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Tax season is approaching: what you need to know

The U.S. Internal Revenue Service (IRS) will begin accepting returns for 2020 on February 12.

Photo: Shutterstock

We will tell you what you need to do to submit your tax return on time and without errors.

Check if you have received income documents

In January or February, you should receive forms reporting how much income you earned from your employers and received from other sources, recalls Better money habits... If you are a full-time worker, you must have a W-2 form detailing your earnings and taxes. If you are a freelance or contract worker, you may have a 1099-MISC detailing what you earned. You can also get documents showing dividends or interest earned on an investment (for example, Form 1099-DIV or 1099-INT), or interest on a student loan (Form 1098-E). If you are a college student (or you have a dependent student), then you receive a Form 1098-T that tells you how much you paid for your tuition and the amounts you received from grants or scholarships to help you calculate deductions and credits. associated with education costs.

Tip: You cannot file your tax return until you receive a Form W-2 or Form 1099 from every location where you worked during the year. When it comes time to file, you use this information to fill out Form 1040, the IRS form for individual income taxes.

On the subject: New IRS checks await Americans: what will the IRS pay

Find out what loans and deductions you can get

Understanding what loans and deductions you are entitled to can help you collect the necessary documents. Here are a few to consider:

  • Depositor loan. If you are not a full-time student and have not been submitted as a dependent, you may be eligible for a tax credit if you are participating in a retirement plan. The loan amount depends on your filing status and your adjusted gross income. In tax year 2021, if your filing status is not listed, you may be eligible for this credit if your adjusted gross income is $ 33 or less. If you are married and filing a joint return, you may be eligible for a loan if your adjusted gross income is $ 000 or less. Figures are subject to change in future tax years.
  • Student loan interest. You can withhold up to $ 2500 in interest payments based on your adjusted gross income.
  • Charity deductions. Want to donate funds to your alma mater or your favorite charity? Typically, you can deduct these donations by taking an itemized deduction.
  • Freelance expenses. If you are self-employed, you can claim a deduction for work-related expenses such as industry subscriptions and office supplies.

On the subject: 12 profitable tax deductions and refunds you can get

If you think you can qualify for additional loans or deductions, visit IRS website.

Decide how to file a tax return

There are several options for preparing and filing a tax return. Learn about each one to make the right choice:

  • Free file: If your adjusted gross income (your income after deduction of certain taxes) is less than a certain limit, the IRS offers free tax filing software that can simplify the preparation of your documents, with features that help you identify any deductions or loans that you could use.
  • IRS Online Forms: if your adjusted gross income exceeds the limit, the IRS offers electronic versions of paper forms that will help you with your calculations, but they only provide basic recommendations and won't help you determine which deductions or loans you could use.
  • Tax preparation software: if you want more detailed instructions, you can pay a commission to use the online tools available from multiple vendors. They will tell you how to prepare your tax return and help you determine any deductions or credits you are eligible for.
  • Specialist help: If you understand that you need expert personalized assistance, contact a tax preparation firm or accountant. Make sure you are working with someone you can trust. You will be giving this person access to a lot of sensitive personal information, so choose a tax professional carefully. The IRS offers a directory of trusted tax experts in your area. While this does not guarantee their integrity, it is a good place to start.

Tip: remember that you may need to prepare and file a state or local tax return in addition to your federal tax return.

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