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most important documents needed for taxes

The Most Important Documents Needed for Taxes

Welcome to tax season! Hopefully, you’re planning ahead to make sure your taxes will be filed in a timely manner. Whether you’re preparing your own return or paying a professional, some documents are needed for taxes, and you need to make sure you have all of them gathered up.

Please, please do not wait until April 14 and expect your accountant to be able to file your return on time. An extension to October 15 is always an option, but that will delay any refund you’re due… and you still need to pay taxes owed in April. 

My other business is virtual bookkeeping, but I avoid doing tax preparation as much as possible. I just don’t like tax prep or want to keep up with the regulations. I only prepare simple returns, mostly for family and friends, but I’ve put together a list of documents needed for simple taxes.

Personal information

Social Security Numbers

Make sure you have SSNs for yourself, your spouse, and any dependents, as well as everyone’s date of birth and full legal name. If you have a minor child from a divorce, remember that only one person can claim the child. Hopefully, your divorce decree outlined who can claim the child(ren).

Bank routing and account numbers

If you want to receive a possible refund through direct deposit, you’ll need to provide your banking information. You can still receive a paper check; it will just take longer. 

If you owe additional taxes, you can pay that amount electronically or via check. The IRS will also allow you to set up a payment plan if you owe a large amount. The important thing is to make a payment or establish a payment plan before April 15, because the IRS charges exorbitant interest rates and late fees. 

Last year’s tax return

Sometimes information from last year’s return will carry over to the current year. It will also provide personal information for anyone who was listed on the return, which will be helpful this year. 

Helpful links:

Who is a dependent?

What is the right tax filing status? Single, married filing jointly, married filing separately, qualified widow(er), and head of household are your options.

Income documents needed for taxes

W-2 for employees

If you work as an employee, your employer should have issued a W-2 by January 31. The W-2 is probably the most important document needed for taxes.

It will list:

  • Income
  • Tax-advantaged retirement contributions
  • Federal and state taxes withheld
  • Tips reported, if applicable

1099-G for unemployment

Pay close attention to whether federal or state income taxes were withheld from your unemployment income. Unemployment payments are taxable.

1099s from investments

Depending on the types of investments you have, you may receive:

  • 1099-INT for interest income
  • 1099-DIV for dividend income & capital gains distributions
  • 1099-R for receipts from retirement accounts
  • 1099-B for capital gains & losses from your investments
  • 1099-OID & 1099-Q are less common, but also report other types of income

Source

Social Security income

Social Security benefits received are reported on form SSA-1099

Homeowners

  • 1098 showing interest paid on your mortgage
  • Real estate tax information. Property taxes may be included in the escrow account of your mortgage, so they could be reported by your mortgage holder. If the mortgage company doesn’t provide real estate tax amounts, your county treasurer should have also mailed a tax statement during the year.
  • Receipts for any energy-efficient home improvements

Present & past students

  • 1098-E for student loan interest paid. If you paid less than $600 in interest, you won’t get an official tax document, but your lender should provide your interest paid somewhere.
  • 1098-T for tuition paid. The deduction for tuition paid is available to the student only if they cannot be claimed as a dependent by someone else. This means that parents often get a deduction for their child’s tuition, regardless of who actually paid the tuition.

Charitable contributions

The rules for charitable contributions have changed over the past few years. In 2020, thanks to the CARES Act, anyone can take a deduction of up to $300 for charitable contributions. Any amount over that is subject to itemized deductions limitations.

Other documents needed for taxes

  • Receipts for childcare expenses
  • Receipts related to medical & dental expenses, including medical travel mileage records. It’s important to remember that medical expenses have to be over 7.5% of your adjusted gross income, and cannot have been reimbursed by insurance previously. That means you have to spend a lot on medical bills to be able to deduct anything from your taxes. 
  • The amount of last year’s federal & state refunds; a refund could be taxed by the other entity in the current year. 
  • State & local taxes may be deductible on your federal income tax return
  • Teachers can deduct $250 of classroom supply expenses, so keep the applicable receipts
  • Records of contributions to tax-advantaged investment accounts

Please note that this business-related tax information does not apply to employees. 

Business information

  • Tax ID
  • Knowledge of the type of business entity. The taxes for an LLC are part of the owner’s personal return, while a corporation requires a separate tax return to be filed.

1099-MISC or 1099-NEC income

Anyone who paid you over $600 in a non-employee capacity should issue you a 1099, unless you have incorporated your business. The regulations change a bit this year, so there are actually two different 1099 forms to cover this type of income.

1099s only show the amount you received, because no taxes are withheld from payments to contractors. 

Schedule K-1

A Schedule K-1 is similar to a 1099,  but it’s issued by the business to its partners. It lists that partner’s portion of the net income or net loss of the business. 

Business financials

Use the profit and loss statement from your business to help determine the deductible business expenses to report. Make sure you have receipts to back up the expenses you’re deducting. 

Mileage report

If you use your personal vehicle for business purposes, you can deduct a certain amount per mile. The IRS changes the mileage rate each year.

Form 8829 for home office use

If you used part of your home as an office, you may be able to deduct a portion of some house-related expenses on your business taxes. 

Taxes paid

If you were required to make quarterly income tax payments for your business, you need to account for those payments on your return.

Information about assets & equipment

Create a list of your business assets & equipment. Update it every year to help determine the depreciation you can claim. Make sure to include the date of purchase, purchase cost, and type of asset. 

TIP: look at your net worth

A lot of the information required for tax preparation is included, or hinted at, on your net worth calculations.

Your net worth shows investment accounts that could generate income, dividends, or capital gains/losses. It also lists liabilities that may have deductible interest expenses, such as your mortgage and student loans. Your retirement contributions may affect your taxes as well.

Keep receipts and records related to your tax returns for at least 6 years, in case of an audit. If you have hesitation about your ability to properly prepare your taxes, I urge you to consult a professional. The tax code is a tricky, changeable document and it’s hard for people to keep up with it.

5 thoughts on “The Most Important Documents Needed for Taxes”

  1. This is super helpful! I need to do this and have been putting it off because I usually just start gathering papers, thinking all the while, “what else do I need?” The task will be much easier now! Thank you!

  2. Great, in-depth article! I haaaate doing my taxes (who doesn’t?), but your list helps take the guesswork out of what to collect to get started, which I always do in bits and pieces. Thanks!

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