Individuals, businesses, and other entities use tax forms to report their income, expenses, deductions, and credits to the Internal Revenue Service (IRS) or other tax authorities.
Purpose of Tax Forms
The purpose of tax forms is to provide the government with information about an individual’s or an entity’s financial activity. This is so they determine the tax owed or to be refunded. This information is used to calculate and enforce tax compliance, enforce tax laws, and collect revenue to fund government programs and services. The forms also serve as a record of an individual’s or entity’s financial activity.
Additionally, tax forms are used to claim tax credits and deductions. This can include credits for education expenses, charitable contributions, and other tax-favored activities. The forms also serve as a means of reporting changes in financial circumstances, such as changes in income, deductions, or credits, to the government, so that they can adjust the taxpayer’s tax liability accordingly. By requiring taxpayers to report their financial information through tax forms, the government is able to monitor tax compliance and ensure that everyone pays their fair share of taxes.
10 Tax Forms To Know Before Filing Taxes
- 1040: U.S. Individual Income Tax Return – used by individuals to report their income, deductions, and credits to the IRS.
- W-2: Wage and Tax Statement – issued by an employer showing the total amount of wages earned and taxes withheld from those wages.
- 1099: Miscellaneous Income – used to report miscellaneous income received, such as freelance work or rental income.
- Schedule A: Itemized Deductions – used by individuals to claim itemized deductions, such as mortgage interest and charitable contributions.
- Schedule C: Profit or Loss from Business – used by self-employed individuals to report their business income and expenses.
- 1065: U.S. Return of Partnership Income – used by partnerships to report their income, deductions, and credits to the IRS.
- 1120: U.S. Corporation Income Tax Return – used by corporations to report their income, deductions, and credits to the IRS.
- 941: Employer’s Quarterly Federal Tax Return – used by employers to report their payroll taxes and employee information to the IRS.
- 1098: Mortgage Interest Statement – issued by mortgage lenders to individuals, showing the amount of mortgage interest paid during the year.
- 8962: Premium Tax Credit – used by individuals who enrolled in health insurance through the Marketplace. They can also report their premium tax credit and reconcile any advance payments.
- Who needs to file: Tax filing requirements vary based on a person’s income, filing status, and other factors. In general, individuals with a taxable income over a certain amount must file a tax return with the IRS.
- Due Dates: The due date for individuals to file their tax return is April 15 of each year. However, extensions may be available for individuals who need additional time to file their return.
It’s important to note that businesses may have different due dates for their tax returns. Certain forms, such as the 941 Employer’s Quarterly Federal Tax Return, have quarterly filing requirements.
- Gathering required information: To accurately complete a tax form, an gather all relevant financial information, including income, expenses, deductions, and credits. This information can be found on various forms and documents, such as W-2s, 1099s, and bank statements.
- Understanding instructions and tax laws: It is important to thoroughly review the instructions for the specific tax form, any relevant tax laws, to ensure that it is filled out accurately and completely.
- Filling out forms accurately and completely: This includes providing all required information, such as a taxpayer’s name, Social Security Number, and income, etc., about deductions and credits. The forms should be filled out legibly and all calculations, checked for accuracy.
Submitting Tax Forms
- Electronic Filing: One of the most convenient and accurate ways to submit tax forms is through electronic filing. E-filing allows individuals and entities to file their tax returns electronically, often with the option to receive their refund directly deposited into their bank account.
- Mail Filing: Tax forms can be submitted by mail. This option is slower and carries a higher risk of errors or delays, as the forms must be physically sent to the IRS or other tax authority.
- Using a Tax Professional: Another option is to use a tax professional, such as an accountant or tax preparation service. This is especially helpful for individuals and businesses with complex tax situations or who need help navigating tax laws.
In conclusion, tax forms play a crucial role in reporting an individual or entity’s financial information to the government and determining their tax liability. Understanding different forms, filing requirements, and processes for completing and submitting is essential for ensuring compliance with tax laws. A thorough understanding of tax forms can help individuals and entities to minimize their liability and avoid penalties and interest charges.