It can be daunting to sit down and file taxes. You can make the process simpler by collecting important financial and personal information prior to filling out Form 1040.

 

To file federal and state taxes, you will need:

 

The basic information about you, including your social security number and tax identification number. Also, the date of birth for everyone who files returns. This will usually include your numbers and dates of birth, of course, but also the numbers of your spouse and dependents.

 

You will also need information on income and investments. Tax accountant South Yarra can get this information from the various forms that should be sent to you before filing taxes. Your W-2 form shows how much you earned in the previous year and how much of your income was withheld from taxes. This form must be sent by your employer each February.

 

You will also need information about your bank account that shows how much you have earned in the savings account. If you have contributed to an IRA, you will need a Form 5498 provided by the financial institution offering your IRA and one that shows how much you contributed in the previous year.

 

Important is the Form 1098 E. Indicates how much interest you paid on student loans. For those who have a mortgage, Form 1098 will show how much interest you paid. Both forms are important because you could deduct this interest from your taxes.

 

If you are self-employed, you will need 1099 forms. These forms are sent to you by any client who paid you $ 600 or more the previous year. You will need to report this information in your tax returns as income. You will need to fill out Form 1099-DIV if you have received dividend income. And if you have received any money or benefits from the government, this income will be listed on Form 1099-G.

 

Submission Status: This is where you will need to identify your submission status. This is important because it helps determine how much income tax you pay. This is how you can apply:

 

 

    • Single: You will be filed as a single taxpayer unless you are married and claimed as dependent on someone else’s tax return. Taxpayers are entitled to a standard deduction up to $ 12,400 in 2020.

 

 

 

    • Marriage filing together: Most people who are married register in this category. This allows them to file one tax return. If you fall into this category, your standard deduction for tax year 2020 is $ 24,800.

 

 

 

    • Married filings separately: Married couples can also each file their own tax returns and report only their personal income, deductions and credits. The standard deduction for taxpayers who file this way is $ 12,400 for the 2020 tax year.

 

 

 

    • The main parts of your tax return: There are three parts to your tax return. The first is where you report your income for the year. The second section is where you can report tax deductions.

 

 

Tax deductions are valuable. You subtract them from your adjustable gross income for the year, which means they help you reduce your taxable income. The more deductions that you include in your tax return, both the taxable income and taxes you pay, the lower they will be. Just make sure you only request deductions to which you are legally entitled.

 

The standard deduction is the most popular deduction. This is the amount of money you can deduct from your taxes if you don’t provide additional deductions. If you are applying as a single taxpayer, the standard deduction is $ 12,400 for the 2020 tax year. If you are married and filing together, your standard deduction for the 2020 tax year is $ 24,800. This means you can deduct as much money as you like from your taxes.

 

If the standard deduction is more than what you could claim, it makes sense to claim it. Examples of deductions that you can apply are:

 

 

    • Interest paid on your mortgage

 

    • Interest paid on student loans

 

    • You have made charitable donations

 

    • IRA contributions and health savings accounts

 

    • Costs of self-employment

 

 

If you are single and your additional deductions exceed $ 12,400, it is a good idea to write your deductions into your tax returns. It is a good idea to take a standard deduction if these deductions total less than $ 12,400.

 

The third part of your tax return focuses on tax breaks. These are different from deductions in a key way. While deductions can reduce your taxable income by reducing it, credits are taken directly from your tax document.

 

Your tax document would drop to $7,000 if you owed $ 12,000 taxes and were eligible for a $5,000 tax credit.

 

There are many tax credits. For example, if you have adopted a child, you may be eligible for an adoption tax credit. This credit can reach up to $ 14,300 for each child adopted in 2020.

 

If you have a dependent child, you may be entitled to the child tax bonus. This credit is available to up to $ 6,660 if you have three or more eligible children. If you have two eligible children, the credit can be as high as $ 5,920. It is $ 3,584 for one child.

 

Filing a tax return: There are many options for filing a tax return. Of course, you can choose to send them to the IRS and your government.

 

Online submissions of tax forms are also possible.

 

Transcripts of tax returns

 

What if you need to see your past tax information? Request a transcript of your tax return from the IRS to do this.

 

A tax return transcript summarizes your past tax returns, including adjusted gross income, filing status and tax payments.

 

The IRS will provide a transcript of your tax return at no cost to you. A transcript of your tax return can be requested for both the current and previous tax years. These transcripts can help you prove your income when applying for a mortgage, student loan or other type of loan.