Yahoo Finance 10 Numbers You Must Know Before You File Your Taxes
Filing your tax returns is a numbers game.
How much did you make? How much do you owe? How much do you have coming back to you as a refund?
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The numbers you plug into your tax software or give to your CPA, and how they square up with the numbers the IRS has on you, will determine whether you leave money on the table, overpay, or satisfy the Treasury Department while keeping every possible dollar for yourself.
In order to get those numbers right in the end, make sure you know these numbers in the beginning before you file.
Your Social Security Number, Employee Identification Number or Individual Taxpayer Identification Number
Every taxpayer must have an SSN, EIN or ITIN to file. You probably know yours by heart — but that’s where the danger lies. It’s easy to make mistakes by rushing through the simple stuff, and if you get these crucial numbers wrong, the IRS will delay or reject your return even if everything else is flawless.
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Your Personal and Bank Numbers
Just like your Social, you might speed through inputting your birthday, address, bank account and routing number — and that’s precisely why it’s so easy to make mistakes. You’ll have plenty of opportunities to make justifiable errors later. Get the easy stuff right to avoid a rejected return.
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Numbers Like 1099
Some of the most critical numbers from tax time are the titles of the forms you receive from all your varied income sources.
“Income documentation includes W-2 forms from employers and 1099 forms for other income such as dividends, interest, and freelance work, and any other documentation that reports income,” said Johan Garcia, CPA, owner and sole author of After Tax Cash and principal of JG CPA & Advisory.
Knowing which forms apply to you is essential so you don’t make the mistake of filing before they all arrive.
The Number of Deductions and Credits You Can Claim
Reducing your taxable income is the name of the game, and the best way to do that is to research all available credits and deductions so you know how many you have coming to you.
There are dozens, including the child tax credit, earned income tax credit, student loan interest deduction, saver’s credit and more. They offer the best opportunity to shrink your bill and boost your refund, but you must do your part to cash in.
“Keep receipts and records for any potential deductions or credits, such as charitable donations, education expenses, or medical costs,” said Garcia.
The Numbers From Last Year’s Tax Returns
Doing your 2023 taxes is much easier if you use your paperwork from 2022 as a guide.
“The previous year’s complete tax returns can help in verifying information and making sure no carryover items are missed,” said Garcia.
The Numbers From Your Business or Brokerage Account
If you work for yourself, have employees or invest outside of a tax-advantaged retirement fund, an accurate accounting of all the numbers from those sources can make or break you.
“That includes financial statements if you have a business, brokerage statements if you invest in equities via taxable brokerages, K-1s if you have investments in partnerships or S corporations or charitable donations documentation if you donated to a 501(c)(3) organization in 2023,” said Garcia.
The Number of Dollars in Your Gross Income
Gross income is the amount you earned throughout the year from all income sources before taxes and deductions. If you have several income sources, meticulous record-keeping is crucial because you must know this number to the dollar. If you don’t, you run the risk of underreporting by filing while 1099s or other forms are still in the mail.
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The Number of Dollars in Your AGI
The dollar amount you have left after credits and deductions shrink your gross income is even more important.
“One crucial number taxpayers should be aware of before filing is their adjusted gross income (AGI),” said attorney and Brillant Law Firm founder David Brillant, a certified estate planning and probate law specialist with a master of laws degree in taxation. “This figure is pivotal because it determines eligibility for certain tax credits and deductions, ultimately impacting tax liability.”
It’s so important, in fact, that the IRS requires those who self-prepare and e-file to enter last year’s AGI to validate their identity.
The Standard Deduction Number
One number single filers must know is $13,850, which is the amount they can reduce their taxable income by for tax year 2023. It’s $27,700 for married couples filing jointly.
“Another essential figure is the standard deduction for your filing status, as it’s often more beneficial than itemizing deductions, depending on your financial situation,” said Brillant.
It’s crucial to know the standard deduction because you have to pick between that and itemizing, and you can’t make the right choice until you know which will reduce your taxable income by more.
The Number of Dollars You Earned Through Side Gigs or Contract Work
If you did any gig work, $400 is an important number to know. If your net earnings from any form of contract work or self-employment is that much or more, you must report it to the IRS.
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This article originally appeared on GOBankingRates.com: 10 Numbers You Must Know Before You File Your Taxes
