Wednesday, August 10, 2022

What Do I Need To Gather For My Taxes

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Information About Income Not Reported On A Slip

Tax Documents 2021! What documents do you need to gather to file your 2020 taxes?

Not all income will be reported on an information slip. This could include tips or occasional earnings, such as payments received through a food delivery service. Whether or not your income is shown on a slip, you are still responsible for reporting it on your tax return.

To report this income, you may need to gather documents such as financial statements, invoices, or other records.

It can be helpful to track these types of income over the year so you are not overwhelmed when you do your taxes.

Plan Ahead For Any Refund

If you expect a tax refund, you have several options for how it’s handled.

  • You can apply some or all of the refund toward next year’s taxes. If you normally pay estimated taxes throughout the year, that can help cover the first quarterly installment.
  • The government can send you a check or deposit the refund directly into your checking or savings account.
  • You can contribute some or all of your refund to certain types of accounts or buy U.S. savings bonds through TreasuryDirect.

You can also split your refund among the direct deposit choices by completing Form 8888.

You’ll need to let your tax preparer know what you want to do so that can be indicated on your return.

Filing Your Tax Return

What you need to know about filing your personal income tax and benefit return.

Get help this tax season with the Ontario Child Care Tax Credit and the Low-Income Workers Tax Credit.

Save your receipts for the new Seniors’ Home Safety Tax Credit in 2021, which you can apply for during the 2022 tax season.

You may be eligible for tax credits and benefits to help you with living costs.

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Electing Under Section 2161

If you are a non-resident actor, a non-resident withholding tax of 23% applies to amounts paid, credited, or provided as a benefit to you for film and video acting services rendered in Canada. Generally, the non-resident withholding tax is considered your final tax obligation to Canada on that income. However, you can choose to report this income on a Canadian income tax return for 2021 by “electing under section 216.1 of the Income Tax Act.” In doing so, you may receive a refund of all or part of the non-resident tax withheld on this income.

Section 216.1 return due date

Generally, if you choose to file a return under section 216.1, your 2021 return must be filed on or before April 30, 2022.

If you are a self-employed individual, your 2021 return must be filed on or before June 15, 2022. However, if you have a balance owing for 2021, you still have to pay it on or before April 30, 2022. For more information, see Due dates.

Completing your section 216.1 return

Write “ACTOR’S ELECTION” at the top of page 1 of your return.

Send your income tax return to the Non-resident services section of your tax services office. For more information, see Film and media tax credits.

If you file your return after the due date, your election is not valid. The 23% non-resident withholding tax will be considered the final tax obligation to Canada on that income.

Tips On Business Income Records:

Do I Need to Collect Sales Tax in My State?
  • You’ll want to have records of your gross receipts from sales of goods or services.
  • If you’ve received goods back as returns, or had to issue refunds, then separate documentation is useful to make sure you don’t count the money you had to give back as taxable income.
  • Don’t forget about any interest or investment income from financial accounts you own in the name of your business.

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What Is A 1040 Tax Form

People use Form 1040 to file their annual income tax returns. This form helps you calculate your taxable income and how much you owe the IRS. It asks for personal information, filing status, the amount of tax youve paid through withholding , how much income you made and from what sources . Its also where you can claim your dependents and tax benefits like the standard deduction and Earned Income Tax Credit. If you use tax software or a website, the software will fill this form out for you and calculate your taxes based on the information you enter.

Best for:All individual taxpayers, no matter your tax status. Those over 65 can use a 1040-SR.

Watch For Your Income Documents To Arrive

You should receive forms about how much income youve earned from your employers and other income sources in January or February. If you are a full-time employee, you will receive a Form W-2 detailing your earnings, as well as which taxes were withheld. If you work freelance or on a contract, you may receive a Form 1099-NEC detailing what you earned. You may also receive documents showing dividends or interest earned on investments , or student loan interest youve paid . If youre a college student , youll receive a Form 1098-T that shows how much you paid in tuition, as well as any amounts you received from grants or fellowships, to help you figure out deductions and credits related to education expenses.

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Why Is It Important To Understand Tax Forms

Nowadays, most people file their taxes using websites or other products that do the work of figuring out which forms you need to file and filling them out. But its not always cheap. Many of those services and software like TuroTax or H& R Block charge users depending on which forms they need to use.

For 2020 tax filings , anyone who made less than $72,000 a year is able to file for free as part of the IRS Free File program. Companies including Intuit, which makes TurboTax, H& R Block and others spent millions lobbying to bar the IRS from making its own free filing option while promising to create their own free products. But then, as ProPublica reported, they systematically undermined the truly free options by hiding search results and even though for many, theyre anything but.

If you havent filed yet, we recommend checking out our guide to filing your state and federal taxes completely for free, looking to see if you qualify for the Earned Income Tax Credit or learning how to track your refund. Though the IRS offers the option of paper filing, with the current COVID-19 state of affairs and a massive backlog of paper returns and documents the agency is encouraging taxpayers to file electronically to ensure prompt payment of refunds and avoid filing errors. Most paid and free tax prep services will tell you which forms you need to file, but if youre still confused, see below for a list of the most commonly used tax forms.

What Is An Ss

Do You Need to Collect Sales Taxes on Amazon.ca as a Seller?

If you dont have an employer identification number, or EIN, use Form SS-4 to apply for one. The nine-digit number is assigned to employers, sole proprietors, corporations, partnerships, estates, trusts, certain individuals, and other entities for tax filing and reporting purposes. Use the IRSs Do You Need an EIN? to determine if you need to apply for one. You can receive your number more quickly by applying online.

Best for:Employers who answer yes to any of these questions, and others who need an EIN.

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Itemized Tax Deductions And Credits:

The government offers a number of deductions and credits to help lower the tax burden on individuals, which means more money in your pocket. You’ll need the following documentation to make sure you get all the deductions and credits you deserve.

  • Child care costsprovider’s name, address, tax id, and amount paid
  • Education costsforms 1098-T, education expenses
  • Adoption costsSSN of child, legal, medical, and transportation costs
  • Home mortgage interest and points you paidForms 1098
  • Charitable donationscash amounts and value of donated property, miles driven, and out-of-pocket expenses
  • Casualty and theft lossesamount of damage, insurance reimbursements
  • Other miscellaneous tax deductionsunion dues, unreimbursed employee expenses

Properly documenting the taxes you’ve already paid can keep you from overpaying.

  • State and local income taxes paid
  • Personal property taxesvehicle license fee based on value

Get An Extension If You Need One

There’s no harm in getting an extension, and if it gives you the time you need to make a full and complete return, then it’s well worth doing.

However, you typically need to file for an extension before the original due date of your tax return, and you also have to make sure to pay your taxes on time — even if you’ve received an extension. The extension is only for filing the return.

Extensions differ by type of business entity, but they tend to be automatic once you file for them. In some cases, you can get multiple extensions, but a second extension, when available, tends to be more difficult to get.

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How And When To File Your Tax Return

Learn how to fill out your return using tax preparation software or on paper.

The deadline for filing personal income tax returns and paying outstanding income tax is . After April 30, penalties and interest start to apply to any outstanding balance owed.

If you are self-employed or filing for someone who has passed away, please see the CRAs website for filing deadlines.

Before You Start Tax Preparation:

Do I Need to Collect Sales Tax on my Digital Courses?
  • Place the checklist in a file folder, or attach it to the outside of the folder.
  • As you receive or locate tax documents, place them in the folder and check them off the list.
  • Scratch off anything on the list that doesn’t apply to your tax situation .
  • Enter information and amounts that are not already available on other documents, such as your bank routing number for direct deposit.
  • If you use a program such as Quicken® to keep track of your finances, print a report of your transactions for the tax year . This will make your tax preparation much easier, and helps you clearly see where your money goes each year.

    • Having this information in a report is much easier than going through your checks and bank statements for the entire year.
    • As you review the report, highlight information you will need to prepare your tax return or make notes to remind yourself of something later.

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    If You Have One Or More Employers

    If you work for someone elsemeaning, employment, and income taxes are deducted from your paychecksyou will need at least these two forms:

    • W-2: Your employer will mail these forms to your house no later than January 31st.
    • 1040*: Depending on the complexity of your taxes, there are three 1040 forms to choose from 1040-EZ, 1040A, or the original 1040. .

    What’s New And What To Consider When You File In 2022

    Reconcile advance Child Tax Credit payments

    If you received advance payments, when you file your 2021 tax return, you will need to compare the advance Child Tax Credit payments that you received during 2021 with the amount of the Child Tax Credit that you can properly claim on your 2021 tax return. The fastest way for you to get your tax refund that will include your Child Tax Credit is by filing electronically and choosing direct deposit.

    If you received less than the amount that you’re eligible for, you’ll claim a credit for the remaining amount of Child Tax Credit on your 2021 tax return. If you received more than the amount that you’re eligible for, you may need to repay some or all of that excess payment when you file.

    In January 2022, the IRS will send you Letter 6419 to provide the total amount of advance Child Tax Credit payments that you received in 2021. You need to keep this and any other IRS letters you received about advance CTC payments you received with your tax records and refer to them when you file.

    Claim Recovery Rebate Credit

    Individuals who didn’t qualify for third Economic Impact Payments or did not receive the full amount may be eligible for the Recovery Rebate Credit based on their 2021 tax situation. The fastest way for you to get your tax refund that will include your Recovery Rebate Credit is by filing electronically and choosing direct deposit.

    See IRS.gov/rrc for more information.

    Get Your Refund Status

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    What About Unemployment Benefits

    In general, unemployment benefits are taxed by the IRS, but some federal taxes are withheldmeaning you paid some of that tax before you ever got the check. Those benefits are also taxed by many states so youll need to follow those guidelines separately. Make sure you have a 1099-G form for any unemployment benefits you received.

    That said, the amount of tax you ultimately have to pay depends on the amount of money you make. Also, the American Rescue Plan Act made the first $10,200 of qualified unemployment benefits tax free in 2020 for taxpayers with an adjusted gross income under $150,000. If you still havent filed for 2020, be sure to ask about that possibility.

    Filing Your Income Tax Return

    What do I need to bring when I get my tax forms?

    Annually, you need to complete the T1 General Income Tax and Benefit Return as well as associated territorial or provincial forms. In order to complete your return, you also will likely need to complete schedules or additional forms that request more information. Schedules should be attached to your income tax return in most cases.

    For example, if you split pension income with your spouse, the CRA requires you to complete and submit form T1032. In most cases, you need to attach these forms to your income tax return when you file it, and you should make copies for your records.

    However, in cases where a form establishes a long-lasting condition, you typically do not have to file it each year.

    • For example, if you are applying for the Disability Tax Credit , you only need to submit Form T2201 for the first year.
    • Once you are approved for the credit, you do not have to submit the form for subsequent years unless CRA requests you to do so. Quite often the DTC will only be approved for a limited number of years, such as 5 or 10. CRA will send you a letter stating that your period of approval has ended and that you need to submit a new T2201 before filing your next tax return.
    • You can check the status of your Disability Tax Credit approval at any time by signing into your CRA My Account and clicking on Benefits & Credits.

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    What About My 401 Or Private Ira

    If you have a 401 through your employer, your contributions will be captured by your W-2.

    If you have a private Roth IRA, those contributions dont reduce your taxes, so you dont need to worry about reporting them. The point of a Roth IRA is to make contributions out of your regular income, which you pay taxes on, so you dont have to pay taxes when you withdraw that money later for retirement.

    If you have a private, traditional IRA, make sure you get a record of those contributions. They reduce your taxable income now in exchange for paying taxes on that money later, when you eventually withdraw from the fund.

    Both Quicken and Simplifi by Quicken include expense reports so you can see your contributions for the year. If you havent been tracking them or categorizing them as IRA contributions, you can still search for them based on the payee.

    Did you withdraw money from your retirement account this year? Make sure you have a 1099-R form showing that income. But remember, if you withdrew from a Roth IRA, you dont have to pay taxes on those funds.

    Extension To File Your Tax Return

    If you cant file your federal income tax return by the due date, you may be able to get a six-month extension from the Internal Revenue Service . This does not grant you more time to pay your taxes. To avoid possible penalties, estimate and pay the taxes you owe by the tax deadline of May 17, 2021.

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    Tax Prep Checklist: What To Gather Before Filing

    Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list ofour partnersandhere’s how we make money.

    Whether you hire a professional or do it yourself, you need certain information and documentation to file your tax return. Heres a tax prep checklist most taxpayers might need to complete the job.

    Adjustments To Your Income

    What do you need to do your taxes? Before your file, review this tax ...

    Its also important to have any documents on hand that can reduce how much of your income is taxed. This can either lower the amount you owe or increase your tax refund. This is why you need to pay attention and gather these documents.

    If youre a student you can use forms 1098-T and 1098-E to show how much you paid for tuition and how much of your student loan interest you paid, respectively. Teachers can provide canceled checks or copies of receipts that show they paid for classroom supplies, which can help to offset their income.

    Other examples of items under this category that can help adjust your income include:

    • Records of any contributions you made to your IRA
    • Proof of improving your home with energy-efficient appliances or windows
    • Records of contributing to a Medical Savings Account

    Also keep track of expenses such as:

    • Moving expenses you incurred

    These can be used to adjust your income and help you get a more substantial return.

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