It’s that time of the year again. The year where you get sent PDFs, paper mail, and everything in between of tax forms. It can be overwhelming and confusing, especially for younger individuals who may just be starting to do their own taxes. We are going to give you an brief list of tax forms and why you may be getting sent them. The tax process may be even more complicated this year due to COVID stimulus checks and unemployment income.
There are 4 possible ways to claim your taxes. These include:
- Married filing jointly
- Married filing separately
- Head of household
There are two ways to file your taxes
- Online using softwares such as TurboTax or H&R Block
- By hand, the old-fashioned way
Depending on the complexity of your income, you may have various forms sent to you that you will use to complete your tax return. We will start with some of the most widely used forms.
- This will show your total wages and income tax withheld for a specific year
- If you are filing a joint return, this would include both you and your spouse
- This form includes Social Security/Medicare payments made by both you and your employer
- This form is used for other types of income such as independent contractors, freelancers, and self-employed individuals
- This form is also used to report non-employee compensation such as rents, prizes and awards
- Please note that independent contractors
- You would receive this form if you the government made payments for your unemployment compensation
- You would also receive this form for state/local income tax refunds or credits
- Please note that the American Rescue Plan excludes income up to $10,200 if you have a modified adjusted income of less than $150,000
- Many taxpayers will receive this form because they own a savings account with a bank
- If you earned more than $10 interest from a bank, brokerage, or other financial institution, you will be sent this form
- Investors receive this form if they own stock in company that distributes dividends
- Please note that dividends are payments made (typically quarterly) from corporations to their shareholders
- This form is sent to individuals who are receiving retirement income and retirement plan distributions of $10 or more
- This form is also used for permanent and total disability payments under life insurance contracts
- This form is used to calculate capital gains for the tax year
- If you sold stocks, commodities, futures contracts, or foreign currency contracts
- Please note that short-term capital gains are taxed at a higher rate than long-term capital gains. (Short-term is considered less than 1 year)
*You will also be asked if you received both stimulus payments in 2020*
These are the most widely used income tax forms for Americans. There are many other forms that you may be sent if you own a small business or farm, receive alimony or child support, receive gambling winnings, and much more. The best way to look at it is this: If you received income in a specific year, you will probably receive a form dictating how you will pay taxes on it.
This article does not include deductions and credits. Be sure to look into possible ways to limit your taxes. If you own a home, have a family, own a car, give to charity, go to college, or have extensive medical expenses, you can qualify for deductions and credits.
If you are a teacher (K-12) that worked more than 900 hours in the school year, you can deduct up to $250 for books, supplies, computer equipment, PPE, disinfectant, PE courses athletic supplies or other equipment you use in the classroom for your federal taxes.
Taxes can get complicated depending on your income streams and how many deductions and credits you qualify for. This is a brief article explaining why you may have received certain forms.