How to Prepare Your Taxes: Important Information to Consider

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February 1, 2024 |
Article | 5 min
| Personal Insights

Tax season is right around the corner! With a bit of planning before you start filling out tax forms, you can make the process much easier on yourself this year. So, let’s review important insights, as well as the forms and documents you might need to gather to file your tax return ASAP.

Filing Your Taxes: What You Need to Get Started

Before you begin the filing process, you should first gather the information and documents that the IRS needs to process your tax return. Tax forms often include a lot of technical terms, but basically, you’ll need:

  • Your Social Security Number (SSN) or Tax Identification Number (TIN)
  • Income statements from your employer
  • Any deduction documents you may have (if applicable)
  • Bank account information
  • Your prior year’s tax return as a point of reference

Next, determine if you’re filing as an individual or jointly with a spouse. If you’re filing jointly, your spouse will also need to gather the same information. You can e-file with the help of commercial tax preparation software, widely available online. You may also file by mail or hire a professional to file your taxes for you.

5 Key Tax Terms and What They Mean for You

Adjusted Gross Income

Your adjusted gross income (AGI) is the total sum you make over the course of a year after certain allowable deductions have been subtracted. Eligible deductions are things like retirement plan contributions, student loan interest, alimony, and some medical expenses.

To calculate your AGI, list your annual gross income, including supplemental income sources. Then, subtract types of payments like those listed above.

A lower AGI may lead to a lower tax bill because each deduction you receive will reduce the amount of taxes you owe. At the same time, your AGI is a critical marker for a variety of different purposes. For instance, you may qualify for additional deductions, but only if they fall within a certain percent of your AGI. Your AGI is also used to determine if you’re eligible for other favorable financial tools like tax-advantaged accounts.

Form 1040

Your 1040 form is the document you use to file your taxes with the IRS. So, if you want to file by mail, you’ll use a paper copy of the form. But if you want to e-file, tax software will walk you through filling out a digital version of the form. The 1040 form asks you to provide personal information, income details, adjustments to income, tax credits, and deductions. This way, your ultimate tax liability can be calculated with all applicable credits and deductions applied. The IRS designed the form to accommodate a wide array of financial systems. So, even if you have a unique arrangement, such as freelancing or multiple streams of income, you may use the 1040 form to file your taxes.

Tax Deductions

Of all the tax terms you need to know, deductions might be the term you’re most eager to understand. If you’re eligible for deductions, you can reduce your tax bill. Deductions are a way for the IRS to account for personal circumstances when determining how much you owe. The IRS lets taxpayers subtract specific expenses from their gross income. Some of the most common deductions people take advantage of are:

  • Medical expenses
  • State and local tax payments
  • Charitable donations
  • Educational expenses
  • Interest payments on a home loan

Now, there are two ways to go about deductions when you file your tax return. You may opt for a standard deduction, a fixed amount the IRS sets. Or you may submit an itemized version, a list of all individual deductions you’re eligible for. It’s wise to calculate which of these two options offers you the greatest benefit each year and submit accordingly.


As the name suggests, tax-exempt status makes certain income, organizations, and transactions immune to taxation. Essentially, the IRS doesn’t tax certain forms of income.

Most commonly, tax-exempt status applies to charitable, nonprofit, religious, or educational organizations that are legally designated 501(c)(3) entities. However, there are a few ways that exemptions can impact individual taxpayers. For instance, donations made to tax-exempt organizations may qualify as deductible charitable contributions. Also, income earned through specific tax-exempt means, like municipal bonds, isn’t taxable.

W-2, W-4, and W-9

Finally, one of the most important forms you’ll need to file your taxes this year is either your W-2 or W-9. However, you might be wondering which one you need. There are three key tax forms in this category:

  • W-2 forms are provided to you by your employer, who’s required to issue the document by January 31. The form details both the total income you earned for the year and the amount withheld. So, if you’re traditionally employed, file using your employer-issued W-2.
  • W-4 forms are filled out by employees when they start a job or when their tax status changes. This form determines the amount of federal income tax to withhold from paychecks throughout the year. Your employer uses the W-4 document, so you don’t need it to file your taxes.
  • W-9 forms are the alternative to W-2 forms for freelancers, independent contractors, and other non-employees. Clients typically use this form to report the amount they paid for contracted or independent services. You’ll use the W-9 form to report any independent income.

Learning Tax Terms with a Financial Professional

Understanding tax basics and terms can help you determine your tax status and what documents you need to successfully file. These basic concepts just skim the surface of the deeply intricate tax code. There are many other contingencies and individual factors at play that are important to account for. The IRS website can also provide additional information, as well.

Our bankers can partner with you and your tax professional to navigate the tax season.  Reach out to speak to your banking professional today.

This material has been prepared for informational purposes only, and is not intended to provide and should not be relied on for accounting, legal or tax advice.