Tax preparation is a task not many people are excited about even the most frequent of tax payers doesn’t look up to this particularly because of the amount of paperwork, complexity and ambiguity that is involved in filing tax returns. As of 2017, the Internal Revenue Service had close to a thousand tax forms available on its website for filing all kinds of tax report for income tax to expenses and other financial data for taxation. And each piece of this letter or forms bears its own letter or number which can seem as strange as trying to read a foreign language for the first time.
Fortunately, you do not need to have knowledge on all of these tax forms. Like the popular philosopher said “I rather have infinite knowledge on a limited subject than have limited knowledge on an infinite subject”. So knowing or understanding a few key tax forms can provide you with all of the information you would need on your tax return. Having knowledge about the frequently used tax forms not only makes the filing process less intimidating and herculean, it also helps you take advantage of tax deductions, credits and refund that you are entitled to claim.
So here’s a summary of what you need to know about some the most common Internal Revenue Service Tax Forms and filing your taxes;
- Form 1040; the form 1040 is the long form for filing individual tax return. Anyone can choose to use it. But the form 1040 must be used if taxable income is $100,000 and above, have self-employment income or plan to itemize deductions or your income includes business.
- Form 1040EZ; this form is the shortest form and simplest version for filing individual tax return. To be eligible to use this form, you must have no dependent, earn less than $100,000, under 65 years, and have no intention of itemizing deductions.
- Form 1040A; this is the mid-length individual tax return form. If you can’t use the 1040EZ then you should opt for the 1040A instead of form 1040. The form 1040A is more comprehensive than 1040EZ but simpler than form 1040. You can use his for if you earn less than $100,000, don’t have self-employment income and it also allows you make deductions such as child tax credits and student loans.
- Form W-2; this form is filled out by your employer to report the amount of income earned to you and the IRS if you have earned more than $600 in a calendar year. This tax form supplies you with information such as taxes withheld by employer, wages earned, and contribution to 401k, which would come in handy when filing your 1040.
- Form 1098; this form must be filled when a recipient receives more than $600 in mortgage interest, student loan or paid tuition.
- Form 1099; the Form 1099 is a form series that reports all income that isn’t salary, wages or tips. The form 1099-DIV; reports dividends, capital gains etc. The form 1099-INT; keeps track of your interest income on investment. Form 1099-MISC documents royalties, commissions, rents, self-employment earning.
- Form 8962; if you have purchased Health Insurance from the Exchange you may qualify for the premium tax credit to help you in making payments for your premiums. To claim the credit you must file the form 8962. The amount of your premium credit is largely determined by your income and family size.