It’s tax time again. Be sure you’re prepared to file by gathering all the forms and documents you’ll need. Here are the most common things taxpayers use to complete their taxes, starting with the most basic:
- Last year’s tax return – federal and state. Not a requirement but used to compare what you filed last year and the documents you used.
- Social Security numbers for yourself, spouse, and dependents, including children, elderly parents, or others who qualify.
You’ll need to confirm your income and report it correctly. The common documents related to this include:
- W-2s, which must be issued by January 31st. You can receive either a physical or electronic copy.
- 1099s. There’s different Form 1099s, each with a different suffix depending on the income received. For example, a 1099-MiSC is for contract work, while a 1099-K is likely issued to those who receive payment through Amazon, PayPal or other third party. Investment earnings are reported on a 1099-INT, while dividends get a 1099-DIV and broker transactions are 1099-B.
Deductions reduce the amount of income you are taxed on, which lowers your tax liability. Whichever deductions you claim, you’ll need documentation to support them if you get audited. Having your receipts will also help you remember which deductions to claim. You have many deductions available if you chose to itemize on Schedule A, however you aren’t required to itemize to claim some.
The most popular tax deductions include:
- Retirement contributions made to a traditional IRA or self-employed account can be deducted.
- Student loan interest can be deducted. Look for Form 1098-E for the appropriate amounts.
- Medical costs over 7.5% of your adjusted gross income are eligible for deduction.
- Mortgage interest and property tax as reported on a Form 1098, which you’ll receive from your lender. It also displays the amount you can claim on a Schedule A of your home loan interest.
- Charitable donations, as long as you have receipts, can be deducted.
- State and local taxes, including sales and income taxes. You won’t need receipts for the sales tax, as the IRS uses tables with averages that can be deducted. A Large purchase tax amount can be added to the table. State income taxes you paid should be reported on your W-2, but you’ll need to include money you paid in estimated taxes during the year.
Credits reduce the amount of taxes you owe, dollar for dollar. Many popular tax credits you can take are:
- American Opportunity and Lifetime Learning Credit. Related to your educational expenses, you’ll need Form 1098-T to claim either credit.
- Child Credit, which is worth up to $1,000 per child for the 2017 tax year.
- Premium Tax Credit, for healthcare purchased on the government marketplace. Form 1095-A will help you reconcile any amount you got in advance or claim the Premium Tax Credit.
- Retirement Savings Contribution Credit, known as the Saver’s Credit. Contributions to a 401(k) or employer-sponsored plan can get you the benefits of this credit.