The government uses income taxes to bill individuals for their earnings (from wages to investments), in proportion to their level of net income.
With the exception of partnerships, all businesses must file their Income Tax Return each year. Partnerships must file an Information Return. Throughout the year, employers withhold a portion of money from each employee’s paycheck. This portion goes towards paying your federal income tax. If the amount of money withheld from your paycheck is greater than the amount that you owe the government, then you should receive a refund.
However, if the amount of money withheld from your paycheck is less than the amount owed, then you must pay the difference to the Internal Revenue Service, or IRS. Employees who don’t pay their federal income taxes through these withholdings may be forced to pay an extra estimated tax.
Documents needed to file taxes
- W-2 Form: If you worked for an employer who reported your annual wages to the IRS, you should receive a W-2 by the end of January.
- Form 1099: You should receive a Form 1099 from anyone for whom you worked as an Independent Contractor. You will also receive a Form 1099 if you have a retirement pension, took a distribution from your 401K plan, or received dividends or other investment income.
- Receipts: You should ensure that you have documentation for every charitable contribution that you made throughout the year, whether it be a cancelled check, statements from your church, bank or credit cards, or acknowledgment letters from organizations to which you’ve given money or goods. The documentation should include your name, the dates on which you gave, and the amount given.
- Form 1095 A, B or C: These forms show proof of Health Insurance. An exemption certificate number (ECN) will be required if you applied for a health care exemption in the Marketplace.
- Form 1098: If you own a home, you should receive a Form 1098 for any mortgage interest paid.
- Last year’s Tax Return
- Other: Some additional expenses might also be deductible. These include job search expenses, any unemployment status throughout the tax year, memberships in any professional organizations that are related to your work, and unreimbursed employee expenses, such as uniforms.