The 1040 form may look complex. However, don’t be overwhelmed with doing taxes and filling out the form. Here we will step through some of the more common lines for the 1040, to help give you an idea of what things you likely will need to fill out.
First, what is Form 1040?
Form 1040 is the U.S. Individual Income Tax Return. It is a federal income tax form that people use to report their income to the IRS and claim tax deductions or credits. It is used to calculate their tax refund and tax bill for the year. You may file your tax return online, with tax software, or you can also download Form 1040 directly from the IRS website if you prefer to complete your return by hand.
What is on the 1040 Tax Form?
Before we get into the details of the 1040, lets take a quick overview of what we will be looking at.
First, it asks you who you are. The top of Form 1040 collects basic information such as your name, address, social security number, your tax-filing status, and how many tax dependents you have.
Next, you calculate your taxable income by adding up all your income for the year. Your taxable income is the amount of income that is subject to income taxes.
On page two of the 1040 form, you calculate the taxes you owe, your tax liability. You can subtract any tax credits you may be eligible for and any taxes that you have already paid via withholding from your paychecks throughout the year.
Finally, you will determine your tax bill or refund. This will tell you whether you have already paid any or all of the tax bill. The Form 1040 can also help you determine whether tax credits or withholding taxes covered your tax bill. You’ll be eligible for a refund if you have overpaid during the year.
Now, lets take a look at the details of the example tax form to see how it looks. Here we will step through some of the more common filled in lines for the 1040, to help give you an idea of what things you may need to fill out. This is form 1040 U.S. Individual Income Tax Return for the year 2021.
This example form has been filled out for John. He is single, so for filing status he has checked the single box. Next, he has filled in his name, and social security number. He also filled out his address information. There is a question about virtual currency. He does not own any, so he checked the NO box. No one can claim him as a dependent, and he has no dependents, so all that information is left blank. Next, he entered his income information. John is employed, and he earned $16,150 this year. He got that information from his W2 form, which was supplied by his employer.
He also had $10 in taxable interest from his bank. His other lines were 0, so he added that here to get a total income amount. He had no adjustments, so the same amount was his adjusted gross income. Next is standard deduction or itemized deductions. He took the standard deduction. He got that amount by looking at the left side of the page and entering the amount listed for single. He gave $100 in charitable contributions, so he entered it here. Next he added lines 12a and 12b, the standard deduction and charitable contributions, to get this amount. He had no qualified business income deductions, so that was left blank, so we enter the amount again here. Next, he subtracted that amount from line 14, adjusted gross income. That gives us taxable income. Taxable income is the amount that we will now use to calculate taxes. He has $3,510 in taxable income. We will use this amount to calculate taxes using the tax table.
The tax table can be found in the 1040 instructions document, by looking up his taxable income amount. Here is the page in the tax table we need to look at. You need to find the line that corresponds with your taxable income. He made $3510 which is at least $3,500 but less than $3,550. Since he is single, the amount he should use therefore is $353.
This now brings us to page two of the 1040 form. On line 16 we enter this amount from the tax table. This is his tax. Other lines don’t apply to him, so he re-entered the amount here. And again here. Now, this is his total tax. Now we need to look at how much he already paid in taxes. Taxes are normally deducted from your paycheck. He got the information for how much he paid on his W2 form and entered it here. His other lines did not apply, so were zero, and the same amount is entered again. So his total payments are entered. Since he already paid more in taxes than his tax amount, he is going to get a refund. Here we subtract the amount paid from the amount owed, and this gives us the amount overpaid. He wants to receive this amount in full, so he entered the same amount here.
Once he makes sure all the information is correct, he will sign the return and fill out the other information. When he is ready, he is going to mail the return to the address listed in the 1040 instruction document, before the due date. To help reduce the chance for errors and delays, it is suggested that you instead submit your form electronically and use direct deposit. This was just an example to help you better understand the 1040 form. Your tax situation is likely different, so be sure to take a look at the 1040 instructions and consult with a tax professional if you need help.
Money Instructor does not provide tax, legal or accounting advice. This material has been prepared for educational and informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors regarding your own situation.