What tax return should I file and Use?”
If you are responsible for filing income tax returns to the IRS, the chances are that you’re going to be confused with the paperwork you’re dealing with because everything can sound the same. With differences between form names and types boiling down to a mere digit or letter and descriptions interlaced with jargon and technicalities, figuring out what you need can turn into a treasure hunt.
Thankfully, filing your income tax returns won’t have to be the most confusing task on your to-do list because we’ve got you covered with a guide to the most common forms you need to know about:
1. IRS Form 1040
Commonly known as a U.S Individual Tax Return, IRS Form 1040 is the simplest tax form that millions of Americans use whenever they file for their annual tax return.
Generally, the applicability or need to file this tax form relies on different factors such as your age, filing status, and gross income. Through the use of a 1040 document, you’ll be able to not only conveniently ledge your returns, but you’ll also get to itemize deductions while claiming considerable expenses and tax credits under IRS programs and incentives!
(Side note: the IRS form 1040 is a document that is also applicable to those who have no taxable income, so as long as they are eligible for a tax refund or credit.)
2. IRS form 1040-EZ
True to its name, IRS form 1040-EZ is a streamlined version of its standard counterpart mentioned above—making for more effortless filing experiences.
The “EZ” version of the 1040 form is available to individual taxpayers that meet specific qualifications and have less complicated tax situations. If you’re under 65 years old, single (or married and filing jointly), claiming no dependents, and have a taxable income that’s less than $100,000 annually, then you can take the “easy route” and file this form!
3. Form 1099-INT (Interest Income)
If you have a significant amount of money in a bank or financial institution, then you’ve probably received interest on your deposits—something that makes you eligible for obtaining, using, and filing Form 1099-INT.
With this specific tax return form, your responsibility of paying tax on the interest income generated from your financial allocation decisions is formalized and documented for both your and the IRS’s reference. Once you receive a Form 1099-INT, you’ll need to act quickly by paying tax on the interest that it lists while accurately adding and reporting it in your ITR!
4. Schedule C to Form 1040, Profit or Loss From Business
Mainly applicable to sole proprietorships or self-employed professionals, Schedule C to Form 1040 documents are a tax return-eligible document that outlines how much gross profit or loss you’ll need to account for. In terms of specifics and cost content, this type of tax document comprises costs generated from business-related items—such as insurance, travel, taxes, office supplies, and wages.
5. Form 1099-MISC (Miscellaneous Income)
Miscellaneous Income tax return forms are often the largest and most elaborate because they feature an assortment of numbers related to costs that don’t fall under the other 15 categories the IRS recognizes. Whether it’s a unique one-off cost that’s related to purchasing a boat or drinks for a launch party, the most uncommon or unique expenses that you’ll make will fall under this type of tax return form!
8. Form 1099-NEC
If you’re a freelancer, self-employed professional, or independent contractor, you’re going to end up receiving a Non-Employee Compensation (NEC) if you’ve rendered any work and received income for the 2020 tax year. In that case, the IRS Form 1099-MISC is what you’ll receive instead of a traditional W-2 form that is distributed to those working for traditional employers!
9. Form 1120/1120S (Corporation Income)
Applicable to domestic corporations in the United States of America, form 1120 helps shed more light on the financial activities of larger-scale businesses—making them quite detailed in nature.
Comprising six pages for the average corporate entity, this particular form ensures that corporations get to figure their income tax liability while reporting the income, gains, losses, deductions, and credits they’ve incurred.
Apart from the baseline variant, the corporation income tax return also comes in an S Corporation-specific format (1120S) which features a few more adjustments that are not found with a regular corporation’s document. Compared to the regular 1120—which is made for C corporations—S corporations must use an 1120S for their information return (which is prepared with a form 10 K-1 for every shareholder to ledge their individual returns).
(To learn more about the difference between a standard IRS form 1120 and 1120S, feel free to check this source out!)
10. Form 1065
With Form 1065, partnerships have the responsibility to provide the Internal Revenue Service with everything they need to know about their activities and figures.
Through the use of this form, you’ll need to fill up, document, and file a detailed report on your income, gains, deductions, losses, credits, and other key pieces of financial information. Compared to Form 1120, however, it is worth noting that the “tax factor” isn’t as present with Form 1065 because a partnership itself does not pay tax on its income as it is passed on to individual constituents themselves. Additionally, this form is unique because it requires the inclusion of partnership items on tax or information returns!
So, what do you do with all these forms? (and how you can ease up your experience)
Admittedly, the complication of dealing with tax forms doesn’t stop at knowing precisely what you’re supposed to use because you’ll also need to use the information correctly to document and file your returns. However, the problem with such a task is that it’s easier said done because of all the different processes and calculations you’ll need to undertake!
Suppose you want to have a more effortless experience filing your Income Tax Return forms and using them properly during the tax season. In that case, it’s time to consider the possibility of outsourcing an expert. When you get to work with a professional accounting service like DoubleRule, you’ll let someone with the necessary training and experience take over the number-crunching so that you can make sense out of the documents on your plate!
When it comes to answering the questions of “how can I file my ITR?” and “what tax return should I file and use?”, it pays to have a dependable service provider like DoubleRule on your side. Regardless if you’re a small business owner, start-up manager, or service bookkeeper, we’re here to help—so schedule a free discovery call with us today!