Tax season can be complicated: From the math, to the organization of documents, to the filing of the forms. The IRS has over 900 different tax forms available to taxpayers when filing their returns. Generally, the average taxpayer doesn’t have to worry about a majority of the forms. Ten of them are relatively common, and you should be familiar with them before you file your tax return.
Three of these forms (W-2, 1098, and 1099) contain the information you’ll need to file your return, while the remaining seven are those you’ll have to complete and submit as part of your return.
- Form 1040: No matter which filing status you use, the Form 1040, along with its counterparts the 1040EZ and the 1040A, is the main form in which you calculate your income and subtract deductions to determine the actual amount due at tax time. Known commonly as “the long form” the 1040 is only two pages long but contains over 70 different data fields, and is generally accompanied by different supporting forms.
- Schedule A: Those who opt to itemize their deductions will list them on a Schedule A, filed in addition to the Form 1040. Deductions such as property taxes, charitable contributions, mortgage interest, state taxes, and medical expenses can reduce your tax-bill significantly, making this form a valuable tax document to itemizers.
- Schedule B: This form applies to taxpayers who have investment income, as it calculates all of the interest and dividends over $1,500 received throughout the year. However, it only applies to interest and dividends that are taxable, so accounts that have tax advantages, like IRAs and 401(k) are exempt, meaning they won’t raise your taxable income. The lower the total on your Schedule B, the lower your tax bill.
- Schedule C: Along with the shortened form Schedule C-EZ, this tax form is used by freelances and small business owners to document business profit and loss for the tax year. If you contract, consult, or work independently of an employer, you’ll use this form to report your income. Additionally, you can use this form to deduct business expenses, such as advertising, home office expenses, supplies, and operating costs. If your expenses are below $5,000, and you don’t employ anyone else, have no home office deductions and no inventory or depreciation, you probably can file using the simpler C-EZ.
- Schedule D: Traders of stocks, bonds, or other monetary instruments will use a Schedule D to total the amount of capital gains and losses on this form. Most taxpayers have investments that do well throughout the year, and others that don’t. Regardless, you need to report all of them to the IRS, as up to $3,000 in capital losses may be deductible. Using info from your Form 1099 (Explained below), you’ll calculate the amount eligible for deduction on a Schedule D.
- W-2: When you start a job, you file a W-4 with your employer, indicating how much in taxes should be withheld from your paycheck. At the end of the tax year, your employer will send you a W-2. The W-2 indicates your total earnings, if you made contributions to the company’s retirement savings and the breakdown of tax withholdings from your salary. The IRS also receives a copy from your employer, so it’s important to report the information as accurately as possible. If you received a large tax refund last year, you may want to revise your W-4 and file a new one with your employer.
- Form 1098: Homeowners who has a mortgage can expect to receive a Form 1098, documenting the amount of interest in excess of $600 that was paid on your loan during the tax year. In many cases, the interest on a mortgage is deductible. Students may also receive a version, the Form 1098-T, which reports payments made to an institution for tuition, or the 1098-E, which shows paid interest on student loans. Both expenses for students may be deductible as well.
- Form 1099: There are a variety of Form 1099, including the four most common: 1099-DIV, records dividends, distributions, and capital gains from investments, 1099-INT, which reports investment interest earned, 1099-OID, states any income received after the price of redemption on maturing bonds, and 1099-MISC, which is for income not sourced from investments, such as freelance work paid by a client. This form documents income received from a party that is not your employer. The IRS gets a copy as well, so they’ll be expecting this income to be reported on your return.
- Form 1040X: This form is important for taxpayers who realize after the fact that they may have made an error on their original return. When you file the 1040X, you may have to include a copy of your original return and supporting forms. This form has to be filed on paper and mailed, just like tax filing of the past, so retain a copy of all the documents. It’s a good idea to send the corrected return via certified mail. If your error results in owing more on your tax bill, you are able to pay the balance due online. Conversely, if your error grants you a larger refund, you can receive it direct deposit.
