Financial

6 Things to Have Ready For Tax Time

Tax time! That tedious time of year that inspires the champion procrastinator in so many of us, for so many reasons. For some of us, we dread the bill (that cash looked so much better sitting in our savings account)! For others, we may have been a little disorganized and we’re afraid to find out how much we owe. Or, if you’re like me, getting together all that paperwork gives you agita.

We can’t make taxes disappear, but we can make things a little bit easier by helping you get prepared for the process. Whether you’re going with DIY tax prep, using a free local resource, or hiring an accountant, here’s a guide to what you’ll need to bring to the table.

Documentation of every dollar you’ve earned, from any source.

Sure, you know you need to report your wages, but you also need to report any other income that you have received. That means you need to have your W2 for wage and salary information, a 1099-NEC for any independent contractor work you’ve done. But you’ll also need to document any earnings from the sale of stocks with a 1099-B, a 1099-DIV for any dividend income, a 1099-INT for interest, and a 1099-MISC for any miscellaneous income you’ve earned. You can check out this list for more information.

Documentation of your unemployment income.

If you are one of the many, many people who received unemployment benefits last year, you’ll need to file a 1099-G to report your unemployment compensation. When you first started receiving unemployment income you were asked whether you wanted to be taxed when you received the check or later. Either way, you’ll need to use this form to report your earnings.

Unreported income.

Sometimes you won’t receive a 1099-MISC or 1099-NEC for your freelance work because the earnings didn’t hit the $600 mark, and the company is not required to report it. However, you are required to report it.

Rental income and expenses.

If you made money renting out a property, or even your apartment, you need to report those earnings. However, you can also report expenses involved with being a renter, which can help reduce your tax burden. You’ll want to have a record of any materials that went into maintenance, cleaning, improving, or repairing your rental.

Documentation of expenses.

To deduct your expenses, you will need a careful record of them so that you can file accordingly. For instance, you’ll need a record of mortgage interest paid for your 1098, your forms from your student loan companies for your 1098-E, and tuition records for your 1098-T. In addition, you’ll want to have records of childcare costs, business expenses, and moving expenses if you moved for work.

Receipts for your charitable donations.

The 2021 Consolidated Appropriations Act extended many programs put in place by the 2020 CARES Act, including a provision allowing individuals to deduct up to $300 in charitable contributions. This year, couples filing jointly can deduct up to $600 in charitable donations. This is a welcome change since the Tax Cuts and Jobs Act made changes to the rules for who could deduct contributions. It is great news for those of you who have been helping your communities this year!



Source
6 Things to Have Ready For Tax Time is written by The Financial Gym Team for financialgym.com

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