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(UPDATED 12/2020)
By Megan Renart
Believe it or not, preparing your taxes can actually be a smooth, manageable process. Yes, really! One way to ensure that filing taxes is a relatively stress-free experience? Knowing everything you need before it’s time to work on your return.
Mental Mindset
It’s helpful to think about taxes as a financial summary of your year so that the IRS knows how much income you’ve earned during that time.
Wages and Income Reported on Forms W-2 and 1099
If you do any freelancing as an independent contractor, you’ll also need a detailed record of business expenses, even if it’s on a much smaller scale compared to a full-time position.
Many veterans, for example, participate in the ride-share economy since driving others from place to place allows for a flexible schedule. Even if it’s for just a few hours a week, the income still needs to be reported. The same goes for short-term rentals of a bedroom or parts of your house. Now that you’re technically self-employed, your business income is accompanied by business expenses, so you must keep detailed records.
Keeping Expenses Organized
If you’re running a small business, invest in bookkeeping software that manages and tracks expenses. In addition to helping you keep organized records, a good software program can walk you through simple to increasingly more complicated returns based on your job and business.
Ready to get started? Use the checklist below to ensure you’ve gathered all the necessary documents.
Need help? Visit USAA’s Tax Center
The contents of this document are not intended to be, and are not, legal or tax advice. The applicable tax law is complex, the penalties for non-compliance are severe, and the applicable tax law of your state may differ from federal tax law. Therefore, you should consult your tax and legal advisors regarding your specific situation.
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