Simplifying IRS Tax Form 1040 – What Is It, How Do You File It, and What’s Changed?
The IRS Form 1040
What is it?
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.
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.
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:
- 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 amount 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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Posted: 07 Nov, 2019