What Do You Need to File Your Income Taxes?

Knowing how taxes work can help you understand what to keep track of throughout the year, how to organize your paperwork and how to get help preparing your income tax return. This can create a smoother process when filing with the Internal Revenue Service (IRS) before the April deadline.

Whether you’re an individual taxpayer, a small business owner or an independent contractor, there are some specific methods for filing that are based on each tax situation. It’s not just about meeting legal obligations—it’s also about maximizing your potential refunds and minimizing liabilities.

Tax information and forms for filing as an individual

You need to file an individual return if you earned income by working for someone else, performing gig work on the side or if you received retirement or investment income.

W-2 employees’ tax information

If you’re a W-2 employee, start by collecting all your W-2 forms from your employers, along with any other tax documents such as 1099s for additional income, mortgage interest statements and deductible expenses.

When preparing your tax return, you can choose to either take the standard deduction or itemize deductions. If you take itemized deductions, be prepared to detail your deductible expenses on Schedule A (Form 1040).  You’ll report your income and deductions on this form, and if you have any tax credits, you’ll claim them here as well.

Once your return is complete, be sure to file it with the IRS by the tax deadline. Most years that’s April 15, but you can confirm the tax deadline on the IRS website. If you owe taxes, you’ll need to submit payment by this date as well. 

If you’ve overpaid throughout the year, you can expect a refund. You can request that the IRS direct deposit your refunds—just know you’ll need to provide your bank account number and routing number.

Independent contractors (self-employed) tax information

Maybe you earned money as an independent contractor performing gig work, freelance work, consulting or other type of self-employment. If so, gather all your 1099-NEC forms, invoices and receipts for business-related expenses when you file. You’ll also need to include both Schedule C (Form 1040) and Schedule SE (Form 1040) with your Form 1040.

Here’s what Schedule C and Schedule SE are used for:

• Schedule C is for reporting your income and expenses from self-employment.
• Schedule SE is for calculating your self-employment tax, including your Social Security and Medicare contributions.

Filing taxes for investments

If you have investments, you need to consider any capital gains or losses when filing personal income taxes. Start by gathering all relevant financial documents that report your investment income, such as Form 1099-DIV for dividends, Form 1099-INT for interest income and Form 1099-B for the proceeds from the sale of stocks or other securities. 

You’ll report dividend and interest income on Form 1040, and you’ll use Schedule D (Form 1040) to report capital gains and losses from the sale of investments.

Filing taxes for digital assets

If you’ve engaged in cryptocurrency transactions, NFT trades or other digital asset activities, you must report these on your tax return. Effective for 2024, there are expanded reporting requirements for digital assets. This includes reporting all acquisitions, sales, exchanges and dispositions of digital assets on Form 8949 and Schedule D (Form 1040). Keep detailed records of all your digital asset transactions, including dates, amounts and the fair market value at the time of each transaction.

Filing taxes for retirement income

If you received distributions from retirement or profit-sharing plans, IRAs, pensions or annuities, you’ll need Form 1099-R. Use this form to report all your investment income and take advantage of any applicable deductions or credits related to your investments, such as the foreign tax credit or deductions for investment interest expenses. You’ll file those along with your personal tax return.

Tax information and forms for filing as a business entity

Business owners and operators have important tax implications to consider when filing. Depending on the business entity structure, you may need to account for profits on your personal tax filing. Here’s a look at the landscape for filing taxes as a business.

Filing taxes as a sole proprietor, LLC

If you’re the sole owner of an LLC, meaning that you’re the exclusive owner of the business, you should have a record of your LLC’s income and expenses. With a sole proprietorship, you’re responsible for paying any taxes due, including self-employment tax. As noted above, it’s helpful to make estimated tax payments throughout the year. This is especially important if you expect your tax liability to be significant.

On your personal tax return, fill out Schedule C to report the LLC’s business income and expenses. If your LLC is profitable, calculate the self-employment tax due using Schedule SE. Your tax return will include your Form 1040 with the Schedule C and Schedule SE attached.

Filing taxes as a C corporation

C corp owners should start by organizing all the corporation’s financial records, including income statements, balance sheets, payroll information and records of expenses. The corporation will file its own tax return using Form 1120 to report income, deductions and credits, as well as calculating the corporate income tax liability.

If the corporation distributes dividends, C corp owners are required to report on the shareholders’ personal tax returns and subject to taxation at their individual tax rates. They must pay its corporate tax by the April 15 tax deadline (or the next business day if the 15th falls on a weekend or holiday). Any dividends distributed to shareholders must be reported on their individual returns.

Filing taxes as an S corporation

Owners of an S corp need to gather the company’s financial statements and file Form 1120S, which is used to report the S corp’s income, losses, deductions and credits. Each shareholder receives a Schedule K-1 that details their share of the corporation’s income or loss, which needs to be reported on their personal tax returns.

The S corp itself doesn’t pay taxes on the income. Instead, shareholders are taxed on their income tax returns for their respective shares of the S corp’s income.

Filing taxes as a partnership

Partners need to gather financial records before filing Form 1065, which is used to report the partnership’s income, deductions and credits. Each partner receives a Schedule K-1, which outlines their share of the partnership’s income or loss. Partners must then include this information on their personal tax returns. They need to report their share of the partnership’s income or loss as well.

A partnership doesn't pay income tax. Instead, the tax liability is passed on to the individual partners.

Tax considerations for employers

If you’re an employer, you’re responsible for collecting and maintaining accurate payroll records for your employees throughout the year. As of 2024, many businesses are now required to file returns electronically. For instance, if you file 10 or more returns of any type (W-2s, 1099s, etc.), you must file in this way. 

You must complete a Form W-2 for each employee. This document details their annual wages and the taxes withheld from their paychecks. You’re also required to file Form 940, which reports your annual Federal Unemployment Tax Act (FUTA) tax liability, and Form 941, which is used to report income taxes, Social Security tax or Medicare tax withheld from employees’ paychecks, as well as your portion of Social Security or Medicare tax. If you made payments to non-employees, such as independent contractors, you’ll need to issue Form 1099-NEC for everyone who received $600 or more from you during the tax year.

Find what you need with Navy Federal Credit Union’s Tax Center

You’ll be glad to know that our Tax Center has what you need all in one place. From forms to tax information for military members and advice on getting your refund faster, we’re ready to help. Check it out today!