Find answers to queries on tax forms and planning tips

Find answers to queries on tax forms and planning tips
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Taxes can be confusing, and getting the appropriate forms can add to that confusion. There are different kinds of forms for tax returns. While there are a few that will be common to most, there are some that will be specific to some. If you’re a freelancer, a home owner or even one who’s made a mistake while filing, there is a form for you. Planning well and filing on time is the only way.

Which are the most common IRS tax forms?

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There are a few forms that are most common to tax payers of all kinds and brackets. They are Form 1040; 1040EZ; Form 1040A; Form W-2; Form W-4; Form W-4P; Form 1099-MISC; Form 1098; Form 941 and Form 8962.

Which form is common to all salaried people?

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That would be Form W-2. Also called the Wage and Tax Statement, it is a form all salaried employees get. Businesses need to file these forms for every employee from whom income, Social Security and Medicare tax was withheld.

What kind of form do those paying a mortgage need?

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For home owners and students the form is the same. Those paying off a mortgage and those paying off their student loans will have to use Form 1098 or variation of it. This will have a summary of the amount of mortgage or tuition payments you’ve made. This information will come in handy when it comes to figuring out what tax deductions you are eligible for come tax time.

Can contributing to charity get me a tax deduction?

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Yes. If you plan ahead and make tax-deductible charitable contributions it can help you to reduce your taxable income. If you contribute stocks or property, the benefits are two-fold. You receive a tax deduction for giving the gift and avoid future tax liability. The organization you donate to will also benefit as they will not owe taxes on the gift. Just retain the receipt of any contribution of any value.

Can retirement accounts help reduce the amount of tax I pay?

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Yes it can. Pre-tax contributions to a company retirement plan, a self-employed retirement account or an IRA can help reduce your taxable income. This is a great way to reduce tax because they can grow to a substantial amount all free of tax. Company-sponsored 401(k) plans work well, because companies generally match those.

Are cash gifts to family members a good way to save on taxes?

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You can transfer up to $14,000 to per family member without being required to pay taxes. If you want to gift a larger amount, it requires a better strategy. You also need to be mindful of future tax changes.

What form is required for income earned from places other than a salaried job?

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Form 1099 is what you should be looking at. It comes in several variations but the main ones are 1099-DIV, 1099-INT, 1099-OID and 1099-MISC. This form is essential when you earn from a freelance gig or from dividends and distributions from investments. If you have been sent a form so has the IRS, so you must report it when filing returns.

Which is the most important form?

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The Form 1040 and its variations 1040EZ and 1040A, is where the actual tax bill is calculated. The 1040EZ is for those under 65 who have simple tax calculations and don’t claim any credits or deductions. The only caveat being the taxable income has to be under $100,000. The 1040A is also for simple tax situations but a taxpayer can claim some tax credits, and deduct student loan interest, IRA contributions and a few other things. Here too the taxable income must be under $100,000. Form 1040 is for anyone no matter what the filing status is. All deductions and credits can be itemized and claimed.

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