In the United States, paying your taxes is one of the most important tasks a citizen must stay on top of in order to avoid financial ruin.
National Tax Day falls on April 15, the deadline for all American taxpayers to file their individual income tax returns to the federal government. The date has remained the same since 1955 after it was first introduced by the 16th Amendment in 1913.
Taxpayers need to be aware of the meaning of the six most important tax forms as they prepare for the April deadline.
A 1099 Form is a tax document that notes a variety of incomes or payments made by an individual that do not come from their full-time employer. The form covers a wide range of payments received during the year. Typically, the sort of income reported on a 1099 includes earnings as an independent contractor, tax refunds, rental income or winnings received from gambling.
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The Internal Revenue Service provides most 1099 forms to taxpayers between the end of January and the middle of February.
The IRS sends out Form1040 for individuals to U.S. taxpayers in order to file their annual income tax return. The form allows for tax paying citizens in the country to calculate the total taxable income and determine how much will be paid or refunded.
The 23-page document form allows taxpayers to also calculate their deductions and credits.
The Form 1098 is used by lenders to report mortgage interest of $600 or more received during the course of the year. This includes for mortgage insurance premiums and other points. The IRS instructs lenders to file separate forms for each mortgage.
Lenders do not have to file the form if the mortgage interest does not meet the $600 threshold set by the IRS. The form asks for a variety of information, including the mortgage insurance premiums paid, potential refund of overpaid interest, and current outstanding mortgage principal.
The W-2 is perhaps the most recognizable IRS tax documents that millions of Americans review every year. The W-2 form shows how much an individual has earned annually from an employer and how much in taxes was withheld for the year.
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Every employer that pays more than $600 a year for employee services must file a Form W-2 for each employee.
Employees must fill out a Form W-4 in order for their employer to calculate the correct amount that should be withheld from their paycheck for federal incomes taxes. The form’s primary purpose is to avoid employees having to over pay in taxes or owe a large balance at the end of the year.
Every taxpayer in the United States must file and organize their taxes around the deadline of April 15, according to the IRS. However, if an individual is traveling abroad or is unable to file at the correct time, Form 4868 allows citizens to request an extension of time to file their individual income tax return. Typically, taxpayers can receive an additional four months to file their returns if the form is approved.
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