Taxes 101: Preparing For Tax Season With Peace of Mind

How is it that April 15th manages to sneak up on us each and every year? No matter how prepared you are, it’s easy to get overwhelmed by tax-season to-do’s. In order to file with a little more peace of mind this year, we’ve put together this guide on what you need to know about filing your taxes—including what documents you’ll need, tax deductions to consider, and special considerations if you’re self-employed. Plus, be sure to read to the end for a special offer to help make your taxes even easier this year. Let’s dive in!

First: What Impacts How I’m Taxed?

Two major things help paint your complete tax picture: the tax bracket you’re a part of (how much you earn) and the tax filing status you choose. If you’re a W-2 employee, when you begin employment, you’re asked to fill out something called a W-4 form and make a selection to determine how much money is withheld from your paychecks. This comes into play at tax time, because it will affect how much you get back as a refund or, in some cases, how much you’ll owe.

If you are self-employed or worked as an independent contractor, you do not have taxes withheld from your paychecks. This is what makes planning and budgeting throughout the year extra important for 1099 workers: when you file your taxes, you’ll either have to pay in what you owe, or plan ahead to do quarterly pay-ins. More on that in a moment!

Getting Ready for Tax Time: What Documents and Info Do I Need?

Before you sit down to file your taxes, you should have a few documents and some personal information at-the-ready. Here’s where to start:

Your information:

• Social Security number (SSN) or tax ID number (ITIN)
• Your W-2 and / or 1099 forms from every type of income you earned this year
• Current address
• Bank account account & routing numbers for your refund or to pay your balance
  
  • Branch makes it easy to get your refund digitally! For more info, click here.
• Adjusted gross income (AGI) and your refund amount from the last tax return
  
  • Wondering the easiest way to find your AGI from last year? Check your Form 1040 from last year; we’ll get into what that means in a little bit.

If you’re married, you’ll also need your spouse’s SSN or ITIN and birth date.

Information for dependents:

A dependent is someone who relies on you for financial support—typically a child or relative. 

• Birth dates 
• SSN or ITIN numbers
• Childcare records (including the provider’s tax ID number) if applicable
• Income of dependents or other adults in your home

Income Tax Forms: Ones You’ll Get & Ones You’ll File

The type of forms you receive and file depend on whether you’re a W-2 employee or you work as a 1099 independent contractor. 

What, exactly, qualifies as an independent contractor these days? Everyone from gig workers and rideshare drivers to freelancers and small business owners are typically considered independent contractors. 

Before the 1st of the year, you should see specific tax documents in the mail depending on how your work is classified: W-2 or 1099. (Some businesses also make your tax documents available online these days for more convenience; check in with your HR department to make sure you know where to find yours!) 

When it comes to income taxes, here’s what to expect if you are….

Full-time employee (W-2)

What You’ll Get

Each year, your employer should send you your W-2 form. This form will outline your earnings and any taxes withheld from your paychecks over the course of the year. Use this information to fill out your Form 1040.

What You’ll File

A Form 1040, using the information from your W-2. 

Self-employed (1099)

What You’ll Get 

If you earned $600 or more from a single client during the year, they should send you a Form 1099-NEC. You may also get a Form 1099-K if you’re a small business owner (like a sole proprietor, for example) and used a third-party platform to collect payments from customers in the previous year. 

The info on your 1099 form(s) will help you file your taxes, so be sure to keep it stored in a safe place!

What You’ll File

Form 1040 (U.S. Individual Income Tax Return)

• What it is: This is the main tax form that all U.S. taxpayers use to file their income tax return. 
• What you need to do: You’ll report your total income from all sources on this form; as an independent contractor, you’ll also use this form along with Schedule C and Schedule SE forms, detailed below.

Schedule C (Profit or Loss from Business)

• What it is: This form is used to report the income and expenses related to your freelance or contracting work.
• What you need to do: You'll report your gross income and deduct business-related expenses (e.g., office supplies, mileage, etc.) to calculate your net profit or loss. This net income is then used to calculate your taxes.

Schedule SE (Self-Employment Tax)

• What it is: This form calculates the self-employment tax you owe, which covers Social Security and Medicare taxes.
• What you need to do: If you're self-employed, you need to pay both the employer and employee portions of Social Security and Medicare taxes, which is roughly 15.3% of your net income (after deductions). Schedule SE will help you calculate the exact amount.

A note about quarterly estimated tax payments

If you’re self-employed, you also have the option to make estimated tax payments throughout the year (due in April, June, September, and January) instead of paying one lump sum during tax season. If you haven’t made quarterly payments throughout the year, plan on owing more at the end of the year. 

Want more tax tips for life as an independent contractor? We’ve got you covered. 

Additional Tax Forms to Consider

Each person’s tax filing will look a little differently, and a certified tax professional or tax software is usually the easiest way to file your taxes with peace of mind. They can help make sure you aren’t missing any information or forms and can get the maximum refund you deserve, if you qualify for one. Just to familiarize yourself, here are a few additional forms you may need to fill out, regardless of employment status, at tax time:

• Forms related to rental income if you own rental properties.
• Retirement or social security income forms if you withdrew funds from a retirement account.
• Forms for savings and investment dividends if you sold stocks or bonds within the given year. 

Types of Tax Deductions

Now that you have a sense of what to expect when it comes to income taxes, it’s time to talk deductions! A tax deduction is an expense you can subtract from your total taxable income to reduce the amount of income that is subject to tax. 

Tax deductions fall into two categories: standard and itemized. 

The standard deduction is a set amount the IRS lets you subtract from your income based on your filing status. Itemized deductions are ones you have to list out yourself as eligible expenses. 

You can either claim the standard deduction or choose to itemize deductions, but you can’t do both—people usually go with whichever one reduces their tax bill the most.

If you’re considering itemized deductions, here are a few types you may qualify for. Remember, you would only want to claim a list of itemized deductions if the total is greater than what you would get from your standard deduction:

• Homeownership. You can deduct mortgage interest using Form 1098, and if you’ve taken out a home equity loan to make home improvements to your property, you may also be able to claim that loan interest. 
• Charitable donations. If you regularly donate to a charity, you may want to itemize these deductions. Make sure you save receipts from these donations so you can properly total them when itemizing your deductions.
• Medical expenses. The IRS generally lets you take a medical expense deduction if your unreimbursed expenses total more than 7.5% of your Adjusted Gross Income. 

Make the Most of Tax Season With Branch x TurboTax

No matter how many years you’ve been filing your taxes, things are always changing and it can be a stressful process of gathering information and ensuring you account for every cent. For peace of mind, consulting with a tax professional or tax software like TurboTax can help streamline the process and answer any questions you might have.

Branch has teamed up with TurboTax to help you save more this tax season. As part of Branch rewards, TurboTax is offering $5 cash back when you use your Branch Card at checkout (with a minimum purchase value of $25). Learn more here, T&Cs apply.

PS: Have you thought about using Branch to help keep track of expenses throughout the year? With everything in one place, it’s easier to stay organized and ready when tax season rolls around. Learn about the benefits of filing your taxes with a Branch Card here. 

Disclaimer: The information provided above is for general informational purposes only and should not be considered professional tax advice. Tax laws and regulations can be complex and vary based on your circumstances and location. We recommend consulting a licensed tax professional or financial advisor for advice. ‍The materials on branchapp.com are for informational purposes only and subject to our terms of use and privacy policy. This website does not provide legal, financial, tax or insurance advice. We work hard to ensure the information here is accurate, but we recommend you contact a professional for any legal, financial, tax or insurance advice.

Branch is not a bank. Banking services provided by Evolve Bank & Trust, Member FDIC. FDIC insurance only applies for eligible accounts should the bank holding your funds fail. The Branch Mastercard Debit Card is issued by Evolve Bank & Trust pursuant to a license from Mastercard and may be used everywhere Mastercard debit cards are accepted.‍