Before you start filing your taxes, gather these documents
Income Documents
The Internal Revenue Service (IRS) already knows the amount of income you earned last year; they just want to confirm it on your tax return. Anyone who paid you more than $600 during the year is required to file an information return with the IRS, typically by no later than January 31 of the following year. This threshold is only $10 in the case of return income or brokerage payments. You should receive a copy of these forms to help you prepare your tax return.
Documents Supporting Tax Deductions
Identifying the documents you will need to claim certain tax deductions can be a daunting process. In fact, you may have been gathering them throughout the year while incurring some specific expenses. It’s not necessary to submit your receipts to the IRS unless you are audited, but you will need them to understand how much you can claim in various deductions, and you will want to keep them handy in case they are needed. While you can take the easy and absolute route and claim the standard deduction for your tax situation, you will need to know how much you spent on qualified expenses if you decide to itemize instead. Common deductions include charitable donations, property taxes, local and state income taxes, healthcare expenses, and health insurance.
Above-the-Line Income Adjustments
You don’t have to itemize to claim above-the-line income adjustments, which are called adjustments to income. You can claim them on Schedule 1 with your tax return and also claim the standard deduction or total itemized deductions. You typically receive a Form 1098 for these expenses. Common forms 1098 include:
- Form 1098: for mortgage interest paid on a qualified home loan
- Form 1098-E: for interest paid on student loans
Self-Employment Income
If you have self-employment income as an independent contractor, keeping receipts is particularly important. If this is the case, you can deduct a variety of business expenses on Schedule C if they are considered “ordinary and necessary” for the business. Again, you do not need to submit these records to the IRS, but you will need to have the documentation handy to support it and prepare your Schedule C.
Documents to Claim Tax Credits
Tax credits are more beneficial than deductions because they reduce your tax liability dollar-for-dollar, whereas claiming tax deductions only reduces your taxable income. Some tax credits require you to receive a Form 1098 for the expenses paid, especially those related to education. Before tax season, you will want to keep detailed records of what you are spending so you can support claims for other credits. Some well-known tax credits available for individuals for 2023 include:
- Adoption Credit: for a portion of the expenses you paid to adopt a qualified child
- American Opportunity Credit and Lifetime Learning Credit: for qualified educational expenses for you and your spouse or for your dependents, reported to you and the IRS on Form 1098-T
- Child Credit and Other Dependents Credit: for each individual you can claim as a dependent on your tax return
- Credit for the Elderly or Disabled: for those who are age 65 or older or permanently and totally disabled
- Earned Income Credit: for low-income taxpayers (income limits apply)
- Savers Credit: for contributions made to qualified retirement plans
What to Bring to Your Tax Preparer
You will need all of this information and documentation whether you prepare your tax return yourself or decide to use a tax preparer. The difference with a professional is that you will need to take all relevant information with you to your appointment or gather it beforehand to send it via fax or electronically. You will also need some additional documentation if you are using a tax preparer for the first time.
You will need to bring…
The tax preparer will need specific information about you and your spouse (if married) and any qualifying dependents you may have. This means Social Security cards, although you can usually bring a copy of your most recent tax return instead. These details will include all your identifying information unless you have gained another dependent not listed on that return.
Of course, you won’t need to bring all this with you if you’re using the same professional you’ve used before. They will already have everything at their fingertips.
It’s a good idea to take your previous tax return with you to the tax accountant meeting, even if you have Social Security cards for all your family members. This will give the tax accountant an accurate picture of your personal tax situation, along with the identifying information it contains.
You may also need a photo ID and the dates of birth for you, your spouse, and your dependents if you don’t have last year’s tax return. Be sure to bring your bank account and routing numbers if you choose direct deposit for any refund you’re owed. And don’t neglect to provide any documentation that verifies changes, such as if you purchased a home last year.
Although it may seem like a lot of paperwork, gathering and organizing it will be worthwhile, especially if your tax situation is complex and requires a lot of documentation.
Frequently Asked Questions
What tax documents should I keep?
It may be wise to keep annual tax returns for at least three years. You will likely want to refer back to your prior year’s tax return when filing the current year’s return. You should also keep any receipts for charitable contributions and proof for tax deductions or credits you hope to claim, as well as any forms sent to you by the IRS throughout the year.
What tax documents should I keep if I bought a house?
If you bought a house, keep documents like closing cost documents, mortgage statements, home improvement bills and receipts (such as energy efficiency upgrades), property tax statements, etc. For example, if a qualified Mortgage Credit Certificate (MCC) was issued to you by a local or state governmental unit or agency, you may be able to use it to benefit from the credit
Source: https://www.thebalancemoney.com/what-documents-do-i-need-to-file-my-taxes-5116039
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