Tax Preparation Checklist (Everything You Need to File) 

Tax Preparation Checklist

Does the thought of preparing your taxes have you feeling stressed out? You’re not alone. Taxpayers across the country feel increased levels of stress when tax season rolls around. Not only may you find yourself owing the IRS money, but you may also face serious consequences if you file your taxes incorrectly. Tax law and language is notoriously complex and confusing, and the consequences for misinformation are nothing to shake a stick at. Taxpayers with filing mistakes may face penalties, levy of assets and property, or even jail time. Filing your taxes is serious business! 

Here at Community Tax, we believe that proper preparation and planning makes for flawless execution. That’s why we’ve created this tax preparation checklist, complete with everything you need to accurately and promptly file your taxes. 

This checklist is intended to be used as exactly that. Print it out, mark it up, and keep it in a folder with your tax documents. You can come back to this list year after year to ensure that you’re in good standing with Uncle Sam.

Gather Your Income Documents 

The first step in preparing your taxes is to gather all of the documents that relate to your income. You’ll use these documents to tell the IRS about the money you made this past year and the entities you earned income from. These documents also contain information about the wages that have already been withheld for things like Social Security, Medicare, and more. 

Income tax documents differ based on the types of work you completed over the past year, as well as the type of employee that you were. Your particular income tax documents checklist may include any of the following items: 

  • Form W-2: If you were employed by an employer, they’re required to send you your W-2 form by the end of January. This is one of the most common tax forms out there. You should be mailed a copy, but in this day and age, many employers make your W-2 available to download from the internet. If you haven’t received your W-2 or information on where to find it by January 31st, contact your employer as soon as possible. 
  • 1099 forms: There are a number of different 1099 forms, including -MISC, -DIV, -INT, and more. They’re a bit of a hodgepodge of less traditional earning scenarios than a W-2. They include: 
    • Form 1099-MISC: Self employment income is reported on a 1099-MISC.  Note that, if you’re self employed, you won’t always receive a 1099 form from the entities you work with. They’re only required to send a 1099 document to independent contractors that they paid over $600—but independent contractors are required to report on income no matter how much money they earned. For this reason, it’s good to keep a list of income from each of your sources throughout the year. 
    • Form 1099-INT and Form 1099-DIV: These two forms are related to investment earnings. 1099-INT is for interest you’ve earned and 1099-DIV is for dividends. 
    • SSA-1099 Form: If you receive Social Security benefits, these will be reported on an SSA-1099. It shows the amount of social security benefits that you received over the past year and the amount paid for Medicare. The SSA-1099 Form may also include any federal taxes that have been withheld from your earnings, though this is an uncommon situation. If you’re a non-resident alien, you should receive an SSA-1042S. 

There are additional types of income that you may need to self-report on. These include things like rental property income, scholarship income, gambling winnings, and more. 

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Compile a List of Deductions 

Tax deductions are the heroes of tax season. They are necessary expenses that you pay throughout the year that detract from your income. They’re considered to lower your “tax liability”, or the amount of taxes that you’re responsible for paying. Tax deductions fall into two different categories: the standard deductions and itemized deductions. 

The standard deduction is a standardized amount of income that the IRS has determined to go towards necessary expenses. It can be deducted from your total income, lowering your tax liability. Any eligible taxpayer may opt to take the standard deduction. In 2019, the standard deduction was $12,200 for single taxpayers or married taxpayers filing separately, $18,350 for heads of household, $24,400 for married taxpayers filing together, and more. 

If you have numerous major expenses or are self-employed full time, you may want to consider opting for an itemized deduction instead of the standard deduction. Itemized deductions take a lot more work on your part, but if your itemized deduction amount will be substantially larger than the standard deduction, the work can pay off handsomely. This portion of our tax preparation checklist will review itemized deductions that you may be eligible to take. 

Common items that can be included in itemized deductions include things like: 

  • Out of pocket healthcare costs. This may include medical or dental insurance and expenses as well as the cost of prescription drugs. 
  • Expenses that can be attributed to home ownership, like property taxes and mortgage interest. 
  • Work-related expenses that you are responsible for, like a home office, business travel, networking, transportation expenses, and more. 
  • Senior Citizen Tax Deductions: The IRS offers a number of senior tax benefits, including deductions and credits. At the state level, you or your loved one may be eligible for even more benefits.

There are a wealth of tax deductions that most taxpayers are eligible for, but don’t take. As a taxpayer with a large number of expenses, it’s foolish not to explore all of the tax deductions available to you! The following are deductions that you may be eligible to claim, that you may never have considered: 

  • Student loan interest payments: If you’re paying off a student loan that accrues interest, you may be able to deduct the cost of the interest you paid from your taxable income. Furthermore, if someone else is paying off a student loan on your behalf, you are still eligible to deduct that interest from your income. The IRS considers someone paying off a loan on your behalf as that person giving you money, so it’s still considered interest you paid–whether or not it came out of your pocket. 
  • Charitable donations: If you made a monetary donation throughout the year, you can write off that donation as a part of your itemized deductions. But did you know that you can also write off the cost of charity-related expenses? This includes things like the purchase of canned goods for a food drive, a holiday gift you bought as part of a holiday toy drive, or even 14 cents for each mile that you drove for a charitable purpose. 
  • Work-related travel: Frequently traveling for your job? You might be able to write that off. If you have to pay to park for a business meeting, you can write off the cost of that parking spot. You can also write off the cost of transportation throughout a business trip, meals you eat, and more. If you use your car for business purposes, you can choose to either deduct the standard mileage rate or the car expenses for the year. 

Determine Eligibility For Credits 

Much like deductions, the IRS offers credits for a number of different expenses that you incur throughout the year. Oftentimes, these have a much larger payoff than the associated deduction. A deduction lowers the cost of your taxable income, which then lowers the cost of your taxes. A credit, however, is pulled directly from the cost of your taxes, ultimately subtracting much more than a deduction. Some of the most common tax credits include the following: 

  • Child and Dependent Tax Credit: This credit is available to taxpayers who pay for the cost of childcare or a dependent while working. This may include a child under 12 years of age or a person (spouse or dependent) that is unable to take care of themself, and for whom you provide care. You are eligible to claim this credit if you pay someone other than your spouse, your dependent, or your own child for regular care. This may add up to as much as $3,000 in credit for the care of a single person, or $6,000 for multiple people. 
  • Earned Income Tax Credit (EITC): This credit is available to those who earn low to moderate income. Your qualification is based on your adjusted gross income (your total income minus your necessary expenses). If you are married with multiple children, you can receive up to $6,557. If you’re single, you can receive up to $529. 

Time To File 

Now that you have a clear picture of your income, expenses, deductions, and credits, it’s time to start preparing your taxes! Be sure to double check all information that you provide to the IRS. You can use IRS Form 1040 to verify the amount of taxes you expect to pay or funds you should expect to receive, depending on your particular situation. 

If preparing your taxes still has you feeling stressed, consider using Community Tax’s professional tax preparation services. We’ll help you with all of the above, and we may even find credits and deductions you didn’t know you were eligible for. Contact us today and we’ll take the stress out of this tax season.