Filing your federal income tax return might be simple, or it might be complex, depending on your financial situation. Either way, it will be easier if you have all your tax records gathered together in one place, and it helps to know what papers you need before you start wading though that 189-page IRS 1040 Instructions booklet.
You need to keep records of your income for the year. After all, it's called the "income tax" for a reason. Your income includes your salary, wages, tips, dividends, interest, self-employment income and partnership distributions. Papers you need to file your taxes for your income may include your W-2s, 1099-INT, 1099-DIV, 1099-MISC, Form K-1, paycheck stubs and bank statements.
You might be able to reduce the amount of your taxable income by itemizing your deductions or taking certain allowable adjustments to your income. You'll need to be able to document your claims in the event of an audit by keeping sales slips, invoices, receipts, bank statements, canceled checks and written communications from charities to which you made donations. It helps to keep a written diary documenting each expense.
Determining capital gains and losses from your investments when you file your taxes can be a nightmare if you don't keep your investment records up to date. Brokerage statements and mutual fund statements can provide you with purchase and sale dates, commissions and fees, price per share information, stock splits and a breakdown of distributions.
Your home can provide you with significant tax write-offs as well as being one of your biggest capital assets. Keep records of your closing statements and purchase invoices to show your original basis. Receipts for improvements add to your cost basis and can reduce the amount of any capital gains tax you might owe once you sell your home. Your monthly payment records should include a breakdown of how much mortgage interest and real estate taxes you paid during the year. You'll need this information if you want to itemize your deductions.
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