Filing taxes for the first time? The process may seem daunting, but it’s not something you can avoid. Learning the proper tax papers and forms will help you avoid costly mistakes and give you peace of mind when you file. If you want to avoid hiring an accountant to do your taxes, read on to learn the basics below!
Know Your Tax Papers
A quick search on the official IRS website will yield nearly 1000 different forms, but don’t be intimidated.
From those forms, only a dozen or so matter for most people. The most important form is Form 1040, which covers individual income tax. You need to fill a 1040 to calculate your tax credits, your deductions, and your tax bill for a year. There used to be several varieties of 1040, but for 2019, there will only be a single, consolidated 1040.
There are many helpful sites that you can use to research the differences between tax forms like W-2 and W-4. Check out one such helpful site here. You may also want to check out our Education section for a ton of guides, blogs, webinars, and free courses on wealth generation.
Tax Form Schedules
Depending on what you own, you might have to fill additional schedules in your 1040. For example, Schedule A itemizes tax deductions. Schedule B covers investment-related income.
Schedule C concerns freelancers and small business owners, while Schedule D covers investors.
W-2 and W-4
There is a lot of confusion between W-2 and W-4 forms. These will concern you if you are employed by a company.
Your employer will give you a Form W-2 to fill at the end of each calendar year. The W-2 shows the total tax they withheld from your paycheck. Your employer will also send the same W-2 to the IRS and several other authorities, including the Social Security Administration. You don’t need to file Form W-2 since your employer will do that on your behalf.
Similarly, you don’t have to file Form W-4 with your annual tax returns. Instead, you have to give it to your employer. Your employer will use Form W-4 to withhold a part of your paycheck to remit to the IRS.
1099-MISC and Other Forms
Finally, if you had other types of earnings in a calendar year, including cash awards, fishing boat proceeds, and lottery prizes, you will have to file these in the 1099-MISC form.
There are numerous other forms that might be relevant to you, but most people are covered with what we mentioned above. If your situation is different, don’t hesitate to seek tax advice from a professional.
Creating Lasting Wealth
Now that you know how to put your tax papers in order, it is time to start thinking about your future.
