What Documents Do I Need to File My Taxes?

The challenge of gathering everything you need to file your annual tax return can be minimal and difficult to be ridiculous or aggravating and time-consuming.

How you feel about paying your taxes may depend on your financial situation. You can probably yawn if you are single, rent a house and work, but you will have to spend some time in the process if you are married, you are a single parent and at least one of your children lives at home, you have investments, are self-employed or work multiple jobs.

Each of the latter scenarios will require you to collect multiple documents.

We have created a downloadable and printable checklist to help you find and collect the information and documents you will need to file your taxes.

Income documents

The Internal Revenue Service already knows how much it raised last year; he just wants you to confirm it on your income tax return.

Anyone who paid you more than $ 600 during the year must file an information return with the IRS reporting these payments, usually by January 31 of the following year. This limit is only $ 10 for royalty income or broker payments.

You should receive a copy of these forms to help you prepare your tax return.

This information is returned in a variety of ways, depending on the type of income you received. You will receive a W-2 form from your employer or employers if you worked a regular job.

If you had multiple employers during the year, you will receive one from each of them. This form details your earnings and how much income tax was withheld from your payment and sent to the IRS on your behalf.

Form 1099-NEC shows how much you earned as a non-employee if you were paid for any work you did or services you performed as an independent contractor or sole proprietor.

There are also several other types of 1099 forms. You can request and receive any of these income forms, depending on your source of income:

Form W-2: Income Earned From Employment
Form W-2G - Gambling winnings (depending on the type of game, as well as the amount of winnings and the relationship between winnings and bets)
Form 1099-NEC: Income Earned From Self-Employment
Form 1099-MISC: Income Earned From "Miscellaneous" Sources Such As Royalties, Broker Payments, Rentals, Premiums, Fishing Boat Income Share, And Premiums
Form 1099-C: Debt canceled or forgiven
Form 1099-DIV: Dividend Income
Form 1099-INT - Interest Income
Form 1099-G: Income received from the government, such as unemployment insurance

Form 1099-R: Withdrawals of $ 10 or more from an employer-sponsored retirement plan
Form SSA-1099: Social Security Income
Form RRB-1099: Income from Railroad Retirement Benefits

Contact the entity that paid you, or your employer in the case of a Form W-2, if you received income from any of these sources and did not receive any supporting comments. You can also request copies from the IRS.

Documents that support tax deductions

Identifying the documents needed to claim certain tax deductions can be an arduous process. Ideally, you collect them throughout the year, as long as you pay for certain expenses.

You don't need to provide your receipts to the IRS unless you're audited, but you'll need them to check how much you can claim for various deductions, and you'll want to keep them on hand just in case.

While you can take the easy route and simply claim the standard deduction for your filing status, you will need to know how much you have spent on qualified expenses if you decide to discriminate instead.

Common itemized deductions include charitable donations, state and local income and property taxes, medical expenses, and health insurance.

A complete list of available itemized deductions appears on Schedule A, which you must complete and submit with your income tax return if you decide to itemize.

Adjustments above the income line

You don't need to discriminate to claim above-the-line deductions, technically called income adjustments. You can claim them on Schedule 1 with your tax return and also claim the standard deduction or the total of your itemized deductions. Typically, you will receive a 1098 form for these expenses. Common 1098 forms include:

Form 1098: For Mortgage Interest Paid on a Qualified Home Loan
Form 1098-E - for interest paid on student loans
Form 1098-T - For Tuition Fees You Paid
Generally, beneficiaries must give these forms to you and the IRS if you make payments of $ 600 or more.

You'll also want a record of each and every contribution made to retirement accounts, because they are generally deductible up to certain limits.

Educator expenses of up to $ 250 per year are additional deductibles for certain teachers, for example, so you'll want to show how much you've spent in this regard, if you qualify. The IRS program displays the full list of available income adjustments.

Income from self-employment

Keeping receipts is particularly important if you have 1099-NEC income as an independent contractor. If that's the case, you can deduct a variety of your business expenses from Schedule C if they are deemed "normal and necessary" to do business.

Again, you don't need to send these records to the IRS, but you will want documentation on hand to back it up and prepare your Schedule C.

Documentation to claim tax credits

Tax credits are more beneficial than deductions because they are subtracted directly from what you owe to the IRS, while claiming tax deductions can only reduce your taxable income.

Claiming some tax credits will require you to receive a 1098 form for expenses paid, especially those that are available for education.

Before tax season, you want to keep detailed records of how much you spend so you can claim other credits. Some tax credits are supported by your income documentation and your tax return.

Tax credits available for tax year 2020 include:

Adoption Credit - For a portion of the expenses you paid to adopt an eligible child.

US Lifetime Learning Opportunity Credit: For eligible educational expenses for you, your spouse, or your dependents reported to you and the IRS on Form 1098-T.

Child and Dependent Care Credit - For expenses you paid for the care of another person for your disabled child or dependents so that you could go to work, look for work, or attend school. You will need your provider's tax identification number or social security number.

Child Tax Credit and Credit for Other Dependents: For each individual, you can claim as a dependent on your income tax return.

Credit for the Elderly or People with Disabilities: For people over 65 or retirees with permanent or total disabilities.

Earned Income Tax Credit - For low and middle income taxpayers. (Income limits apply).

Recovery discount credit: For economic stimulus payments, you were entitled to receive in 2020, but you did not.

Savings Credit - For contributions made to qualifying retirement plans.

What to bring to an accountant for tax preparation

You will need all of this information and documentation regardless of whether you prepare your tax return yourself or decide to hire a tax professional.

The difference with the professional is that you will have to take with you all the pertinent information for the consultation or collect it in advance to send it by fax or electronically. You will also need additional documentation if you are using a tax professional for the first time.

Your tax preparer will require identifying information for you, your spouse (if married), and your eligible dependents, if applicable.

This means Social Security cards, although you can usually get a copy of the most recent year's income tax return. This will list all of your identifying information, unless you have acquired another dependent that is not listed on this statement.

Of course, you won't have to carry all of this with you if you are using the same professional you used before. They will have everything at their fingertips.

It's a good idea to bring your tax return from the previous year to meet a tax professional, even if you have a Social Security card for everyone in your family.

This should give your tax preparer an accurate picture of your personal tax situation, in addition to the identifying information it includes.

You will probably also need a photo ID and dates of birth for yourself, your spouse, and your dependents if you don't have a tax return from the prior year.

Be sure to bring your bank account and routing numbers if you choose to directly deposit the refunds you are entitled to. And don't overlook proof of any documentation that confirms things that have changed, like whether you bought a home last year.

You will probably also need a photo ID and dates of birth for yourself, your spouse, and your dependents if you don't have the prior year's tax return.

Be sure to bring your bank account and routing numbers if you choose to direct deposit for any refund to which you are entitled. And don't overlook the proof of any confirmation documentation of things that have changed, such as if you bought a home last year.

You may need a wheelbarrow to hold all of this paperwork, but it's worth it if your tax situation is complex enough to require a large amount of documentation.

We hope you enjoy watching this video about documents needed to file your tax return

Source: Entrepreneur Help Desk

 

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