Any experienced tax preparer will tell you that tax season isn’t an event. Tax “season” should be the lens that you view your finances through all year long. Let’s talk about how to prepare for tax season in a way that keeps you ready and shielded. Even a person who feels confident about filing their taxes may suddenly have questions if they’ve had their business or personal finances disrupted by things like unexpected business or school closures.
What Do I Need to Do My Taxes?
Getting and staying organized is crucial when it comes to preparing your taxes. You’ll need to compile a mix of IRS worksheets and your own personal documents when sitting down to prepare your taxes. Your state may also require you to submit a copy of a government-issued photo ID when you file your taxes.
The list of what you’ll need to have in front of you before you can start your taxes can actually be a little overwhelming if you don’t have a lot of experience with filing. Of course, the specifics of what you’ll need to produce in terms of documents and records will vary based on how you file. For instance, a person who owns a home or claims dependents will need to deal with extra paperwork that may not be in play for someone who doesn’t own any property or have any dependents. Here’s a rundown of some of the basic information you’ll need in front of you when preparing taxes:
- Social Security number and tax ID number.
- Dependent(s) information.
- Sources of income.
- Records related to deductions for home ownership, charitable contributions, medical expenses, childcare expenses, education expenses, state and local taxes, retirement savings, and K-12 educator expenses.
Successfully gathering all of the information related to these core tax-preparation categories will have you feeling pretty confident that you’re ready to dive into filing your taxes. However, you may not be fully ready just yet. The IRS requires you to use specific documents depending on how you choose to file. Next, let’s dive into some of the forms that you may need when getting your taxes done.
Documents Needed for Taxes
The common form used by taxpayers when filing tax returns is the W-2 form. This is the form that all employers must issue by the end of January. You won’t be able to file your taxes as an employed filer if you don’t have this form. That means that it’s time to contact any employer that paid you over the course of the previous tax year if you haven’t received yours. You may also need to deal with a 1099 form. 1099 forms come with a number of different suffixes that are used to differentiate how you were paid. Many sellers and freelancers who are paid through platforms like Amazon and PayPal need to file 1099-K forms that they receive from those platforms. However, someone who receives payouts for dividends may need to file a 1099-B. Let’s take a look at some specific forms that you may need to deal with based on particular tax circumstances:
- Employment income (W-2).
- Self-employment income (1095-A).
- Unemployment state tax refund (1099-G).
- Pension/IRA/annuity income (1099-R).
- Interest dividend income (1099-INT, 1099-OID, or 1099-DIV).
- Income from sales of stock or other property (1099-B or 1099-S).
- Health Savings Account (HSA) reimbursements (1099-SA or 1099-LTC).
- Marketplace/exchange health insurance (1095-A).
- Gambling income (W-2G).
- Royalty income (1099–Misc).
- Mortgage interest (1098).
- Student loan interest (1098-E).
- HSA contributions (5498-SA).
- IRA contributions (5498).
This is by no means an exhaustive list of forms that the IRS uses. The IRS provides a plethora of forms that cover specialized industries and filing statuses. Getting these forms in your hands and completed is just part of the job. You’ll generally need to produce receipts and records tied to the income or expenses being claimed on your return. Self-employed filers will need to provide details regarding income records, expense records, business-use assets, and records of estimated tax payments.
Unfortunately, the IRS does make you work a bit to receive deductions. This is one of the reasons why so many people simply find it worth it to hand over their taxes to a professional tax expert. The reality is that it’s so easy to miss what can turn out to be very lucrative tax deductions that can significantly reduce your tax burden. Yes, it’s more than worth your time to put the effort into tracking down every deduction possible. For instance, homeowners have the advantage of being able to submit records for things like property taxes and energy-saving home improvements to receive what work out to be very generous deductions. Similarly, someone who pays for childcare stands to receive a very generous benefit at tax time. However, it takes understanding what does or doesn’t qualify to maximize tax benefits. It’s also important to understand that not every deductible item is fully deductible. Many tax credits are only provided up to a certain percentage.
How to Prepare for Tax Season
Again, preparing for tax season should not be like cramming for a test at the end of the semester! The process really does require you to keep impeccable records to avoid missing out on beneficial deductions. What’s more, failing to report income fully and accurately can land you in hot water with the IRS in terms of penalties and fees. Unfortunately, the IRS doesn’t distinguish between “calculation errors” and fraud when scanning through tax returns to find mistakes and discrepancies. An inaccuracy on your return can trigger an audit even if you simply made a clerical error.
The first thing to do is to make sure you have every document needed. It’s possible that your employer, bank, or childcare provider has failed to supply with you the right forms needed for filing your taxes. You’ll need to reach out to request replacement forms if you notice that you’re missing anything. Employers and financial institutions have until Jan 31 to get that information to you. That means that Feb. 1 is often the best day to conduct a little “audit” to make sure you have all that you need to begin your tax journey in anticipation of the April filing deadline.
Tax Prep Checklist 2020
What should you focus on getting in front of you right now if you’re putting an essential tax checklist together? You’ve hopefully received the forms needed from your employer and financial institutions if it’s past January. However, you can still begin preparing even if the deadline for those key documents hasn’t arrived yet. Here’s your quick checklist for documents needed for taxes:
- Bring out last year’s federal and state returns. Giving them a good glance will help you to remember which documents you used to file in the previous year. They will serve as good guideposts if not much has changed with your situation since then.
- Gather up any Social Security numbers for yourself, your spouse, or your dependents if you can’t remember them off the top of your head.
- Get in gear for deductions by gathering records for charitable donations, state and local taxes, property taxes, mortgage interest, medical bills, education expenses, traditional IRA or self-employed retirement contributions, childcare costs, and any other deductible expenses.
Just how much time you end up devoting to tax preparation will come down to just how exotic your tax situation looks. One big thing to remember is that tax laws changed significantly after 2018. That means that your default formula for maximizing deductions may not be applicable any longer. It’s worth having your tax situation looked at by a professional to discover new opportunities that could significantly lower your tax burden this year.
Tax Group Center Can Help
Tax Group Center has been helping taxpayers file their taxes for 30 years. We’re here to help you comply fully with IRS requirements to reduce the odds of facing penalties stemming from errors. Let us comb through your records to discover tax deductions you may not have known applied to your situation. There’s no need to lose days and nights trying to get your taxes filed on your own. Reach out today to book your appointment to experience your easiest tax season yet!