Filing the right IRS tax forms and providing a proof of eligibility to claim tax deductions or credits can legally reduce your financial obligations to Uncle Sam. Generally, you need certain information and documentation when filing your tax return to the IRS. Knowing what the necessary documents are, can ease the exhausting task of collecting them all and increase the chance of saving you money from all the deductions or credits you might qualify for. To speed up the preparation time, these items below will come in handy when filing your returns!
IRS Tax Forms and Important Documents to Reduce Tax Liabilities
For starters, you need to prepare your personal information. You need to let the IRS know who is filing the return and other individuals who might be covered. They will need your Social Security Number as well as your spouse’s and your dependent’s SSN. You might also need to prepare your bank account info and bank routing number if you want your tax refund to be directly transferred into your account. In addition, looking for your last year’s taxes to check the documents you used can cut the prep time in half.
After collecting all the necessary personal info, gather all the records that will help you provide your income information throughout the previous year. To begin with, you will need W-2 IRS Tax Forms from your employer for the previous tax year. If you’re filing a joint return, you will also need W-2 Forms from your spouse’s employer. If you and your spouse have completed a contract project earning more than $600, you’ll need a Form 1099 for every contract.
For business owners, you will need accounting and income records. If you own rental properties, documents stating your income will also come into play. If you are an investor, you need to prepare your investment income information such as dividend income, income from interests, foreign investments and/or earnings from selling bonds or stocks. You will also need to prepare your tax refunds, both local and state, from the past year.
You need to prepare records of other sources of revenue or miscellaneous income from the previous year like income from jury duty and winnings from gambling and lottery. Also, provide records of Social Security benefits and unemployment income. Fill out the Form 1099-MISC for awards and prizes and Form 1099 MSA for distribution of medical savings accounts. You must remember that for every income-related document, there’s a specific IRS Tax Form W-2 and 1099 you need to use.
Preparing your deductions is the best approach to lighten your financial burden and lower the amount of your taxable income. Gather every document, proof of payment, and receipts you can get to help you reduce your tax bill. Also, these records will provide some sort of protection if ever you get audited. To give you more idea about it, here’s a list of deductions you can prepare to save you more money this coming tax day:
- Standard Deduction (A flat amount the IRS lets you deduct and it will depend on your filing status)
- Deductible Business Expenses
- Home Office Deduction (Form 8829)
- Business Use of a Car
- Business Travel Expenses
- Deductible Taxes (Non-business taxes)
- Local, state, and foreign income taxes and real estate taxes
- Local and state general sales and personal property taxes
- Charitable Donations
- Home Mortgage Interest
- Moving Expenses
- Student Loan Interest (Form 1098-E)
- Tuition and Fees Deduction (Form 1098-T)
- Work-Related Educational Expenses
- Teacher Educational Expenses
- Medical and Dental Expenses
- Medical Savings Account (MSA) contributions
- Health Savings Account (HSA)
- Sale of Home
- Individual Retirement Arrangements (IRAs)
- Capital Losses
In preparing most of your deductions, you’ll need to fill out IRS Forms 1040, 1040A or 1040EZ.
Another way to lessen your tax bill is to acquire tax credits. It’s somewhat similar to deductions, however, credits are subtracted from your tax liability and not on your taxable income. They provide more impact than deductions because it provides dollar-for-dollar reduction. For example, you owe the IRS $700 in taxes and you have a $300 tax credit then, you only have to pay $400. Here’s a list of tax credits you might be eligible for:
- American Opportunity Tax Credit (Form 8863)
- Lifetime Learning Credit (Form 8863)
- Adoption Credit
- Child Tax Credit
- Credit for the Elderly or Disabled
- Child and Dependent Care Credit
- Saver’s Credit
- Earned Income Tax Credit
- Nonrefundable Credit for Previous Year Minimum Tax
- Low Income Housing Credit for Homeowners
- Mortgage Interest Credit
- Health Coverage Tax Credit (Form 8885)
- Premium Tax Credit or Affordable Care Act (Form 8962)
- Nonbusiness Energy Property Credit
- Residential Energy Efficient Property Credit (Form 5695)
- Foreign Tax Credit (Form 1116)
- Investment Credit (Form 3468)
Download, save or share this infographic to keep things handy while you file your taxes: The Complete Tax Form Prep Checklist.
Check out the video below and learn more about the things you didn’t know you could deduct from your taxes!
Having the right documents with you won’t only reduce the prep time, but it will also be essential in claiming your credits or deductions. There are some expenses that can be a write-off so don’t just throw those receipts away. That piece of paper can save you money. So before filing a return, make a checklist of the important tax-related things you need and fill out the right IRS tax forms. You’ll be surprised how it can lighten the burden this tax season might bring.
Have you tried using different IRS tax forms? Share your experiences with us in the comments section below!