The task of gathering everything you need to prepare your annual tax return may be either simple and yawn-worthy or tedious and time-consuming. Your financial condition may influence how you feel about filing your taxes. If you're single, rent your house, and work one job, you can probably yawn, but if you're married, a single parent with at least one of your children living at home, have investments, are self-employed, or work numerous jobs, you'll have to devote some effort to the filing process. Each of the latter cases will necessitate the collecting of several papers. We've produced a checklist that you can download and print to assist you in finding and gathering the information and papers you'll need to file your taxes.
Income Documents
The Internal Revenue Service (IRS) already knows how much money you made last year; all it needs is for you to certify it on your tax return. Anyone who paid you more than $600 throughout the year is obliged to submit an information return with the IRS, normally no later than January 31 of the following year. In the event of royalties or broker payments, the threshold is only $10. You should get a copy of this paperwork to help you prepare your tax return. Depending on the sort of income you receive, these information returns take various forms. If you have regular employment, you will get a Form W-2 from your employer or employers. You would receive one from each of your employers if you worked for more than one throughout the year. This form summarizes your earnings and the amount of income tax taken from your salary and forwarded to the IRS on your behalf. Form 1099-NEC shows how much money you made as a non-employee if you were paid for any job you accomplished or services you provided as an independent contractor or single entrepreneur. If you received income from any of these sources but did not receive a supporting information return, contact the organization that paid you or your employer in the case of a Form W-2. You can also get copies from the IRS. The IRS website has a complete array of 1099 forms.Documents That Support Tax Deductions
Identifying the documentation required to claim some tax deductions can be a time-consuming task. You should have been collecting them all year when you paid specific bills. You do not have to disclose your receipts to the IRS until you are audited, but you will need them to determine how much you may claim for certain deductions, so keep them on hand just in case. While you can take the simple route and simply claim the standard deduction for your filing status, if you choose to itemize, you'll need to know how much you spent on qualified expenditures. Charitable contributions, state and local property and income taxes, medical expenditures, and health insurance are all common itemized deductions. Schedule A contains a complete list of potential itemized deductions, which you must complete and submit with your tax return if you want to itemize.Above-the-Line Adjustments to Income
Above-the-line deductions, often known as adjustments to income, do not require itemization. These can be claimed on Schedule 1 of your tax return, along with the standard deduction or the amount of your itemized deductions. For these costs, you should obtain a Form 1098. There are two typical 1098 forms:- Form 1098: For mortgage interest paid on a qualifying home loan
- Form 1098-E: For interest paid on student loans
Self-Employment Income
Receipts are especially necessary if you get 1099-NEC revenue as an independent contractor. Provided this is the case, you can deduct a wide range of business costs on Schedule C if they are "ordinary and essential" for doing business. Again, you are not required to submit these records to the IRS, but you will need the evidence to substantiate them and produce your Schedule C.Documents for Claiming Tax Credits
Tax credits are preferable to deductions since they immediately decrease what you owe the IRS, whereas tax deductions simply reduce your taxable income. Some tax credits, most notably those offered for schooling, will need you to get a Form 1098 for the paid costs before you can claim them. You should keep accurate records of your spending prior to tax season so that you can justify claiming other credits. Some tax credits need proof of income as well as a tax return.- Among the more well-known individual tax credits available for the 2021 tax year are:
- Adoption credit: For a portion of the costs of adopting an eligible child. American opportunity and lifetime learning credit: Form 1098-T is used to record eligible educational costs for you, your spouse, or your dependents to you and the IRS.
- Credit for child and dependent care: For costs, you paid for care for your kid or disabled dependents by another person so you could work, search for jobs, or attend school—you'll need the care provider's tax identification number or Social Security number.
- Child tax credit and other dependents credit: You can claim each individual as a dependent on your tax return.
- Credit for the aged or disabled: For individuals 65 and older or those who resigned due to permanent or complete incapacity
- Earned income tax credit (EITC): For lower-income taxpayers (income limits apply)
- Credit for recovery rebates: For economic stimulus payments you were due in 2021 but did not get Saver's credit: Contributions to qualified retirement plans
What To Bring to Your Accountant at Tax Time
You'll need all of this information and evidence whether you complete your own tax return or hire a tax expert. The difference with a professional is that you must bring all necessary material to your appointment or gather it in advance to transmit through fax or online. If you're employing a tax professional for the first time, you'll also require some additional papers. Your tax preparer will need personal information from you, your spouse (if married), and any qualified dependents. This includes Social Security cards; however, you may usually substitute a copy of your most recent tax return. Unless you've since acquired another dependant who wasn't reported on that return, this will reveal all of your identifying information. Of course, if you're working with the same expert as previously, you won't need to carry all of the information with you. They'll already have access to everything. Even if you have Social Security cards for everyone in your family, it's a good idea to bring your previous year's tax return with you when you meet with a tax expert. This should provide your tax preparer with an accurate picture of your personal tax position, including any identifying information. If you don't have a prior year's tax return, you'll generally need a photo ID and dates of birth for yourself, your spouse, and any dependents. If you choose direct deposit for any return, bring the account and routing details for your bank account with you. And don't forget to provide confirmation of any verifying papers for any changes, such as if you've acquired a property in the last year. While it may appear that there is a lot of paperwork to acquire and organize, it will be worth it, especially if your tax position is complicated and requires a lot of evidence.Frequently Asked Questions (FAQs)
What tax paperwork must I keep?
It's a good idea to have your annual tax returns from the past three years. When filing your current year's tax return, you'll most likely want to refer to your prior year's return. You should also retain any charity donation receipts, proof of tax deductions or credits you expect to claim, and any IRS forms you get throughout the year.What tax paperwork will I require if I purchase a home?
Keep papers such as closing costs documentation, mortgage bills, home renovation invoices and receipts (such as energy-efficient improvements), property tax statements, and so on if you acquired a house. Assume you received a qualifying Mortgage Credit Certificate (MCC) from a state or local government entity or agency. In such an instance, you may be eligible for a mortgage interest deduction.