A tax preparation checklist can help you figure out whether or not you’ve missed anything on your tax return when you prepare your return by yourself. Taxes can be pretty challenging, but it doesn’t have to be.
Like anything else in life, you won’t have any problems as long as you know what you’re doing. There are several things that are the same in every tax return. You’re going to report your income on your tax return, make adjustments and take deductions, figure out taxable income, tax liability, claim tax credits, and take out the taxes paid from the tax owed to see if you still owe the IRS or get a refund. The process is quite simple for all.
Your tax preparation checklist should contain:
- Information returns
- Schedules
- Deductions and credits
- Tax liability and refund
Information Returns on Tax Return
The information returns are tax forms that report your income, such as W-2 and 1099s. If you’re working for an employer, you’ll receive your W-2 reporting the wages, salaries, and tips you earned during the tax year. Any other type of income earned is generally reported using either one of Forms 1099. Considering there are close to 20 variants of this tax form, the broad range of income earned is on these tax forms. So go over them and calculate your total gross income properly.
Schedules (Attachments of Form 1040)
While you’re going to attach every tax form that goes into your tax return, Schedules are the ones that you’ll fill out yourself. There is one tax form in particular that every taxpayer needs to fill out, and that is Schedule 1.
This tax form is used for calculating adjusted gross income, which determines eligibility for many of the tax deductions and credit. It’s a way for the Internal Revenue Service to measure your true income as you might forward a portion of it to certain expenses and retirement accounts. Since these won’t reflect your actual income, Schedule 1 is for calculating it correctly. Other than Schedule 1, if you’re itemizing, use Schedule A if you have a loss from your business, use Schedule C.
Deductions and credits
The tax deductions and credits are among the few things that make up the foundations of federal income taxes. You claim deductions to reduce your taxable income and credits to reduce taxes owed. The deductions are granted for certain expenses, and credits are about certain things such as having a child, low-to-middle income, and more.
There are over 300 deductions and credits for taxpayers. There are indeed some that you can claim on your federal income tax return. It’s essential to take a look at your expenses and find what deductions and credits you can claim. Filing your federal income tax return through a tax preparation service can help you figure out which deductions and credits you can take.
Tax Liability and Tax Refund
Once you get to the bottom of the above, you’ll have your tax liability. Due to how we pay taxes in the United States, the total amount of tax owed may be more or less than your liability. If the total amount of tax paid during the tax year is less than what you owe, you’ll have to pay the difference by April 15 (May 17 for the 2024 tax season). If more, you’ll receive a tax refund, refunding the amount you overpaid.