What Tax Documents Do I Need?

By Markets Fool.com


A W-2 is the most important form to have, but it's not the only one. Image source: IRS.

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Before you can prepare your tax return properly, you need to know the numbers that will go on it. That requires that you have the necessary tax documents with the information you need. But with so many different forms, it can be hard to know exactly what to expect. Below, we go through some of the common tax documents that you'll need in order to do your return accurately.

Must-have document: Form W-2
Perhaps the most important document in preparing your taxes is your W-2. This form indicates your income from your job, including not only your income for tax purposes but also a wide variety of other totals for key expenses during the course of the year. For instance, W-2s will indicate how much was withheld from your paychecks for Social Security and Medicare taxes, as well as deductible expenses like health insurance coverage and excluded items like 401(k) contributions. It also includes income-tax withholding, which is a key number in determining whether you'll be entitled to a refund.

What makes your W-2 so essential is that if you file a paper return, the IRS wants you to include a copy of the form in your mailing to the IRS. Even for electronic filers, though, the information on W-2 is critical to doing your returns correctly.

Other key tax documents
There are many other forms that provide useful information in determining what to put on your tax return. You can generally come up with the correct numbers from other sources like year-end statements, but waiting for the official tax forms has the benefit of making it easier to find the important numbers as well as ensuring that the numbers you use match up with what gets reported to the IRS.

Some examples of these documents are the following:

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  • 1099-INT for bank account and interest income.
  • 1099-DIV for stock and mutual fund dividend income.
  • 1099-B for proceeds from sales of investments.
  • Schedule K-1 if you invest in master limited partnerships or other investments treated as partnerships.
  • 1099-R for distributions from retirement accounts and pensions.
  • 1099-MISC for nonemployee compensation for self-employed people and others.
  • 1099-G for your previous year's state income tax refund.
  • 1098 for mortgage interest information.
  • 1098-E for student loan interest information.

You don't need to send these documents in to the IRS with your return, but you'll want to use the numbers on these forms and make sure they match up with what you report. Otherwise, a red flag could end up putting your return in the IRS audit pile.

Supporting documents
In addition, you'll want to have any supporting documentation you need in order to take certain deductions or credits. For example, if you make a charitable donation of $250 or more, then you need to obtain a written acknowledgement from the charity before you can claim a deduction on your tax return. If you receive any goods or services in exchange for a donation, you must get a written disclosure of the value of those goods and services if your deduction is greater than $75.

Again, you'll never send most supporting documents to the IRS. But having them in your records is vital if you get audited, because if you can't prove to the IRS that you've met the requirements for taking a deduction, then you'll likely have it disallowed. That will not only produce additional tax but also interest and potential penalties from the date that you should have paid the tax.

Even though there aren't many documents that you absolutely have to have before you prepare and send in your return, having the right documentation is extremely useful. In the long run, it often pays to wait until you have all the documents you expect, rather than jumping the gun and then having to file an amended return if you discover a later mistake.

The article What Tax Documents Do I Need? originally appeared on Fool.com.

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