Tax season is officially in full swing, and the Internal Revenue Service is now accepting and processing 2016 federal individual income tax returns. That means you’re due to get your tax forms and receipts in order, so you can be one step closer to your tax refund.
Here are a few tips to get a jump-start on your refund and the most common forms you'll need to prepare and file this year.
Organize and Prepare. Step number one to starting any tax return is to gather all of the right tax documents to ensure that you have all your information ready when you sit down to do your taxes. If you were employed during 2016, you should see your W-2 from your employer soon since employers were required to issue W-2s by Jan. 31, 2017.
If you were self-employed, or worked on a contract basis with no taxes withheld, your income may be reported to you on different tax forms, including a 1099-MISC or 1099-K, which you should also see soon.
Here's a look at the most common tax forms you'll need to gather.
- W-2: You will receive a W-2 if you earned income working for an employer. This form shows how much income you earned for the year and how much was deducted for taxes and any other withholding.
- 1099-MISC: If you worked as a freelancer or did contract work on the side and received earnings from those activities, you can expect to receive a 1099-MISC.
- 1099-K: If you earned income working as a freelancer or in the on-demand economy – signing on with Uber, Lyft or Airbnb, for example – you may see this form, which reports income processed through third-party networks, such as PayPal.
- Other 1099 forms: There are also other versions of the 1099 form, like a 1099-INT, if you received interest from savings or investments. The 1099-DIV reports dividends and distributions from investments.
- 1098: If you own a home and have been paying mortgage interest, you will receive this form from your lender that shows the amount of mortgage interest you paid and can deduct. It may also show property taxes you paid as well any points paid, which are both tax deductible.
- 1098-E: This form details your tax-deductible student loan interest payments paid over $600. If you paid less than $600 you may not receive a 1098-E, but don't forget your interest. You can still deduct it.
- 1098-T: This form can be used to help you figure out education tax benefits since it reports tuition costs and related education expenses you may have paid during the year.
There are also other pieces of supporting documents you won't receive in the mail that you'll need to have handy when you sit down to do your taxes. Here's what else you can work on digging up.
- Social Security numbers for family members: In order to file your taxes, you need to include your accurate Social Security number. You want to make sure you have the correct Social Security numbers for your spouse, as well as for anyone you are claiming as a dependent. If you had a baby last year, make sure that they have a Social Security number because you will need that in order to claim those valuable tax deductions and credits.
- Supporting information for tax deductions and credits: If you are eligible for tax deductions and credits, you want to make sure you have information from supporting documents for verification. Whether it's information needed to claim child care or job search expenses, you will need to refer to related documents. If you are reporting your home office and car expenses, make sure that you have the receipts to back these up.
- Charitable donations: If you donated to charity, you need proper receipts to fill out information when preparing your tax return. You don't have to include these receipts with your tax return, but you need to keep them for your records to prove your donations or other expenses.
- Contribution information: Don't forget information about retirement plan contributions that may be deductible. Also, if you contributed to a 529 plan, and your state offers you a tax benefit for contributing, don't forget that information (it doesn't apply to your federal taxes).
- The number of people who did their own taxes increased more than 5 percent last tax season, and taxpayers received an average refund of close to $2,800, according to the IRS. The IRS anticipates issuing more than nine out of 10 federal tax refunds in 21 days or less from acceptance.
Your tax refund can make a big difference in your financial life, whether you need to pay down debt or save for something special – so what are you waiting for? Happy filing!