The Ultimate Tax-Time Checklist

By Amy Fontinelle AAA

Tax time has arrived once again. But before you start preparing your return, you'll need to gather some forms and data. Collecting everything before you start filling out forms and crunching numbers will simplify and speed up the often tedious process of filling out your tax return. Here's a checklist of the information you should pull together. (Follow these simple steps to get you ready for April 15th. See 10 Steps To Tax Preparation.)

Tutorial: Personal Income Tax Guide

1. For Single Filers
If you're single and employed by someone else, your tax return will be relatively easy to prepare. Here's what you'll need and why:

  • Last year's tax return: If you use tax preparation software, it will ask you for much of the information contained on last year's return.
  • Social Security number: Your SSN is a unique identifier that theoretically ensures that the government won't confuse you with someone else who shares your name. You must include it on your tax return. If you don't have yours memorized, check your records and make sure you enter it with 100% accuracy. Missing or incorrect SSNs are one of the most common tax mistakes, yet one of the easiest mistakes to avoid. Don't risk delaying your refund or tempt the IRS into sending you scary letters.
  • Form W2: This is the form your employer gives you that lists your wages/salary, federal and state tax withholding, tips and earned income credit. If you haven't received it, you may be able to retrieve it electronically if you work for a large company. If your employer makes a mistake when it issues your W2 form, it will issue a corrected version called a W2-C, and you will then need both forms. The W2 gives you the numbers you need to report your wages, salaries, and tips (Line 7), as well as federal income tax withheld. (Line 61).
  • Forms 1099 MISC: If you earned self-employment income (nonemployee compensation), rents, royalties or other types of income the IRS considers to be "miscellaneous," you will receive this form in the mail. (If your self-employment income exceeds $400, you'll also need to file Schedule SE, which we'll cover in the last section of this article.)
  • Forms 1099-INT and 1099-DIV: These forms are used to report any interest and dividend income you earn. For example, if you have a certificate of deposit that earned interest, that income would be reported on form 1099-INT. Similarly, if you own any stocks that paid dividends and they aren't in your retirement account, Form 1099-DIV will report that income. Enter these numbers on Lines 8a, 8b, 9a and 9b of Form 1040.
  • Forms 1099-R: This form shows money received from pensions, annuities, retirement or profit-sharing plans, IRAs, insurance contracts and other sources of retirement income. If you received any of these, Form 1099-R will memorialize it.
  • Other income: If you received unemployment income, alimony, gambling proceeds, jury duty pay, rental income, cancellation of debt or sold your home, you may have additional income to report. Also, be aware that most types of income are taxable even if they aren't reported on a 1099 form. You can report additional income on line 21 of form 1040.

Now that you've gathered information about your income, you'll need to gather information that will reduce your tax bill. The following credits and deductions are some of the most common (although there may be others that apply to your situation):

  • IRA contributions: If you contributed to an IRA, the IRS wants to know about it. If your contribution was to a traditional IRA, your tax bill will be reduced accordingly, depending on your income.
  • Education-related credits and deductions: The IRS allows qualified taxpayers to reduce their tax bills for expenses related to postsecondary education at a qualified institution. If you paid student loan interest in excess of $600, your loan servicer should provide you with a Form 1098-E showing how much interest you paid last year. If you don't receive it in the mail, this form may be available by logging into your account. Interest payments of less than $600 are still deductible, but you'll have to look up the information yourself. If you have eligible education expenses, you can use either Form 8863 or Form 8917 to claim an education credit or a tuition and fees deduction. If you're eligible for either, choose the one that will reduce your tax bill the most.
  • Other adjustments: If you contributed to a health savings account, paid moving expenses for a qualified job change or incurred K–12 educator expenses, these may also reduce your tax bill.

Standard or Itemized?
Decide whether to take the standard or itemized deduction. If you're going to itemize, you will need records for all deductions you want to claim on Schedule A. These include medical and dental expenses, state income taxes, home mortgage interest, real estate taxes, private mortgage insurance, donations, motor vehicle registration tax, points paid on a mortgage or refinance, residential energy credits and the alternative motor vehicle credit.

Finally, some unlucky individuals may be subject to the alternative minimum tax. (Read How To Cut Your Alternative Minimum Tax for more information on this subject.)

2. For Married Filers or Filers With Children
If you're married and/or have kids, you'll need everything on the single filer checklist, plus a few additional items related to your spouse and offspring:

  • Social Security numbers: If you're married filing jointly, you'll need your spouse's SSN. If you want to claim exemptions for your qualifying dependent children, you'll also need their SSNs. If you have any qualifying relatives for whom you can claim an exemption, you'll need their SSNs as well. Moreover, if you're married, you'll need to decide how to file. Married couples tend to assume that they should file their taxes jointly, but this isn't always the best decision. (For further reading, see The Tax Benefits Of Having A Spouse and Happily Married? File Taxes Separately!)
  • Child tax credits: Along with the exemption for qualifying dependent children, there are also child tax credits. Form 2441 can help you determine whether you can take a credit for child and dependent care expenses, which can be claimed on Line 48 of form 1040. The child tax credit (Line 51) can reduce your tax liability by $1,000 per qualifying child.
  • Alimony: If you receive spousal support, this is reportable as income on Line 11. (For more, see The Fundamentals Of Spousal Support Taxation.)
  • Social Security benefits: Social Security benefits can be taxable - it depends on your marital status and total income. Report this income on Lines 20a and 20b.

3. For Self-Employed Filers
Self-employed individuals can have some of the most complicated tax returns, particularly if they have inventory to account for or home office expenses to report.

Being self-employed certainly requires more recordkeeping and can make professional tax help a good idea unless you're particularly tax-savvy. Here's what you'll need in addition to the items discussed above in order to complete Schedule C (Profit or Loss from Business) and any other tax forms relevant to your business.

  • 1099s and your own records of your income: Self-employed individuals don't get W2s. Instead, your clients should each send you a 1099-MISC reporting your nonemployee compensation for the year. Unlike employees, this compensation will generally not have had any taxes withheld from it. Some of your clients will not send you 1099s, however, either because you didn't earn at least $600 from them (the reporting threshold established by the IRS), or simply because they don't realize they're required to send you one, don't feel like it or have too many other things to deal with. The lack of a 1099 doesn't mean that you don't have to pay tax on that income. This is why you must rely on your own records of all self-employment income you've earned. Keeping a spreadsheet throughout the year is helpful; if you don't already have one, make it now. Remember that self-employed individuals are audited at a higher rate, and if you are discovered to have underreported your income, you will be subject to back taxes, interest and penalties.

  • Inventory and cost of goods sold: If your business sells a product, you'll need your records of inventory levels, sales, inventory withdrawn for personal use, costs of labor, materials and supplies associated with selling your inventory, and the year-end value of your inventory.
  • Home office deduction: If you use a portion of your home exclusively for your business, you can deduct a percentage of your home's bills as a home office expense. You'll need to complete Form 8829. Make sure to keep meticulous records because this is a commonly audited area.
  • Business deductions: Self-employed individuals have deductions available to them that corporate employees do not. Numerous business expenses can be deducted, including advertising, automobile operations, labor, insurance, legal and professional services, rent or lease fees, supplies, licenses, travel expenses and more as long as they are incurred as operational business expenses. In order to be deductible, an expense must be ordinary, necessary and documented. Make sure to save your receipts. Some deductions, described below, are not grouped with your business expenses.
  • Self-employed retirement plan contribution: If you're self-employed, you can still contribute to a traditional or Roth IRA like everyone else, but you also can contribute to a SEP, SIMPLE or Keogh plan. There are formulas to determine the maximum amount you can contribute depending on your plan and your business income. Contributions are tax deductible on Line 28 of Form 1040.
  • Health insurance deduction: If you pay for your own health insurance premiums, you may be eligible to claim this expense as a tax deduction on Line 29.
  • Self-employment tax: If you're self-employed, you're responsible for paying your own Social Security and Medicare taxes - both the employee's share and the employer's share. The only consolation, and it's a very small one, is that the employer's portion of the Federal Insurance Contribution Act (FICA) tax is tax deductible on Line 27. Use Schedule SE to calculate how much self-employment tax you owe. (To learn more, read 10 Tax Benefits For The Self-Employed.)
  • Quarterly estimated tax payments: When you're self-employed, you don't have taxes withheld from your paycheck like employees do; instead, you're required to pay in quarterly installments either 100% of the tax you owed last year or 90% of the tax you will owe this year. Pull out your records of the payments you've made so you can see how much of your federal tax bill you've already paid. Also look at last year's tax return to see if you had a refund that you applied to this year's taxes.

Bottom Line
This article is only a quick-start guide and is not exhaustive - there may be aspects of your tax situation that aren't listed here. When in doubt, it's a good idea to consult a tax professional or, at minimum, a tax software program. No matter what your filing situation and no matter who helps you prepare it, make sure to keep records related to everything you claim on your tax return. You may also want to take notes so you can remember where your numbers came from if you need to come back to your return months or years later. (Tax time can be intimidating - but knowing these tips can ease the process and get you a hefty return. Check out Filing Your First Tax Return.)

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