Happily, you probably don’t need to care about most of them. But here are 10 major IRS tax forms you should know about before you file.
Three of them — the W-2, 1098 and 1099 — are forms that may be sent to you with information you’ll need in order to file. The others are forms that you might need to fill out as part of your tax return. Below are the most important tax forms currently used.
1. The Biggie: Form 1040
The Form 1040 (and its buddies the 1040EZ and 1040A) is the star of the tax show — it’s the form where you tally your income and deductions and calculate your actual tax bill. The 1040 “long form” itself is just two pages long, but to fill in its 70+ lines, you usually have to fill out lots of other forms.
There are rules about which of the three 1040s you can use; here’s a quick breakdown.
- Form 1040EZ: A one-pager primarily for people under 65 who have very simple tax situations and can’t claim any credits or deductions, with the exception of the Earned Income Tax Credit (EITC). Your taxable income has to be under $100,000.
- Form 1040A: Also for fairly simple tax situations, with a twist. Although you can’t itemize, you can claim certain popular tax credits, and you can deduct your student loan interest, IRA contributions and a handful of other things. Your taxable income has to be under $100,000.
- Form 1040: Anyone can use it, regardless of filing status. You can itemize and claim all allowable deductions and credits.
2. For Itemizers: Schedule A
Schedule A is for itemizing your deductions — property taxes, charitable contributions, mortgage interest, state taxes, medical expenses or one of myriad other options. Its tax-bill-reducing powers make it one of the single most valuable pieces of tax paper in the stack.
3. For Those With Investment Income: Schedule B
This form tallies all the taxable interest and dividends over $1,500 that you received during the year. Note the word “taxable.” The lower the total, the lower your tax bill, which is one reason tax-advantaged accounts such as IRAs and 401(k)s can be so valuable — they don’t raise your taxable income.
4. For Freelancers and Small Business Owners: Schedule C
Schedule C (or the simpler Schedule C-EZ) is what you use to report the profits and losses from freelancing, consulting or contractor work. It’s also where you can deduct expenses related to the growth and development of your business, such as advertising, home office expenses or office supplies. You might be able to get away with using the shorter C-EZ if your expenses are below $5,000, and you have no employees, no inventory and no depreciation or deductions for the cost of your home.
5. For Investors: Schedule D
If you trade stocks, bonds or other instruments, Schedule D is for you, because it’s where you tally your capital gains and losses for the year. If you’re like most investors, some of your investments probably did well, and some probably didn’t. Report both types: Up to $3,000 of your net losses could be deductible — and Schedule D is where that mathematical magic happens. You’ll likely need information from your 1099s (see below) to get it done.
6. For Regular Employees: The W-2
The W-4 is a form you give to your employer (typically when you start at a job), instructing how much tax to withhold from each paycheck. The W-2 is a form your employer sends back to you in January or February. It shows, among other things, how much you earned, what you contributed to your company’s retirement plan and the amount of taxes withheld on your behalf. A copy goes to the IRS, so be sure you report this information accurately. (Side note: If you got a huge refund last year, fill out a new W-4 to reduce your withholding — otherwise, you’re just giving the government a free loan.)
7. For Homeowners and Students: Form 1098
If you have a mortgage, you’ll get one of these tax forms in the mail. It shows the interest (over $600) you paid on your home loan during the year, and that mortgage interest is generally deductible. Students might get a 1098-T, which reports tuition payments they’ve made, or a 1098-E, which reports the interest they’ve paid on their student loans. Student loan interest and tuition payments may also be deductible.
8. For Multitaskers: Form 1099
The 1099 tax form comes in several flavors, but the big four are the 1099-DIV, 1099-INT, 1099-OID and 1099-MISC. They’re all records of income you’ve received from a source other than your employer, and whoever sent you one also sent the IRS a copy, so don’t forget to report it on your return. In a nutshell, the 1099-DIV reports dividends and distributions from investments; the 1099-INT reports interest you earned on investments; the 1099-OID comes when you buy a bond or note for less than face value; and the 1099-MISC is for most everything else not derived from investments, such as money a client paid you for freelance work.
9. For People Who Made a Mistake: Form 1040X
If you filed your return and then realized you made an error, the 1040X will save your bacon. You may need to include copies of your other tax forms when you file it (go here to learn more about amending your return). Note that you’ll have to file this form on paper and mail it the old-fashioned way, so be sure to keep a copy of all supporting documents, and consider sending it certified mail. If you find out you owe more due to your mistake, you can still pay online. If you score and realize you’re owed a bigger refund, you can still get a direct deposit.
10. For People Who Need More Time: Form 4868
File this form with the IRS by the April deadline — you can even do it online — and you’ll buy yourself an extension until October. Beware: You have to make a good estimate of what you owe the IRS and send in some or all of that amount along with your extension request. If the estimated payment you send in April ends up being less than what you actually owe, you’ll need to pay interest on the difference. And don’t miss your extended deadline: The IRS can sock you with a late-filing penalty of 5 percent of the amount due for every month or partial month your return is late.
Source: Small Business Trends