US taxpayers can use IRS Form 1040 to file their annual income tax returns. IRS Form 1040 comes in several variations. IRS Form 1040 has undergone a few changes in recent years. We'll review the differences and show you how to fill out the 1040 during tax season.

A 1040 form is one of the official documents used by U.S. taxpayers to file their annual income tax returns. It is divided into sections where you report your income and deductions to determine the amount of tax you owe or the refund you can expect to receive. There may be a need to attach additional schedules based on the type of income you report.

What is IRS form 1040?

An IRS Form 1040, or the U.S. Individual Income Tax Return, is the basic form used to file your annual income tax return in the United States.

The Form 1040 gives you the tools to report your annual income, claim your tax deductions, collect your tax credits, and determine the amount of your tax refund each year. As of 2018, the form now stands alone, but you may need to attach other federal tax forms or any of the six additional schedules depending on your source of annual income.

You can obtain the Form 1040 from the IRS website, from using tax return software, or by visiting a tax preparer. While filing the Form 1040 on your own is an option, a tax preparer can make the process simple by submitting your return for you and giving you peace of mind.

IRS form 1040 example

What is the purpose of a 1040 form?

A taxpayer's taxable income and tax on that income are calculated by using the federal 1040 form. You must first report your total income and then claim any allowable adjustments, also known as above-the-line deductions, in order to calculate Adjusted Gross Income (AGI). Many deduction limitations are based on your AGI.

You will report your AGI on line 11 of Form 1040 for tax year 2021. You can reduce it further by taking the standard deduction or itemizing your deductions on Schedule A. Itemized deductions include expenses such as:

  • mortgage interest
  • sales taxes or state income taxes
  • charitable contributions
  • excess medical expenses

When your itemized deductions do not exceed the standard deduction for your filing status, your taxable income will usually be lower if you claim the standard deduction. From 2018, the exemption deductions will be replaced by higher child tax credits and a new other-dependent tax credit.

What are the different versions of the 1040 form?

The 1040 form now has four variations (1040A and 1040EZ no longer exist):

Form 1040: Taxpayers generally use this one to report income and determine their tax for the year, as well as any refund or additional tax owed.

Form 1040-SR: Intended for elderly taxpayers (age 65 and older). Almost identical to Form 1040, Form 1040-SR includes a chart for determining the standard deduction and is printed in a larger font.

Form 1040-NR: For non-US citizens without a green card, this form is several pages longer than the other 1040 forms.

Form 1040-X: If you previously filed a Form 1040 and need to make changes, this is the form you need to use.

What are the most recent changes to Form 1040?

One of the biggest changes to Federal Form 1040 is the addition of Line 30 for the Recovery Rebate Credit. If you didn't receive the government's economic impact payments (stimulus checks) in 2021, or if you could have received a larger payment, please fill out this form. A refundable credit of that amount can be claimed by these taxpayers.

According to the "Amount You Owe" section of Form 1040, "For Schedule H and Schedule SE filers, line 37 may not represent all of the taxes you owe for 2020." Which means that since employers were permitted to defer payment of the employer's share of social security tax due to the CARES Act, the deferred amount will be reported in Schedule 3, Line 12e of Form 1040. For certain Schedule H or SE filers, it will be entered as a "Deferral.".

In 2020, Form 1040 will have three lines to report withholdings. There will be three lines on Form 1040 for withholdings: Line 25a for W-2 withholdings, Line 25b for 1099 withholdings, and Line 25c for other withholdings.

Do I Need To File A Tax Return?

Whether or not you are required to file depends on many factors. Your personal annual income, annual income of those dependent on you, source of health care coverage, and age are all elements that influence your need to file an annual tax return.

The annual earnings threshold changes year to year, so it is important to check the IRS chart annually. 

Who Should File a 1040 Tax Form?

You might need to file a 1040 tax form if you receive these types of income or losses:

  • An income of $400 or more from self-employment
  • If you are any of the following:
    • You are a partner in a partnership
    • You are an S corporation shareholder
    • You are the beneficiary of an estate or trust
  • You received insurance policy dividends in excess of the premiums you paid
  • You received or paid interest on securities transferred between interest payment dates.
  • Your original issue discount (OID) doesn't match the amount on Form 1099-OID.
  • You have suffered a loss related to an area designated as a disaster area by the federal government.
  • You received a qualified health savings account (HSA) distribution from your IRA.
  • You claim the Adoption Credit or your employer offers adoption benefits.
  • You owe excise tax on insider stock compensation you received from an expatriated corporation.

If you have any of the following, you must file a Form 1040:

  • Your employer wasn't informed of your tips.
  • Alternative Minimum Tax (AMT) is due.
  • You must pay household employment taxes.
  • A premium tax credit is available to you.
  • Neither Social Security nor Medicare taxes were withheld by your employer.
  • You are repaying a first-time homebuyer credit.
  • You have an overseas account.
  • You received a distribution from a foreign trust.
  • You are eligible for the foreign earned income exclusion.
  • You are entitled to exclude income from Puerto Rico or American Samoa since you were a bona fide resident of either.

What do I need to fill out Form 1040?

To prepare your taxes, you'll need a lot of information, but here are a few basic items most people need:

  • The Social Security numbers of you, your spouse, and any dependents.
  • Your date of birth, your spouse's date of birth, and any dependents' dates of birth.
  • A statement of wages earned (such as your W-2 form and 1099).
  • For dividends from banks or brokerages, statements of interest or 1099-DIV forms.
  • Documentation of tax credits and/or tax deductions.
  • A copy of your past tax return.
  • A routing number and bank account number (for direct deposit of any refund).

Filing Your Form 1040

Calculating Adjusted Gross Income

The first step in filing your IRS Form 1040 is calculating your Adjusted Gross Income, also known as AGI. The Form 1040 first asks for your basic information along with your sources of income including annual salary, tips, income from claiming Social Security or unemployment, alimony, and more. To prepare, you should collect information such as:

  • W2s
  • 1099s
  • Dividend / interest statements

It is important to follow the instructions and consider each source of income listed on the form while using the space allotted for other income to report any additional income not listed. Depending on the sources of your income, you may need to attach a Schedule 1 to your Form 1040. For example, if you have collected unemployment, paid interest on student loans, or accumulated business income, the Schedule 1 will allow you to make adjustments to your annual income. If you run a business as a sole proprietor, you will also need to fill out and attach a Schedule C. The Schedule C allows you to report how much your business gained or lost in the past year.

Tax Deductions, Exemptions, and Credits

After calculating your AGI, you can begin to lower it by claiming your tax deductions and exemptions. You can use the form to itemize deductions such as:

  • State income taxes
  • Personal property taxes 
  • Charitable donations
  • Sales taxes

If your itemized deduction amount is lower than the amount of a standard deduction, it is a wise choice to select the standard deduction instead in order to lower your taxable income. As of 2018, the IRS Form 1040 no longer lists exemption deductions for dependents, but instead allows dependent tax credits. Unlike a deduction, a tax credit lowers the amount of taxes you owe instead of lowering the amount of your AGI.

Determining Your Tax Amount

The amount of tax you will owe will depend on your final AGI after making deductions. You will use the given tax tables in order to calculate the amount of tax owed for your taxable income. Once you’ve arrived at this number, you can reduce the amount by each tax credit you’ve qualified for. If the number of tax credits and withheld taxes through the year have exceeded the amount of tax you owe, you will receive a tax refund from the IRS. Your Form 1040 allows you to specify how you would like to receive this refund. If your credits and withholdings are below the amount of tax owed, you will pay the difference when filing your Form 1040.

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