Checklist for tax preparation

This content is for general educational purposes and is not intended as financial, legal, investment, or tax advice and should not be relied on as such. We do not guarantee the accuracy or completeness of the information found in this post.

Summary

• Gather essential personal information, including Social Security numbers for everyone on your return and a copy of last year's tax filing.

• Collect all your income-related documents, such as W-2s for employment, 1099s for freelance or investment income, and records for any digital asset transactions.

• Organize records of your spending to help find tax deductions and tax credits you may be eligible for. These can include expenses related to homeownership, education, medical bills, and childcare.

• Understanding the difference between tax deductions (which lower your taxable income) and tax credits (which reduce your tax bill dollar-for-dollar) can help you maximize your tax return.

Tax season can feel like a huge puzzle, but you have all the pieces. You just need a system to put them together. Tax preparation is much less about being a math expert and much more about being organized. When you collect your tax documents ahead of time and know what each form is for, it’s easier to stay organized and file with confidence.

We'll walk through key things you need to file taxes, from the basics of personal information, to important tax documents you’ll need, and the details of your income and expenses. To begin, you may want to find out if you even need to pay taxes this year.

Phase 1: Your foundational information

Before you can dig into the numbers, you need to collect the basic information that identifies you to the Internal Revenue Service (IRS). The IRS is the U.S. government agency responsible for collecting taxes. Having these details ready will make the process go smoothly.

Your core personal details

First, make a list of the full legal names and birthdates for every person you will include on both your state and federal tax return. This includes you, your spouse if you’re filing together, and any dependents. A dependent is a person, like a child or qualifying relative, who relies on you for financial support. Accuracy is key here, so be sure the names and birthdates match what is on each person's Social Security card.

Your essential identification numbers

Along with names and birthdates, make sure you have the right identification number for everyone you’ll include on your tax return. Below is a list of identification documents or information you may need when preparing your tax return:

• Social Security Numbers (SSN): This is a nine-digit identification number used by the government to track earnings and benefits. Include the SSN for yourself, your spouse (if filing jointly), and any dependents.

• Individual Taxpayer Identification Number (ITIN): If you or a family member don't have an SSN, you might use an ITIN. This is a tax processing number available to certain non-U.S. residents and other individuals who don’t qualify for an SSN. It can also be issued to their spouses and dependents.

• Identity Protection PIN (IP PIN): Some people receive an IP PIN from the IRS. This is a six-digit number assigned to eligible taxpayers to help prevent the fraudulent use of their Social Security number on tax returns. If the IRS sent you, your spouse, or a dependent an IP PIN, you must use it to confirm your identity when you file your taxes.

Last year's tax return: your secret weapon

When filing this year’s taxes, have a copy of your prior year's income tax return nearby. This document is useful for tax time. It acts as a reminder of which forms you used and what income sources you reported last year, which can help ensure you don't forget to include anything when filing your taxes this year.

More importantly, you will likely need your Adjusted Gross Income (AGI) from last year's return to verify your identity if and when you file electronically. Your AGI is your gross income (like wages, salaries, and interest) minus certain deductions. It’s a key figure on your tax return, and having it ready can help to prevent delays.

Your banking information

The final step in this phase is to find your bank account and routing numbers. You can find these on a check or by logging into your online banking portal. If you expect a tax refund, providing this information for direct deposit is a fast and safe way to receive your money. If you owe taxes, you can also use this information to pay electronically.

Phase 2: Gathering your income documents

Now it's time to collect the documents that show your income for the year. Most of these forms should be sent to you by January 31st. Depending on your employment, you may receive more than one form. 

Income from employment

If you work for an employer, your main income document is the Form W-2, Wage and Tax Statement. Your employer sends one copy of your W-2 to you and one to the IRS. This form shows how much you earned in wages and how much tax was already withheld and sent to the government on your behalf. If you had more than one employer during the year, you should receive a W-2 from each employer who paid you at least $600.

Income from self-employment

Many people earn income outside of traditional employment. If you are a freelancer, independent contractor, or small business owner, your income documents will look different. Here are a few key examples:

• Form 1099-NEC, Nonemployee Compensation: You’ll likely receive this form from any client who paid you $600 or more during the year. It reports what you were paid, but unlike a W-2, no taxes are withheld.

• Form 1099-K, Payment Card and Third Party Network Transactions: You might get this form if you accept payments through a third-party network like a payment app or online marketplace. It reports the gross amount of payments you received.

Even if you don't receive these forms, you are still required to report all of your self-employment income. This is why keeping track of your own records, including bank statements and invoices, is so important.

Investment and savings income

If you have money in savings accounts or certain investments, you’ll likely have income to report from those sources.

• Form 1099-INT, Interest Income: This form reports interest you earned from bank accounts, certificates of deposit (CDs), and other sources.

• Form 1099-DIV, Dividends and Distributions: If you own stocks or mutual funds, this form shows any dividends you received.

• Form 1099-B, Proceeds from Broker and Barter Exchange Transactions: This form reports sales of stocks, bonds, and other investments. You'll need this information, along with what you originally paid for the investments (your "cost basis"), to calculate any capital gains or losses.

• Digital Assets (Cryptocurrency): The world of digital assets is new and can be confusing. If you sold, exchanged, or spent any cryptocurrency, you have a taxable transaction to report. Some crypto exchanges may send you a 1099-B, but not all do. It's critical to keep your own detailed records of your digital asset transactions.

Reporting other income

Some types of income don’t come from a typical employer. If you earned money from things like rent, prizes, or other miscellaneous work, you might get a Form 1099-MISC. This form shows how much you earned and helps you report it on your taxes. Even if you don’t get a 1099-MISC, you still need to report this income. Keep careful records like bank statements or invoices to make sure you don’t miss anything.

Retirement income

For those who are retired, income can be reported on a few different forms.

• Form 1099-R, Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.: This is a key form that reports withdrawals from retirement plan accounts like a 401(k) or traditional IRA.

• Form SSA-1099, Social Security Benefit Statement: This form shows the total Social Security benefits you received during the year. Depending on your total income, a portion of your benefits may be taxable.

Other common income sources

There are many other types of income you might have received. Look for forms or records related to unemployment benefits (Form 1099-G), gambling winnings (Form W-2G), alimony received (for divorce agreements dated before 2019), rental property income, or royalties.

Form 1040: Your main tax form

The Form 1040 is the main tax form most individual U.S. taxpayers use  to file with the IRS. It collects all your income, deductions, and credits. Think of it as the summary page for your taxes. The 1040 is where you calculate how much tax you owe or how much refund you will get. Most of the other forms and statements, like W-2s and 1099s, feed into this form.

Phase 3: Unlocking deductions to lower your taxable income

Deductions are your friend. They are qualified expenses that you can subtract from your income, which can lower the amount of your income that is subject to tax. You have two choices: take the standard deduction or itemize your deductions.

The standard deduction is a fixed dollar amount that reduces your taxable income, and the amount depends on your filing status, such as single or married filing jointly. Filing status reflects how you file your tax return and is based on factors like marital status and household situation. Each filing status has its own standard deduction amount set by the IRS.

Itemizing deductions means you add up all your individual deductible expenses. If your total of itemized deductions is greater than the standard deduction, it may make sense to itemize. This is where good record-keeping can really pay off.

Here are some common expenses you may be able to itemize:

• For Homeowners: You could deduct the interest you paid on your mortgage, which is reported on Form 1098, Mortgage Interest Statement. You may also be able to deduct the state and local property taxes you paid.

• For Charitable Giving: If you donated to a qualified charity, you may be able to deduct those contributions. For cash charitable donations, you need a bank record or a written receipt from the charity. For non-cash donations, like clothes or furniture, you need a receipt from the charity, and you should keep a list of the items you donated.

• For Medical Expenses: You may be able to deduct medical expenses that are more than 7.5% of your Adjusted Gross Income (AGI). This can include what you paid for doctor visits, hospital stays, dental care, and prescription medications.

• For People with a Health Savings Account: Your HSA provider should send Form 5498-SA, which shows contributions you made, and Form 1099-SA, which shows withdrawals.

• For Students: If you paid interest on a student loan, you may be able to deduct up to $2,500 from your taxable income. This can lower the amount of income the IRS taxes, which may reduce your overall tax bill. The loan servicer usually sends Form 1098-E, which shows how much interest you paid during the year. Keep this form handy when you file.

• For State and Local Taxes: You may be able to deduct state and local income taxes or sales taxes you paid during the year. This is often called the SALT (state and local tax) deduction, and it is currently capped at $10,000 per household in most cases under federal law, although a higher limit may apply in 2025 and beyond. As with all of these tips, always check the IRS website for the latest information.

• For Retirement Savers: If you contributed to a traditional IRA, you might be able to deduct your contribution. Your IRA provider will send you Form 5498, IRA Contribution Information.

• For the Self-Employed: If you work for yourself, you have access to many business-related deductions. This could include a portion of your home expenses if you have a dedicated home office, the cost of business supplies, software, and even healthcare insurance premiums.

Phase 4: Leveraging tax credits to reduce what you owe

Tax credits work differently than deductions. While a deduction reduces the amount of income that’s subject to tax, a tax credit reduces the amount of tax you owe. Depending on the type of credit and your situation, a credit can reduce your tax bill dollar for dollar, up to certain limits.

Here are some of the most common types of credits:

• Family and Dependent Credits: The Child Tax Credit is for people with qualifying children. The Child and Dependent Care Credit helps cover the cost of a babysitter, daycare, or other care for a child or dependent. You'll need records of your expenses and the provider's information.

• Education Credits: If you, your spouse, or a dependent are in college, you may qualify for an education credit. The American Opportunity Tax Credit (AOTC) is for the first four years of higher education, while the Lifetime Learning Credit (LLC) is for a broader range of post-high school courses. You will need Form 1098-T, Tuition Statement, from the educational institution.

• Health Insurance Credits: If you bought health insurance through the Health Insurance Marketplace, you might be eligible for the Premium Tax Credit. The goal of this credit is to help make insurance premiums more affordable. To determine eligibility and calculate the credit, information from Form 1095-A (Health Insurance Marketplace Statement) is used, and Form 8962 is generally required to reconcile the credit on your tax return.

• Energy Credits: There are credits available for making your home more energy-efficient, like installing new windows or solar panels. There are also credits for buying certain new or used clean energy vehicles. Keep all your receipts and documentation from these purchases.

Phase 5: Filing your taxes

Once you have gathered all your papers, it’s time for the final step: filing your tax return. You have two main choices for how to do this.

E-filing (Electronic filing) 

Many people today use e-filing. E-filing just means you send your tax return to the IRS over the internet. You can do this by using tax software programs or platforms or by filing online directly with the IRS, depending on your income.

These platforms help you file by asking for information about your income and other details. Your responses are used to fill in the relevant tax forms. Being prepared with your documents can make the process easier, since you’ll be able to reference your W-2 or other forms when prompted.

E-filing is a fast and safe way to file your taxes. If you are owed a refund, you typically get it more quickly with e-filing and direct deposit.

Filing by mail 

You can also file your taxes by printing the paper forms and mailing them to the IRS. This method generally takes longer, and mailed returns may take the IRS several weeks to process. If you choose to file by mail, make sure you use the correct IRS address and that your return is postmarked by the tax deadline.

Tax season can be easier to navigate when you stay organized and understand the deductions and credits that may apply to you. Careful preparation can help you avoid errors and receive your refund more quickly. With a plan in place, filing your return can feel more manageable.