Those words are enough to make even the most organized people crawl under the covers. I personally love tax season! If you stay organized you can fly through it easily! Over the next few weeks I will be going into tax season with tips and advice to help you do just that. We will start with the basics and later will get into the details of preparing, filing, and how to make next year much easier.
Taxes and filing taxes can be stressful and time consuming. Because of this, I wanted to start off this series with giving you some basics to go into it.
Tip # 1: When starting out, your don’t need diligent records. When you mature financially, you will need more. For now, chances are you need basic filing.
Tip #2: Grab a file and label it “2016 Taxes.” This will give you a place to keep all your records for filing this year!
“What kind of documents should I keep?”
This is a question most people ask themselves throughout the year. Debating and deciding what is worth keeping. I covered basics on what paper you should be keeping a few weeks ago, and you can brush up on that to get a little more detail. For now, this is a good list of what you should have in your “2016 Taxes” folder.
1. W-2 from employer
2. 1099-MISC for self-employment
3. 1099-B for brokerage trades (if applicable)
4. 1099-E for interest paid on student loans (if applicable)
5. 1098 showing interest paid on mortgage (if applicable)
6. Documents showing donations, medical expenses, contributions made, etc.
Here are some special forms for personalized situations you may need to know about:
- 1040EZ– This is the shortest and easiest. Here are some qualifications you will need for this form:
-Income is under $100,000
-Interest income is under $1,500
-All your income is wages, interest, or unemployment
-Filing single or married
-No adjustments are needed
-Claiming a standard deduction.
- 1040A – Form to use when you have a more complicated tax file. Here are some qualifications:
-Investments in the IRA
-Invested and made money in stocks
-Total income is under $100,000
-Any age and filing status
-Income is from wages, interest, dividend capital gain, IRA, pensions, unemployment, or social security.
“Should my deductions be itemized or standard?”
Tax deductions come in two forms, Standard and Itemized. Sometimes it can be difficult to decide which one you should file with. If you use a program like TurboTax, submit your information, and they should be able to tell you which one you should use. But, here are some basics.
If the total of your itemized expenses is greater than the standard deduction ($5,800 for single or $11,600 if married) then itemize your deductions.
If the total is smaller, then take the standard.
Again, this was just the basics. Stay tuned over the next few weeks while we dive into things like vocabulary, tracking income, filling our your W-2s, filling, and more!
Have a great weekend!