American citizens are obligated by law to file tax returns at the end of every financial year. With all the new regulations and laws coming into effect in 2019, it can be a challenge to file the simplest of tax returns.
It is, therefore, very important to understand how to prepare your tax returns, what documents are required to make the process an easy one, to know what receipts should you keep for taxes, and what taxes you’re filling, i.e. federal tax or state tax. Although some information may be similar for both the federal and state taxes, your state might have credit and tax deductions etcetera, which apply to you.
The first thing that you will need is the basic information like proof of identification, your social security number, date of birth, filling and residency status, your bank account number and routing number regardless of whether it is federal tax or state tax. The bank account and routing number are needed if you wish your tax refund deposited in your bank account. If you are married, you will need your spouse’s social security number, date of birth, as well as any dependents.
Here is a handy tax documents checklist for you
Last Year’s Tax Return Proof
The next thing you will be required to provide is a copy of tax return for the previous year. A copy or a transcript of your tax returns can be obtained from the IRS. A transcript is much more detailed than a copy. Also, you will need state and a local tax refund from the previous tax year.
Statements of Wages
There are some forms that are needed during tax return processing. Here are the most common forms.
- W-2 forms– Every employer sends the W-2 form to both their employees and the IRS at the end of every tax year. They indicate employee’s wages in that given year, and the amount of taxes withheld.
- 1099 forms- This is another form required when filing your tax returns. 1099 forms are required to report any income other than that paid by an employer. This type of income may include government payments, income generated through self-employment among other sources.
- Form 8843- You’re required to file form 8843 even when you’re not filing for income tax.
Investment Income Information
When filing tax returns, you are required to declare income generated from various investments during that particular tax year. This will include statements of dividend and interest income from brokers or banks, income from foreign investors as well as proceeds got from the sale of bonds or stocks.
Rental property income is where you declare the total income from renting your house(s) or apartments for that one year.
If you are unemployed and receive government support, you will be required to declare the unemployment income, your social security benefits, and miscellaneous income. Miscellaneous income can include things like the lottery or gambling winnings and jury duty.
Tax deductions, tax credits, or tax exclusions will have to be declared and issue a proof of the same. There are several tax deductions and credits that can reduce the amount of tax you have to pay and possibly get a tax refund. Here are a few;
• Homebuyer tax credit
• Student loan interest
• Green energy credits
• Job and moving expenses
• Childcare costs
As the tax season is drawing nigh, keep the documents as close to you as possible. This will save a lot of your time. If you’re a business owner, you need to file a different type of tax returns, business income tax. You will need accounting records for your business. If you aren’t too confident doing it on your own, it might be helpful to consult a tax professional.
Always keep all these documents in order at home, not amongst the clutter or in dirty places. Professional home cleaners can help you clean your home and inspire you to get more organized.