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Tax Returns: What Are They, And How Do They Work?
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Sitting down to file taxes can seem daunting. You can make the process simpler by collecting important financial and personal information prior to filling out Form 1040.



You will need the following documents to file your federal and state taxes:



Your basic personal information, such as your social security number or tax identification number for all the persons listed in your return, and the date of birth for everyone who returns. These numbers will include your names and dates of birth. However, you may also need to include the numbers of your spouse or dependents.



Information about income and investments will also be required. This information can be obtained from the forms you should send to you prior to filing taxes. Your W-2 form shows how much you earned in the previous year and how much of your income was withheld from taxes. This form must be sent by your employer each February.



Information about your bank account, including information on how much you've earned in savings, will be required. You will also need a Form 5498 from the financial institution that offers your IRA. This form should show how much you contributed in each year.



Form 1098-E is also important. Indicates how much interest you paid on student loans. For those who have a mortgage, Form 1098 will show how much interest you paid. Both forms are important because you could deduct this interest from your taxes.



You will need 1099 forms if you are self-employed. Any client that paid $ 600 or more in the past year will send these forms to you. This information will be required to be reported in your income tax returns. You will need to fill out Form 1099-DIV if you have received dividend income. You will also need to list any income received from the government.



Submission Status: You will also need to determine your submission status. This is important because it helps determine how much income tax you pay. You can apply as:




Single: If you are not married or claimed as dependent on another's tax return, you will file your taxes as a single taxpayer. Taxpayers are entitled to a standard deduction up to $ 12,400 in 2020.




Filing jointly for marriage: This is where most married couples register. This allows them to file one tax return. This category allows you to deduct $ 24,800 as your standard deduction for 2020 tax year.




Married filings separately: Married couples can also each file their own tax returns and report only their personal income, deductions and credits. The standard deduction for taxpayers who file this way is $ 12,400 for the 2020 tax year.




Main parts of tax returns: There are three main parts to your tax return. This is where you will report your income for the previous year. The second section is where you can report tax deductions.



Tax deductions can be very beneficial. These deductions are subtracted from your adjusted gross income for the year. This helps you to reduce your taxable income. The more deductions that you include in your tax return, both the taxable income and taxes you pay, the lower they will be. Be sure to only request deductions that you are legally allowed.



The standard deduction is the most popular deduction. This is the amount of money you can deduct from your taxes if you don't provide additional deductions. If you are applying as a single taxpayer, the standard deduction is $ 12,400 for the 2020 tax year. If you are married and filing together, your standard deduction for the 2020 tax year is $ 24,800. This means you can deduct as much money as you like from your taxes.



It makes sense to claim a standard deduction if this amount is greater than the total amount of other deductions you could claim. Examples of deductions that you can apply are:





Interest paid on your mortgage


Student loans are subject to interest


You have made charitable donations


Contributions to IRAs and Health Savings Accounts


Costs of self - employment



If you are single and your additional deductions exceed $ 12,400, it is a good idea to write your deductions into your tax returns. If these deductions are less than $ 12,400, it makes sense to use a standard deduction.



Tax breaks are the third section of your tax return. These differ from deductions in an important way: While deductions reduce your taxable income, credits are deducted directly from your total tax document.



Your tax document would drop to $7,000 if you owed $ 12,000 taxes and were eligible for a $5,000 tax credit.



There are many tax credits. For example, if you have adopted a child, you may be eligible for an adoption tax credit. This credit can reach up to $ 14,300 for each child adopted in 2020.



You may be eligible for the child tax bonus if you have a dependent kid. If you have three eligible children, this credit can reach up to $ 6,660. This credit could be $ 5,920 if you have two eligible children and $ 3,584 with one eligible child.



Filing a return: You can file a tax return in many ways. Of course, you can choose to send them to the IRS and your government.



You can also submit tax forms online.



Transcripts of tax returns


What if you need to see your past tax information? Request How to do a tax return? of your tax return from the IRS to do this.



A tax return transcript summarizes your past tax returns, including adjusted gross income, filing status and tax payments.



You can request a tax transcript from the IRS at any time, and the agency will not charge you fees. You can request a transcript of the tax return for the current tax year and the previous 3 years. These transcripts can help you prove your income when applying for a mortgage, student loan or other type of loan.



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