The IRS Form 1040 is one of the official documents that U.S. taxpayers can use to file their annual income tax return. This form is divided into sections where you can report your income and deductions to determine the amount of tax you owe to the government or the refund you can expect to receive. This form can be simple or complicated depending on the type of income and deductions you report.
Filing your annual tax return is critical and is your responsibility as a citizen or resident. If you fail to file your tax return, you may lose out on some of the options you may have in the event you accumulate tax debt. To avail of options to get rid of tax debt, one of the crucial criteria is that you should have filed your tax return or Form 1040.
Understanding Form 1040
Form 1040 has a number of different components. The first page of Form 1040 is where you would calculate your Adjusted Gross Income. You would do so by entering information of all sources of income such as your salary, tips, interest dividends and other taxable income such as tax refunds, alimony, capital gains, pensions, unemployment income, Social Security benefits, etc.
If you have other types of income, you should list them in a box titled “other income.” It is important that you report all of the income you receive regardless of where it comes from, unless it is exempt from taxes. The sum of all these income items will be your total income.
From this amount, the IRS allows you to claim specific deductions or adjustments to arrive at your Adjusted Gross Income. Examples of adjustments include half of your employment tax payments, IRA contributions, alimony payments you make, student loan interest payments, health savings plan contributions, etc.
The second page of Form 1040 begins with your Adjusted Gross Income and allows you to further reduce it with either a standard deduction or the total of your itemized deductions, which may include business expenses, medical costs, mortgage interest, etc. After subtracting your exemptions, you will be left with your taxable income, which is the amount that will be subject to income tax.
You may be able to figure out the amount of tax you owe on your taxable income by using computing software. You will also be able to see if you must make an additional payment to the IRS or if you should expect a refund. If you are eligible for any of the tax credits that are listed on the Form 1040, make sure you reduce your taxes owed by each credit. This will help you reduce the amount of taxes you owe or get the maximum possible refund.
Which Form 1040 is Right for You?
IRS Form 1040: If you are not sure if you meet the necessary conditions of 1040A or 1040EZ, you need to fill out Form 1040. This is the most complex version of the form, but it is also the one that most end up filling out. There are four criteria to use this form:
- Your taxable income is $100,000 or more.
- You earn income from a business, unreported tips, or income received as a partner or shareholder in an S corporation.
- You itemize deductions or claim tax credits or adjustments to income
- You owe household employment taxes
Form 1040EZ: This is the income tax return for single and joint filers with no dependents. As the name suggests, this is the easiest form to fill out. However, you can only use Form 1040EZ if you satisfy the following conditions:
- Your filing status is single or married filing jointly.
- You are not claiming any dependents.
- You are not claiming any tax credits or adjustments to income.
- You don’t claim any credits other than the earned income credit.
- You and your spouse, if filing a joint return, are under the age of 65.
- Your taxable income is below $100,000.
- Your taxable interest was not more than $1,500.
- You don’t owe any household employment taxes on wages you paid to a household employee.
- You are not a debtor in a Chapter 11 bankruptcy case filed after October 16, 2005.
IRS Form 1040A: If you don’t meet the criteria for a 1040EZ, your best option may be to file a 1040A. You can use this form if you received dependent care benefits or if you owe tax on the recapture of an education credit. To file a 1040A, you must meet the following criteria:
- Your income is only from wages, salaries, tips, interest, ordinary dividends, capital gains, scholarship and fellowship grants, pensions, annuities, IRAs and taxable social security benefits.
- The only adjustments you can claim are on student loan interest, IRA, educator expenses and tuition and fees.
- Your taxable income is under $100,000.
- You do not itemize deductions.
- The only tax credits you can claim are credit for child and dependent care, elderly or disabled care, education, retirement saving and earned income credit.
- You did not have an alternative minimum tax adjustment on stock that you acquired from the exercise of an incentive stock option.
What Information Do You Need?
Before you begin filing the Form 1040, make sure you have the following information ready:
- Proof of identification.
- Filing status and residency status.
- Dates of birth for you, your spouse and other dependents.
- A copy of your past tax return.
- Statement of wages earned such as W-2, 1099-R etc.
- Statements of interest/dividends from banks, brokerages, etc.
- Proof of tax credits, deductions or exclusions.
- Your bank account number and routing number (for direct deposit).
Need Help? Our Attorneys Are Here For You
If you are overwhelmed by tax debt, it is important that you contact an experienced Arizona tax attorney who will help you better understand your options. Whether you are facing tax liens, an IRS audit or are overwhelmed by back taxes, our knowledgeable tax attorneys at the Pew Law Center PLLC. can help you resolve your situation and help you get that valuable fresh start.
Facing the IRS on your own can be challenging and intimidating. You need significant resources on your side to be able to resolve your tax debt issues. Call us today at (480) 745-1770 for a no-cost, no-obligation consultation.