Each tax season, the mail often brings a flurry of tax-related forms. Although there are many, and some with similar names and numbers, each has a particular purpose and carries information critical to completing your tax return each year.
Here are this year’s most important tax forms, including how to figure out which is best for you. For more help, check out our complete Tax Guide.
You might think of this as the grandfather of tax forms. Many of the other forms and schedules are tied to it. For example, the amount in Box 1 of Form W-2 is reported on Form 1040, line 7. Form 1040 is a summary of your income, adjustments, deductions, taxes and credits for your tax year, which, for most individuals, is the calendar year. Relevant supporting forms and schedules must be filed with Form 1040.
There are simplified versions of Form 1040: Form 1040A and Form 1040EZ. These forms can be used instead of Form 1040 when certain conditions apply. You can use Form 1040EZ if you meet all eleven conditions in the checklist on page 7 of the 1040EZ Instructions. Similarly, you can use Form 1040A if you meet all six conditions itemized on page 13 of the 1040A Instructions.
Most tax-preparation software chooses the appropriate form for you automatically. For help choosing the best tax service, see our Top Tax Software Review, plus check out our list of free filing options.
Another 1040 version is Form 1040X, which you file when you need to amend a previously filed return. This form cannot be e-filed and must be mailed with a copy of your 1040 return “As Amended” and any schedules that changed, plus any new tax documents that show federal withholding.
For more detail, check out our complete Form 1040 Guide.
Employers use Form W-2 to report wages and salaries as well as income tax, social security, and Medicare taxes withheld during the year. This information is reported to the IRS as well as the employee. State and local income tax withholdings are also reported on Form W-2.
Other information commonly reported on Form W-2 includes voluntary contributions to a retirement plan, the amount the employer paid for the employee’s health insurance, and employer contributions to an employee’s HSA (Health Savings Account) – all of these are noted in Box 12 with specific codes. Box 10 records employer-provided dependent care benefits. The most common entry in Box 13 is a check in the box labeled “Retirement Plan.”
Note that this year, some 50 million W-2s have a verification code on them. This 16-digit alphanumeric code needs to be reported when W-2s are entered in tax-preparation software. They are found in Box 9 or elsewhere on the W-2. Not all W-2s have them.
For more detail, check out our complete Form W-2 Guide.
This form is used to report winnings over certain amounts from bingo, slot machines, keno, poker tournaments, and racing, for example. These amounts are generally reported on Form 1040, line 21, Other Income.
Form W-4 is the Employee’s Withholding Allowance Certificate. When you first begin working for an employer, you fill out a W-4 to let your employer know how much income tax to withhold from your paycheck, based on your filing status and the number of qualified dependents. Later, your can fill out a new W-4 in order to change the number of exemptions you claim for withholding purposes.
Generally speaking, the fewer exemptions claimed, the more income tax is withheld. When you file your tax return, you are reconciling the tax you owe on your income with the tax you have pre-paid through withholding. Ordinarily, you want tax owed and tax withheld to be about the same. If, during the year, you got married, divorced, had a baby, or had a child leave the nest, you should file a new W-4 to reflect changes so that your employer will not withhold too much or too little.
For more detail, check out our complete Form W-4 Guide.
There are many forms 1099, each with a following letter or letters indicating its particular purpose. These forms typically report various kinds of income. The most common ones are included below. For more detail, check out our complete Form 1099 Guide.
Records pension or annuity income or a distribution from an IRA. These amounts are reported on Form 1040, lines 15a,b and 16a,b. Lines 15a and 16a are total amounts of the distributions, and lines 15b and 16b are the taxable amounts. The amount on a and b may differ because of employee contributions to retirement accounts during working years, or because of a basis (non-deductible contributions) in an IRA.
Reports interest earned from banks, credit unions or brokerage accounts. The interest may be reported on Schedule B, and the total reported on Form 1040, line 8a (taxable interest) or 8b (tax-exempt interest).
Reports dividends earned, most commonly from a brokerage account, but also from stock owned directly in a company. Dividends are reported on Schedule B and the totals transferred to Form 1040, lines 9a (total dividends) and 9b (qualified dividends). Qualified dividends are stated separately on the return because they are taxed at capital gains rates, which are lower than the tax rates for ordinary income (such as wages).
Reports stock or bond transactions in a brokerage account. The transactions usually result in a gain or loss, which is reported on Schedule D and the net loss or gain on Form 1040, line 13.
Reports canceled debt that may have to be reported as income on your tax return (on Form 1040, line 21).
Reports certain government payments, such as a state tax refund or unemployment compensation. These amounts are reported on Form 1040, lines 10 or 19.
Reports several kinds of miscellaneous income, the most frequent being Non-employee Compensation (box 7) for amounts greater than $600 paid to independent contractors. But it is also used for reporting Rents and Royalties. Amounts from Box 7 are typically reported on Schedule C, with the net profit reported on Form 1040, line 12. Rents and Royalties are reported on Schedule E, and the net amount reported on Form 1040, line 17.
Reports proceeds from the sale or exchange of real estate. This is another scenario where capital gains may be involved. Whether the gain is taxable depends on the circumstances pertinent to the sale.
Reports income from social security. The total amount and taxable amount are reported on Form 1040, lines 20a and 20b, respectively. All social security may not be taxable. The taxable portion depends upon other income items on the return.
Other forms may be related to adjustments or deductions on Form 1040 or Schedule A (Itemized Deductions). The most common ones are included below. For more detail, check out our complete Form 1098 Guide.
Form 1098, Mortgage Interest Statement, reports the amount of interest paid to the mortgage holder on real estate (typically, the taxpayer’s home), as well as any points paid on the purchase and mortgage insurance premiums. If your mortgage payments include property taxes, that amount may be reported on Form 1098 as well. If it is not reported on the form itself, it may be included in the transaction detail that frequently is received with Form 1098.
The amounts on Form 1098 are deductions that are reported on Schedule A, Itemized Deductions, which you would want to do if your Itemized Deductions are greater than your Standard Deduction (based on your filing status). Itemized Deductions higher than your Standard Deduction means that your Taxable Income and Tax will be lower. Real estate taxes go on line 6 of Schedule A; home mortgage interest and points go on line 10; mortgage insurance premiums go on line 13. Unless Congress decides otherwise, 2016 is the last year mortgage insurance premiums may be deducted.
Form 1098-E, Student Loan Interest Statement, reports the amount of student loan interest the recipient paid during the year. If the student has loans from more than one source, he or she may receive a 1098-E from each one. Student loan interest paid is a downward adjustment to income on Form 1040, line 33, which lowers adjusted gross income and taxable income up to a maximum of $2,500 per return.
For more student loan help, check out 16 Ways to Reduce & Avoid Overwhelming College Student Loan Debt.
It is worth keeping in mind that the person legally responsible for the student debt may take the student loan interest adjustment, not necessarily the person who pays it. So if a student’s benevolent uncle is paying the student loan and interest, but the student is legally responsible for the debt, the student gets the adjustment to income, not the uncle.
Form 1098-T is a Tuition Statement. It records the amount of tuition and fees received or billed by a qualifying educational institution, scholarships or grants the student received, whether the student is at least a half-time student, and whether he or she is doing graduate work.
This form is essential in order to claim the various education benefits:
- Tuition and Fees adjustment which is recorded on Form 8917, with the allowed amount reported on Form 1040, line 34 (2016 is the last year for this adjustment, unless Congress extends it).
- The American Opportunity Credit or Lifetime Learning Credit (figured on Form 8863, with the allowed amount recorded on Form 1040, line 50 to offset tax liability). A portion of the American Opportunity Credit may be refundable, which is entered on Form 1040, line 68. The American Opportunity Credit is available for the first four years of undergraduate, post-secondary education only. After that, the Lifetime Learning Credit must be used.
Forms 1095-A, B, and C
These three forms deal with health coverage.
Form 1095-B comes from the Health Coverage provider and indicates who in the household is covered and for how long. Form 1095-C is issued by the employer, and indicates who is covered by the employer’s health coverage and for how long. It also indicates if there was an offer of coverage to the employee, and may indicate the monthly cost. This information can be used to determine if the employee (and, possibly, the family) may be exempted from coverage based on the affordability of the offer as a percentage of the employee’s household income.
Form 1095-A is provided by the Insurance Marketplace if health insurance was purchased there. It indicates who in the household was covered and for how long. It also indicates whether the taxpayer qualified for the Premium Tax Credit and if a portion of that was paid in advance to reduce the monthly health coverage premium due. If you receive a Form 1095-A, and the advanced premium tax credit was paid, you must file a return to reconcile the Advanced Premium Tax Credit, even if you would not otherwise have to file. The reconciliation is done on Form 8962 and may result in having to repay a portion of the credit (which goes on Form 1040, line 46), or in an additional credit being paid to you (Form 1040, line 69).
With the blizzard of tax forms you might receive this year, it is no wonder you might feel uncertain or anxious about how it all fits together. Categorizing them as related to income, adjustments, deductions or credits will certainly help you begin to gain the upper hand. A little knowledge is a beautiful thing as you manage the paperwork at tax time.