Form 1040 Explained
- IRS Form 1040, U.S. Individual Income Tax Return, is the tax document individuals use to report their annual income and file their federal income tax return with the IRS.
- There are 4 different versions of the 1040 tax form: the regular IRS 1040 Form, the IRS 1040-SR Form for people aged 65 and older, the IRS 1040-X Form for filing an amended tax return, and the IRS Form 1040-NR for non-resident aliens.
- The IRS provides additional tax forms known as schedules that allow taxpayers to report additional information that supplements their tax returns. This includes Schedules 1, 2, 3, A, B, C, D, E, F, H, J, R, SE, and 8812.
Table of Contents
What Is IRS Form 1040?
IRS Form 1040, U.S. Individual Income Tax Return, is a tax form used to report annual income and file an income tax return with the IRS.
Within this tax form, taxpayers can report their gross income, and consider the applicable tax credits and tax deductions to determine how much of their income is taxable as they find their final tax liability owed to the IRS or the tax refund they should receive.
Who Must File IRS Form 1040?
Most individuals who earn above a certain income threshold for their filing status are responsible for filing IRS Form 1040. In particular, taxpayers are required to file a federal income tax return if they:
- Earn tips that weren’t reported to an employer,
- Owe Alternative Minimum Tax
- Owe household employment tax
- Are eligible for the Premium Tax Credit,
- Did not have FICA taxes withheld from their pay,
- Are repaying the first-time homebuyer credit,
- Have a foreign account,
- Earn self-employment income of $400 or more,
- Earn income as a partner in a partnership, a shareholder in an S corporation, or a beneficiary of a trust or estate,
- Receive dividends from an insurance policy that exceeds what they paid in premiums,
- Receive interest,
- Experience loss due to a federally-declared disaster area,
- Receive qualified HSA funding distribution from an IRA,
- Report an original issue discount (OID) amount that is different from the amount reported on IRS Form 1099-OID,
- Claim the Adoption Tax Credit or receive adoption benefits from an employer, or
- Owe excise tax.
Types Of 1040 Tax Forms
There are different versions of the 1040 tax form that are used by individuals to file their tax returns with the IRS:
IRS Form 1040
IRS Form 1040 is the most common version of the income tax return form used by U.S. taxpayers. This form is used to report annual income and determine if they owe tax for the year or if they are owed a tax refund.
IRS Form 1040-SR
IRS Form 1040-SR is the version of the income tax return form used by senior taxpayers above the age of 65. The only difference between this version of the income tax return form and the regular IRS Form 1040 is that the IRS Form 1040-SR provides a convenient standard deduction chart and is printed using a larger font.
IRS Form 1040-X
IRS Form 1040-X is used to file an amended tax return after already filing a regular IRS Form 1040.
IRS Form 1040-NR
IRS Form 1040-NR is the tax form used by non-resident aliens to file their federal income taxes. This version of the tax form requires additional information from the person and includes more pages than the other versions of the 1040 tax form.
What Are The Form 1040 Schedules?
In addition to the IRS 1040 Form, the IRS provides various schedules, which are additional IRS tax forms that allow taxpayers to report certain information to supplement their income tax returns.
The Form 1040 Schedule 1 is used for reporting additional income on Line 8 of the tax form or income adjustments on Line 10. The information reported on Schedule 1 may include:
- Health savings account (HSA) contributions
- Unemployment compensation
- Educator expenses
- Disposition proceeds from selling a business
The Schedule 2 1040 Form is used for reporting additional taxes to the IRS. The first part of Schedule 2 allows the taxpayer to report alternative minimum tax and excess premium tax credit repayments for health insurance marketplace purchases of insurance. The second part of the tax form is for the individual to report the following items:
- Self-employment tax
- Unreported FICA taxes
- Additional IRA tax
- Tax from other tax-favored accounts
- Additional Medicare tax
- Net investment income tax
- Household employment taxes
- First-time home buyer credit repayment
The Schedule 3 Form is used for reporting additional payments and tax credits to the IRS. Refundable tax credits are reported on Line 31 of the tax form, and non-refundable tax credits are reported on Line 20. The additional information reported on Schedule 3 includes:
- Residential energy tax credits
- Dependent care expense credits
- Previous overpayment of taxes
- Previous overpayment of Social Security taxes
The Schedule A Form is used to report itemized deductions to the IRS, including state and local taxes, medical expenses, mortgage interest, casualty and theft losses, and charitable donations.
The Schedule B Form is used for reporting dividends and interest income that exceeds $1,500 to the IRS. Any dividend and interest income of a lower amount will be reported directly on Lines 2 and 3 or IRS Form 1040.
The Schedule C Tax Form allows taxpayers to report business profit and loss. The types of taxpayers who most commonly use this schedule include freelancers, independent contractors, and individuals who own single-member LLCs or sole proprietorships.
The Schedule D Form is used to report investment capital gains and losses.
The Schedule E Form is used for reporting income or losses related to rental real estate, partnerships, S corporations, estates, trusts, royalties, and REMICs.
The Schedule F Form allows farmers to report their farming income and expenses.
The Schedule H Tax Form is used by employers of household workers who have withheld income for Social Security and Medicare taxes. Household workers could include nannies or caretakers.
The Schedule J Form is used by fishermen and farmers who elect to calculate their income tax liability by figuring the average of the past three years of taxes for a more even distribution of tax liability.
The Schedule R Form is used to claim the senior or disability tax credit.
The Schedule SE Form is used by independent contractors or owners of businesses who have profited more than $400. This form allows them to calculate self-employment taxes.
IRS Schedule 8812 is used to claim the Child Tax Credit and Credit for Other Dependents.
How To File IRS Form 1040
Here are the instructions for filing IRS Form 1040 with the IRS:
1. Gather the required information.
The first step in filing the IRS 1040 Form is to gather the required tax documents and financial records, including W-2 forms, 1099 forms, and information about their income, tax credits, and tax deductions.
2. Decide on a filing method.
Taxpayers can choose to use the IRS Free File tool or a tax filing software like TurboTax if they wish to file their taxes by themselves. Otherwise, they can hire a professional tax preparer for assistance.
3. Enter personal information.
The first page of the 1040 Tax Form requires the taxpayer to enter personal identification information for themselves and their spouse if they file their taxes jointly. This information includes their name, Social Security number, mailing address, filing status, and information about their dependents. Additionally, the first section is where individuals will list their digital assets and standard deduction.
4. Enter income information.
The next section allows individuals to report all their income sources, including wages, salaries, interest, dividends, capital gains, and retirement income.
5. Claim deductions.
Taxpayers can reduce their taxable income by claiming any relevant tax deduction or exemption. Taxpayers must choose if they wish to claim the standard deduction using Schedule A, or if they prefer to itemize their deductions.
6. Determine tax liability.
The second page of IRS Form 1040 allows taxpayers to calculate their tax liability. They may need to use other IRS schedules to complete this calculation.
7. Sign and date.
At the bottom of the tax form, taxpayers must provide their signature and the date to authenticate the information provided.
If you are seeking help with any aspect of tax filing, such as preparing the tax form, calculating tax liability, amending taxes, or understanding the difference between federal and state tax returns, the tax experts at Ideal Tax are here to help. Today is the day to set up a free consultation phone call to ensure your tax situation is adequately handled so you can minimize your tax balance and maximize your tax refund.