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How to file taxes: The full breakdown

Tax day 2021 is May 17. Here’s how to break down the process into pieces to reduce the stress of filing.

Video Transcript

- Tax day is perhaps the least liked day on the calendar. And part of the reason why is the enormity of it. Breaking down the process into pieces can leave you with a lot less stress when April 15 rolls around. Or in 2021's case, May 17.

Start with the personal information you'll need, which includes your social security number, and that of your spouse and dependents, if you have any. You'll need last year's tax return, and your checking account and bank routing number, in case you get a refund and want to have that directly deposited into your bank account. You'll need your W-2 from your employer, and any 1099s you may receive from side businesses or self-employment income.

If you receive alimony, unemployment benefits, or social security, you'll also need those statements. Here are some other types of income and adjustments to income that you may have. Investment or interest income from a bank, credit union, or financial institution, miscellaneous income from jury duty, scholarships earned, medical savings accounts, or gambling winnings, IRA or other retirement plan distributions, income from sale of a home or rental property, or cancellation of debt.

The government offers a wide variety of deductions, adjustments, and credits to offset your income. If you're self-employed or own a business, it's wise to consider working with a tax professional. Remember, regardless of who prepares your taxes, taxpayers are legally responsible for what's on their tax return.

One option is to purchase tax prep software. Programs will find deductions and credits that may reduce your taxes. They'll also expedite the process of e-filing your returns with state and federal governments. Stay financially fit, friends.