What Is an IRS 1040 Form?
Updated for Tax Year 2017
OVERVIEW
One of the official documents that U.S. taxpayers can use to file their annual income tax return is the IRS 1040 form.
The IRS Form 1040 is one of the official documents that U.S.
taxpayers can use to file their annual income tax return. The form is
divided into sections where you can report your income and deductions to
determine the amount of tax you owe or the refund you can expect to
receive. Depending on the type of income you report, it may be necessary
to attach other forms or schedules to it.
Reporting your income
The first page of Form 1040 is where you calculate your Adjusted
Gross Income (AGI). The first section requires you to enter information
on all sources of income such as your wages and salary, tips, interest,
dividends, taxable state and local tax refunds, alimony, business
income, capital gains, IRA and pension distributions, farm income,
unemployment income and Social Security benefits.
You will always find a box on the form to list “other income” you
receive that doesn’t fit into one of the other categories. You must
report all income you receive, regardless of where it comes from, unless
it’s tax-exempt. The sum of all of these income items is known as your
total income.
Deductions for AGI
From your total income, the IRS allows you to claim specific
deductions or adjustments to arrive at your AGI. Allowable adjustments
include one-half of your self-employment tax payments, alimony payments
you make, IRA contributions, payments of student loan interest and
health savings plan contributions, to name just a few. Your AGI is an
important number since many deduction limitations are affected by it.
Deductions and exemptions
The second page of Form 1040 begins with your AGI and allows you to
reduce it further with either the standard deduction or the total of
your itemized deductions. Itemized deductions include expenses such as
mortgage interest, unreimbursed business expenses and excess medical
expenses as well as many others.
If the total of your itemized deductions does not exceed the standard
deduction for your filing status, then your taxable income will be
lower if you claim the standard deduction. After choosing the best
deduction, you can then reduce your taxable income even more by one
exemption for yourself, and one for each of the dependents you claim.
After subtracting your exemptions, you are left with your taxable
income, which is the amount subject to income tax.
When you use TurboTax, we’ll do this for you and recommend whether
choosing the standard deduction or itemizing will give you the best
results.
Calculating the tax and claiming credits
You must now figure out the amount of tax you owe on your taxable
income by referencing the tax tables in your instructions. However, if
you use software, such as TurboTax, to prepare your return, the tax will
be automatically calculated for you. Comparing your total tax
withholding to your tax bill at the bottom of Form 1040 will tell you
whether you must make an additional payment or if you should expect a
refund. If you are eligible for any of the tax credits listed on the
form, make sure you reduce the amount of tax you owe by each credit
before completing your Form 1040.
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What Is the IRS 1040A Form?
Updated for Tax Year 2017
OVERVIEW
One of the three forms you can use to file your federal income tax return is IRS Form 1040A.
The IRS Form 1040A is one of three forms you can use to file your
federal income tax return. Form 1040A is a shorter version of the more
detailed Form 1040, but is more complex than the simple 1040EZ form. All
taxpayers can use Form 1040; however, to use Form 1040A you must
satisfy a number of requirements, such as having taxable income of
$100,000 or less and claiming the standard deduction rather than
itemizing.
Filing status and exemptions
When preparing Form 1040A, you must list your exemptions and choose
your filing status and exemptions before you begin to report any income.
Each filing status, such as “single” or “married filing jointly,” uses
different tax brackets for calculating your income tax.
However, your filing status doesn’t affect the exemption amount you
claim for yourself and each of your dependents. Each exemption works
just like a deduction; the amount reduces your taxable income, so the
more exemptions you have, the lower your tax liability will be. The top
portion of the form includes a section where you must list the name and
Social Security number of each dependent and provide their relationship
to you.
Types of income allowed on the 1040A
The income section of the 1040A form only allows you to report
limited types of income. Specific items include wages, salaries and
tips, interest and dividend income, capital gains, IRA, pension and
annuity distributions, unemployment compensation, Alaska permanent fund
dividends and Social Security benefits. If you have other types of
income, such as from a business you operate as a sole proprietorship,
you still must report the income since it is taxable, but you must file
the full-length Form 1040.
After reporting your income, the 1040A form allows you to claim
certain adjustments to arrive at your adjusted gross income. These
include deductions for educator expenses, IRA contributions, student
loan interest and tuition payments.
Reporting tax, credits and payments on Form 1040A
The second page of Form 1040A allows you to subtract a standard
deduction and your exemption allowances from your adjusted gross income
to arrive at your taxable income. You then need to determine the amount
of tax you owe by finding the appropriate range for your taxable income
and filing status in the tax tables in the instructions.
Once you calculate your tax, Form 1040A allows you to claim a limited
number of tax credits such as for child and dependent care expenses,
the credit for the elderly or disabled and education tax credits. Your
total credits reduce your tax bill on a dollar-for-dollar basis. After
reducing your tax by the credits, you reduce it again by the amount of
your tax payments and withholding.
Differences between Form 1040A and Form 1040
The filing status and exemptions section of Form 1040A is similar to
the corresponding section on Form 1040. Due to the limited types of
income you can receive and the limited adjustments to income you can
make on Form 1040A, the income and adjusted gross income sections of
Form 1040A are much shorter. One of the most significant differences
between the two forms is that you can itemize deductions on Form 1040
but not on Form 1040A.
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