400% of the federal poverty level qualify for no credit (IRS). A late-year conversion that pushed income over the line shows up here.
• Check that household size is right and that each month's coverage is listed.

Also check other credits: the foreign tax credit from fund holdings (often claimable without Form 1116 if under $300 single, $600 joint), and education credits if you or a dependent were enrolled.

Illustration: catching a basis error

Illustration. Assumptions: married couple, 2026, $60,000 of IRA withdrawals and a planned $20,000 long-term gain from selling shares bought in 2009 and transferred between brokerages. The consolidated 1099 lists the sale as noncovered with no basis, and the software imports $50,000 of proceeds as $50,000 of gain instead of $20,000.

• As imported: $110,000 of total income, taxable income $77,800. Gains of $50,000 stack above $27,800 of ordinary taxable income, and all still fit under the $98,900 threshold, so the tax looks the same. The couple almost files it.
• But MAGI is overstated by $30,000. If they had marketplace coverage, Form 8962 would show income above the 400% FPL limit and claw back the entire credit.
• Corrected with $30,000 of basis from old statements: MAGI $80,000, below the limit for a household of two.

The tax line looked fine; the error hid in MAGI. That is why basis checks matter even when the tax does not change.

Estimated payment reconciliation

• Total your estimated payments by date and compare with your bank records and your IRS online account.
• Include any payment applied from last year's refund.
• Withholding from 1099-R (box 4) and SSA-1099 must be entered; it is easy to miss on a 1099-R from a small account.
• If software computes an underpayment penalty, check whether the annualized income method or the even-withholding rule would reduce it (see IRA withholding and estimates).
• Set next year's estimates: prior-year safe harbor is 100% of this year's tax, 110% if AGI was over $150,000 (IRS Publication 505).

Deductions and other checks

• Standard deduction for 2026: $16,100 single, $32,200 married filing jointly, plus additional amounts for age 65 or blindness (IRS).
• The senior deduction of $6,000 per eligible person age 65 or older, phasing out above $75,000/$150,000 MAGI, for 2025 through 2028 (IRS).
• Self-employed health insurance deduction if you had business income.
• HSA contributions, if you had a qualifying high-deductible plan.
• Qualified charitable distributions, reported as a 1099-R distribution with "QCD" noted and excluded from taxable amount.
• Check the Social Security taxable amount against the taxable benefits calculator.
• Run your final income through the tax bracket calculator to sanity-check the total.

State return items

• Residency: if you moved, file part-year returns in both states and allocate income by date.
• Retirement income exclusions: many states exclude some pension, IRA or Social Security income, sometimes based on age.
• State treatment of Roth conversions, capital gains and muni interest from other states.
• State estimated payments and withholding.
• State marketplace subsidies, if your state has its own program.

Final sanity checks

1. Compare total income with last year's; explain big differences.
2. Check that AGI matches what you planned for ACA and IRMAA purposes.
3. Confirm the bank account for any refund or debit.
4. Save a PDF of the return and all source documents, including Form 8606 and your basis ledger.
5. Calendar next year's estimated payment dates.

Frugal Fran reviews her return with a cup of tea and a highlighter. Lavish Larry files on February 1 and amends in April, which is a bit like reading the recipe after the cake has burned.