The best season of the year is here! The one we have all been waiting for with eager anticipation and excitement….
Tax Season!!
Okay, so that’s not true. It’s not fun. But it is here. And it’s time to find out how much money you lent the U.S. government at 0% interest (your refund), or how much you owe them (oops).
Taxes are complicated business. If you have ever (or perhaps still do) filled out the paper version of Form 1040, you’ll know, it’s a puzzle… a web of additional forms, schedules and enough bewildering questions to make you feel like you’re back in your high school algebra class.
Thankfully, online software has greatly simplified this process, and at little or no cost to you.
If it’s your first time filing taxes or you are simply trying to keep up with the latest “need-to-knows” for tax season, the below is a quick guide to help you out.
Tax Guide
Common Forms
W-2 – reports the wages you earned from your employer, and the taxes they withheld for the year.
1099-DIV – used to report distributions that an investor received (dividends or capital gains).
Example: Stock or bond dividends in taxable accounts (note that this does not apply to tax-sheltered accounts like a 401k, Individual Retirement Account (IRA) or Health Savings Account (HSA)).
1099-INT – a form used to report interest income (e.g. Bank account).
Note: if you did not receive more than $10 in income interest from the account for the year, your bank would not be required to provide you with a 1099-INT. You would, however, still be required to report the interest when filing your taxes.
Schedule 1 – used to report any additional income you generated, such as from a business or through real estate rentals, and to claim adjustments to income through deductions for educator expenses and student loan interest payments (see below).
8889 – if you have a high deductible health plan, and are eligible for an HSA, you would use Form 8889 to report HSA contributions made during the year, as well as any distributions you received from your account.
Form 1098-E – this is your Student Loan Interest Statement, indicating how much student loan interest you paid during the tax year.
Deductions
The 2017 Tax Cuts and Jobs Act doubled the standard deduction (beginning in the 2018 tax year), reducing the likelihood that you will need (or choose) to itemize your various deductions. However, there are still a number of “above-the-line” deductions that you are able to take, regardless of whether you take the standard deduction or not.
Student Loan Interest – millions of Americans are paying down their student loans. If you count yourself among them, you can deduct up to $2,500 in interest per year, per tax return (a married couple would only be able to deduct $2,500 in total). Be aware that this deduction does phase out above certain income thresholds.
Educator Expense – provides for “eligible educators” to deduct up to $250 worth of qualified expenses (items such as books, classroom supplies and computers).
Saver’s Credit – if you saved money in a retirement account (401k, Individual Retirement Account (IRA) or other credit-qualifying account), and your income for the year was within certain thresholds, you could qualify. Individuals would need to have saved $2,000; couples would need to have contributed $4,000.