The Tax Cut and Jobs Act (TCJA) changed the filing season dramatically.
Thanks to the new tax code, nearly 90 percent of tax filers are claiming the standard deduction.
In 2017, before the TCJA was implemented, approximately 46.5 million tax filers itemized their taxes. Now, this number has dropped to slightly over 18 million.
Simplification is one of the most impactful changes of the TCJA. Claiming the standard deduction reduces the number of tax return documents required.
Read on if you are wondering what documents do you need to file taxes? Explore a comprehensive guide to tax documentation regardless if you take the standard deduction or itemize.
All filers submit their tax return on a 1040 form. This is a summary form that includes information like income and deductions.
Those that still mail in their tax return will need to print out a 1040 form. For the people that use tax preparation software, a 1040 is automatically populated using the questionnaires.
For some filers, the IRS requires additional reporting information. Schedules are the official title for these forms.
For example, a Schedule A form is required if you are itemizing your tax deduction. If you earn money through freelance work or independent contracting, a Schedule C form is necessary. Schedule B is for interest and dividends, while Schedule D is for investment income.
The IRS wants traceability when it comes to income. Therefore, one of the most important tax documents is the W-2 form.
The W-2 is an annual income summary from your employer. It provides information on gross wages, taxes paid, and employee benefits.
The W-2 essentially rolls up all of the paystubs that you receive throughout the year. Websites such as www.paystubs.net digitally generate these documents on a weekly or biweekly basis.
Independent contractors and freelance workers do not receive a W-2 form. Instead, their income is typically reported on a 1099-MISC form.
If you opt to itemize tax deductions, the IRS likes to see supporting documentation. There are many different deductions to claim, so we will cover the most popular.
One of the most popular and impactful deductions is mortgage interest. This is captured with a 1098 form. Also reported on this form are property taxes paid, which is another impactful deduction.
There is another important form needed by college students and their parents. This form is called the 1098-T and reports on college tuition payments.
Along these same lines, many Americans are paying back student loans. The interest paid on a student loan is tax deductible and reported on the 1098-E form.
What Documents Do You Need to File Taxes?
For many tax season is a stressful time of year. It does not have to be if you have a basic understanding of what is required.
Tax preparation software makes filing easier than ever. At this point, all you need to know is what tax documents to save for inputting into the software. Documents like the W-2 and 1098 are amongst the most important.
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