What Do I Need in Order to Do My Taxes?
Every spring, as April 15 inches closer and closer, we all tend to get a little on edge. Tax season is stressful, after all, and there’s nothing worse than looking through a mess of paperwork and wondering if you’ve forgotten something. Do you have all of the right forms? Is an IRS agent going to come knocking at your door because you couldn’t tell the difference between a 1099-K and a 1099-MISC?
Luckily, with just a little prep work, you can save yourself time, money, and a whole lot of headaches. Whether you plan on doing your own taxes or hiring a licensed professional, here’s a tax prep checklist that will ensure you have everything you need before getting started.
Keep in mind that every taxpayer is different, and while this checklist covers the common forms and information most taxpayers need, your particular situation might require additional preparation.
Personal Information
- Your SSN or Taxpayer ID number
- Your spouse’s SSN or Taxpayer ID number
- Last year’s tax returns, both federal and state – These are not essential, but they can be a helpful reference to see what forms you used last year
Dependents’ Information
- DOB and SSN for all dependents
- Childcare records
- Income of other adults in your home
Sources of Income
- W-2 forms – Employers must issue these by January 31.
- 1099 forms – There are a lot of different 1099 forms, all of which cover some form of income separate from what your employer paid you. Contract work, for instance, is usually recorded on a 1099-MISC, while investment earnings might show up on a 1099-INT (interest) or 1099-DIV (dividends). Most of these should be received by January 31, though some might arrive a couple of weeks later.
Deductions
Deductions help reduce your taxable income. Though it can take some time to gather, proper documentation is the key to successfully claiming deductions. Not only will it protect you if you’re ever audited, but it can lower your tax bill by helping you remember what to claim.
Keep in mind that you can opt for the standard deduction or you can itemize your deductions on a Schedule A. The standard deduction is a fixed amount that any taxpayer can claim (in 2020, $12,400 for single filers, and $24,800 for joint filers), while itemized deductions allow you to break down your expenses. This takes some number-crunching, but it’s worth it to see which will save you more.
While there are lots of potential deductions, here’s a quick rundown of some popular ones. Make sure you have documentation for each before you file:
- Retirement account contributions – You can deduct contributions to a traditional IRA or self-employed retirement account. Just be sure to stay within the contribution limits.
- Educational expenses – Students can claim a deduction for tuition and fees they paid, as well as for interest paid on a student loan. The IRS won’t accept your deduction claim without Form 1098-T, which shows your education transactions. Form 1098-E provides details on your student loan.
- Medical and dental bills – Medical costs could provide tax savings, but only if they total more than 7.5 percent of your adjusted gross income.
- Property taxes and mortgage interest – If your mortgage payment includes an amount escrowed for property taxes, that will be included on the Form 1098 your lender sends you. That document will also show how much home loan interest you can claim on Schedule A.
- Charitable donations – To ensure your generosity pays off at tax time, keep your receipts for charitable donations. The IRS could disallow your claim if you don’t provide verification.
- Classroom expenses – If you’re a school teacher or other eligible educator, you can deduct up to $250 spent on classroom supplies.
- Work-related education expenses – You may be able to deduct the expense of work-related education from your taxes if you itemize. This can include items such as tuition, books, supplies, lab fees, transportation and travel costs, and even the cost of research. Know that to claim this deduction, your costs must have been required by your employer and had to have been used to maintain or improve your job skills.
Credits
While deductions reduce your taxable income, credits subtract directly from your final tax bill. These include items such as the Child Tax Credit (CTC), the Retirement Savings Contribution Credit, and the Lifetime Learning Credit (LLC). Visit our Tax Credits and Incentives page for more information on utilizing credits to lower your tax bill.
As with deductions, the IRS will not allow you to claim a credit unless you provide proper documentation.
Estimated Payments
If you had money withheld from your paycheck, that will already be recorded on your W-2. However, if you made estimated tax payments throughout the year (1040-ES), you’ll need that information available come tax time.
I Have Everything. What Do I Do Now?
Now that you’ve run down the checklist, you have everything you need to file your taxes. You can either do them on your own or hire a tax pro to ensure that you’re optimally minimizing your tax bill.
At Boxelder, our team of licensed tax professionals can evaluate your situation, guide you through any challenges that develop, and help you take advantage of any credits and deductions to which you’re entitled. We’re here to minimize your tax liability, so that you can keep more of your hard-earned money. Reach out today to get started!