Sitting down to file taxes can see m daunting. You can make the process simpler by collecting important financial and personal information prior to filling out Form 1040.
You will need the following documents to file your federal and state taxes:
Your basic personal information, such as your social security number or tax identification number for all the persons listed in your return, and the date of birth for everyone who returns. This will usually include your numbers and dates of birth, of course, but also the numbers of your spouse and dependents.
Information about income and investments will also be required. You can get this information from the various forms that should be sent to you before filing taxes. Your W-2 form shows how much you earned in the previous year and how much of your income was withheld from taxes. Your employer must send you this form by February each year.
You will also need information about your bank account that shows how much you have earned in the savings account. You will also need a Form 5498 from the financial institution that offers your IRA. This form should show how much you contributed in each year.
Important is the Form 1098 E. Indicates how much interest you paid on student loans. If you have a mortgage, Form 1098 shows how much you paid on interest on that loan. Both forms are important because you could deduct this interest from your taxes.
If you are self-employed, you will need 1099 forms. These forms are sent to you by any client who paid you $ 600 or more the previous year. This information will be required to be reported in your income tax returns. You will need to fill out Form 1099-DIV if you have received dividend income. You will also need to list any income received from the government.
Submission Status: You will also need to determine your submission status. This is important because it helps determine how much income tax you pay. This is how you can apply:
- Single: If you are not married or claimed as dependent on another’s tax return, you will file your taxes as a single taxpayer. Individual taxpayers are entitled to a standard deduction of $ 12,400 for tax year 2020.
- Marriage filing together: Most people who are married register in this category. This allows them to file a single tax return. This category allows you to deduct $ 24,800 as your standard deduction for 2020 tax year.
- Married filings separately: Married couples can also each file their own tax returns and report only their personal income, deductions and credits. For the 2020 tax year, the standard deduction for taxpayers filing this way is $ 12,400
- The main parts of your tax return: There are three parts to your tax return. This is where you will report your income for the previous year. The second section is where you can report tax deductions.
Tax deductions are valuable. These deductions are subtracted from your adjusted gross income for the year. This helps you to reduce your taxable income. The more deductions that you include in your tax return, both the taxable income and taxes you pay, the lower they will be. Just make sure you only request deductions to which you are legally entitled.
The most common deduction is the standard deduction. This is the amount of money you can deduct from your taxes if you don’t provide additional deductions. If you are applying as a single taxpayer, the standard deduction is $ 12,400 for the 2020 tax year. For 2020, the standard deduction for married couples filing jointly is $ 24,800. This means you can deduct as much money as you like from your taxes.
If the standard deduction is more than what you could claim, it makes sense to claim it. These are some examples of deductions you could apply:
- Interest paid on your mortgage
- Interest paid on student loans
- Charitable donations you have made
- IRA contributions and health savings accounts
- Costs of self – employment
If you are single and your additional deductions exceed $ 12,400, it is a good idea to write your deductions into your tax returns. It is a good idea to take a standard deduction if these deductions total less than $ 12,400.
The third part of your tax return focuses on tax breaks. These are different from deductions in a key way. While deductions can reduce your taxable income by reducing it, credits are taken directly from your tax document.
Your tax document would drop to $7,000 if you owed $ 12,000 taxes and were eligible for a $5,000 tax credit.
There are several different tax credits. An example is an adoption credit, which you might be eligible for if you adopted a child. For every child adopted in 2020, this credit can be up to $ 14,300
If you have a dependent child, you may be entitled to the child tax bonus. If you have three eligible children, this credit can reach up to $ 6,660. This credit could be $ 5,920 if you have two eligible children and $ 3,584 with one eligible child.
Filing a return: You can file a tax return in many ways. You can also choose to send the tax returns to your government and the IRS.
You can also submit tax forms online.
Transcripts of tax returns
What if you want to view your tax history? Request a transcript of your tax return from the IRS to do this.
A tax return transcript summarizes your past tax returns, including adjusted gross income, filing status and tax payments.
You can request a tax transcript from the IRS at any time, and the agency will not charge you fees. A transcript of your tax return can be requested for both the current and previous tax years. These transcripts can help you prove your income when applying for a mortgage, student loan or other type of loan.