It's tax time! You know what that means. It's time to get all your tax documents together and give yourself a headache figuring out what is and isn't relevant for this year. With all the forms that sound the same, it can be hard to know what you need in order to file your taxes. A lot of software can help you understand some of the materials you need, but you still may forget a few things here and there.
What do I need in order to file my taxes?
The most important thing that you need to report is the amount of income that you made with a W-2 (or a 1099 if you are a contractor or self-employed). This helps the IRS determine which tax bracket you are in and how much you owe. Remember, your tax bracket only affects the money you make in that bracket. For example, you will be taxed the same on the first $20,000 you make, regardless of if you make $25,000 or if you make $500,000 a year.
If you are self-employed also remember that you can deduct any business expenses. This includes gas for any business trips. If you have any of the receipts for business expenses, including flights and meals, you can report it on your taxes to lower your net income, effectively lowering the amount of taxes you need to pay.
How educational expenses affect your taxes
Did you pay for tuition or pay off student loans in the past year? Well, this can also help lower your tax bill. If you paid for classes, the school will give you a 1098-T that says how much you paid on tuition. You should also track additional expenses, such as costs for books, and have receipts of those to add to that cost.
If you have student loans, any interest you paid on the student loans can be deducted from your income. This will come from your student loan servicer as a 1098-E form.
What else do I need in order to file my taxes?
Any investment gains/losses that you made throughout the year, including interest from bank accounts and dividends, need to be reported. You should collect a 1099-DIV or similar document from each of your investment companies. This will show how much you made (or lost) throughout the year.
You also need to decide if you want to take the standard deduction or an itemized deduction. In most cases, you will just take the standard deduction, but sometimes it does make sense to itemize. If you have some large expenses that add up to more than the standard deduction amount, it may make sense to itemize. However, it's also more work. You should look into whether this option makes sense for you.
You should also think about other deductions or credits that you may qualify for. If you forget about these, you could be leaving money on the table. Check out other credits and deductions and see if you qualify.
What to do once you get everything together
Now it's time for the fun part, filing your taxes. Today, filing your taxes is easier and doesn't even require an accountant (although they can be helpful). But with tools like Credit Karma Tax and Turbo Tax, you can fill in your information and get your taxes submitted for you. These tools also walk you through and show you what forms you need in order to maximize your tax refund.
