Form 1040: What it is, how it works, and the different types to know about

By Lydia Kibet

Mar 2, 2022, 8:52 PM

Read the article in businessinsider.com

Tax season can be a stressful time for many people, especially with the various tax forms that you’ll have to remember to file. Form 1040 is one of the tax forms that US taxpayers use to report their individual income tax returns with the Internal Revenue Service each year.

Although there’s been some changes made to Form 1040 to make the filing process easier, some still find it complicated. Here’s a guide to Form 1040, how it works, and the different types of 1040s to know about.

What is Form 1040? 

Form 1040 is the IRS form that US taxpayers use to file their annual income tax returns. Formerly known as the US Individual Income Tax Return, Form 1040 has sections requiring taxpayers to report their annual taxable income and deductions to determine whether taxes are owed, or the filer will get a tax refund. Based on the type of income you report, you may also want to attach extra forms referred to as Schedules.

“In the past, you could choose to file Form 1040A or Form 1040EZ instead of Form 1040 if your taxes were relatively simple. But starting with the 2018 tax year, these forms have been eliminated in favor of a shorter Form 1040,” says Brandon Berquist, tax planning specialist at Personal Capital. “There are fewer boxes to fill in on Form 1040 than there were before because many lines from the old form have been moved onto additional schedules.”

Understanding Form 1040 

The purpose of Form 1040 is to declare annual income tax returns. If you earn income over a certain threshold, you need to report that plus tax deductions and tax credits for that year. You’ll then use this information to calculate your tax liability for the year and find out if you owe any taxes or you’ll receive a refund.

Tax season officially begins mid-February, and you should file Form 1040 with the IRS by April 15 each year. However, the IRS has extended the 2020 tax deadline to May 17, 2021, in correspondence with the COVID-19 pandemic. If you need more time to file your taxes, you can file for a six-month extension to file your taxes by October 15.

Here’s a closer look at what the Form 1040 does:

  • It confirms your identity. The very top part of Form 1040 requires you to fill out your basic information. This includes your tax filing status, name, address, Social Security number, and dependents. The filing status can be single, married filing jointly, married filing separately, head of household, or qualifying widow(er). 
  • It calculates your taxable income. Form 1040 computes your taxable income for the year plus the deductions you’d like to claim. One of the steps is calculating your Adjusted Gross Income minus any allowable adjustments. When reporting your AGI, you can reduce how much you owe the IRS with standard deductions or itemized deductions. Subtracting your itemized or standard deductions from your AGI will calculate your taxable income Most filers use the standard deduction, but you can use itemized deduction if the latter is greater than the former for your filing status. Itemized deductions include mortgage interest, charitable deductions, state and local taxes, and medical expenses — with certain limitations.
  • It calculates your tax liability. When filing your taxes, you need to report how much income tax you owe the IRS; this is called tax liability. If you have dependents, you can claim tax credits at this point. For example, you may claim a child tax credit or any other qualifying tax credit.
  • It determines whether you’ve paid all or part of your tax bill. Form 1040 also ascertains if you’ve paid all of your income taxes or you still owe some. If you’ve paid more, you’re due for a tax refund. If you’ve paid less, you owe the IRS and need to pay the full balance by the tax filing deadline in order to avoid penalties and interest. If you owe and cannot pay the full balance, it is recommended that you still file form 1040 on time to avoid a failure to file penalty. Any amounts owed after the filing deadline will still incur failure to pay penalties and interest, even if you apply for an installment agreement with the IRS.

If you need to file your individual income tax returns, you can find Form 1040 on the IRS website. The form is typically available in PDF, where you can fill out manually and mail it in or use the IRS’s Free File Fillable Forms. You can also file your returns using tax software, where you only need to provide the required information.

Tax season can be a stressful time for many people, especially with the various tax forms that you’ll have to remember to file. Form 1040 is one of the tax forms that US taxpayers use to report their individual income tax returns with the Internal Revenue Service each year.

Although there’s been some changes made to Form 1040 to make the filing process easier, some still find it complicated. Here’s a guide to Form 1040, how it works, and the different types of 1040s to know about.

What is Form 1040? 

Form 1040 is the IRS form that US taxpayers use to file their annual income tax returns. Formerly known as the US Individual Income Tax Return, Form 1040 has sections requiring taxpayers to report their annual taxable income and deductions to determine whether taxes are owed, or the filer will get a tax refund. Based on the type of income you report, you may also want to attach extra forms referred to as Schedules.

“In the past, you could choose to file Form 1040A or Form 1040EZ instead of Form 1040 if your taxes were relatively simple. But starting with the 2018 tax year, these forms have been eliminated in favor of a shorter Form 1040,” says Brandon Berquist, tax planning specialist at Personal Capital. “There are fewer boxes to fill in on Form 1040 than there were before because many lines from the old form have been moved onto additional schedules.”

Understanding Form 1040 

The purpose of Form 1040 is to declare annual income tax returns. If you earn income over a certain threshold, you need to report that plus tax deductions and tax credits for that year. You’ll then use this information to calculate your tax liability for the year and find out if you owe any taxes or you’ll receive a refund.

Tax season officially begins mid-February, and you should file Form 1040 with the IRS by April 15 each year. However, the IRS has extended the 2020 tax deadline to May 17, 2021, in correspondence with the COVID-19 pandemic. If you need more time to file your taxes, you can file for a six-month extension to file your taxes by October 15.

Here’s a closer look at what the Form 1040 does:

  • It confirms your identity. The very top part of Form 1040 requires you to fill out your basic information. This includes your tax filing status, name, address, Social Security number, and dependents. The filing status can be single, married filing jointly, married filing separately, head of household, or qualifying widow(er). 
  • It calculates your taxable income. Form 1040 computes your taxable income for the year plus the deductions you’d like to claim. One of the steps is calculating your Adjusted Gross Income minus any allowable adjustments. When reporting your AGI, you can reduce how much you owe the IRS with standard deductions or itemized deductions. Subtracting your itemized or standard deductions from your AGI will calculate your taxable income Most filers use the standard deduction, but you can use itemized deduction if the latter is greater than the former for your filing status. Itemized deductions include mortgage interest, charitable deductions, state and local taxes, and medical expenses — with certain limitations.
  • It calculates your tax liability. When filing your taxes, you need to report how much income tax you owe the IRS; this is called tax liability. If you have dependents, you can claim tax credits at this point. For example, you may claim a child tax credit or any other qualifying tax credit.
  • It determines whether you’ve paid all or part of your tax bill. Form 1040 also ascertains if you’ve paid all of your income taxes or you still owe some. If you’ve paid more, you’re due for a tax refund. If you’ve paid less, you owe the IRS and need to pay the full balance by the tax filing deadline in order to avoid penalties and interest. If you owe and cannot pay the full balance, it is recommended that you still file form 1040 on time to avoid a failure to file penalty. Any amounts owed after the filing deadline will still incur failure to pay penalties and interest, even if you apply for an installment agreement with the IRS.

If you need to file your individual income tax returns, you can find Form 1040 on the IRS website. The form is typically available in PDF, where you can fill out manually and mail it in or use the IRS’s Free File Fillable Forms. You can also file your returns using tax software, where you only need to provide the required information.

Tax season can be a stressful time for many people, especially with the various tax forms that you’ll have to remember to file. Form 1040 is one of the tax forms that US taxpayers use to report their individual income tax returns with the Internal Revenue Service each year.

Although there’s been some changes made to Form 1040 to make the filing process easier, some still find it complicated. Here’s a guide to Form 1040, how it works, and the different types of 1040s to know about.

What is Form 1040? 

Form 1040 is the IRS form that US taxpayers use to file their annual income tax returns. Formerly known as the US Individual Income Tax Return, Form 1040 has sections requiring taxpayers to report their annual taxable income and deductions to determine whether taxes are owed, or the filer will get a tax refund. Based on the type of income you report, you may also want to attach extra forms referred to as Schedules.

“In the past, you could choose to file Form 1040A or Form 1040EZ instead of Form 1040 if your taxes were relatively simple. But starting with the 2018 tax year, these forms have been eliminated in favor of a shorter Form 1040,” says Brandon Berquist, tax planning specialist at Personal Capital. “There are fewer boxes to fill in on Form 1040 than there were before because many lines from the old form have been moved onto additional schedules.”

Understanding Form 1040 

The purpose of Form 1040 is to declare annual income tax returns. If you earn income over a certain threshold, you need to report that plus tax deductions and tax credits for that year. You’ll then use this information to calculate your tax liability for the year and find out if you owe any taxes or you’ll receive a refund.

Tax season officially begins mid-February, and you should file Form 1040 with the IRS by April 15 each year. However, the IRS has extended the 2020 tax deadline to May 17, 2021, in correspondence with the COVID-19 pandemic. If you need more time to file your taxes, you can file for a six-month extension to file your taxes by October 15.

Here’s a closer look at what the Form 1040 does:

  • It confirms your identity. The very top part of Form 1040 requires you to fill out your basic information. This includes your tax filing status, name, address, Social Security number, and dependents. The filing status can be single, married filing jointly, married filing separately, head of household, or qualifying widow(er). 
  • It calculates your taxable income. Form 1040 computes your taxable income for the year plus the deductions you’d like to claim. One of the steps is calculating your Adjusted Gross Income minus any allowable adjustments. When reporting your AGI, you can reduce how much you owe the IRS with standard deductions or itemized deductions. Subtracting your itemized or standard deductions from your AGI will calculate your taxable income Most filers use the standard deduction, but you can use itemized deduction if the latter is greater than the former for your filing status. Itemized deductions include mortgage interest, charitable deductions, state and local taxes, and medical expenses — with certain limitations.
  • It calculates your tax liability. When filing your taxes, you need to report how much income tax you owe the IRS; this is called tax liability. If you have dependents, you can claim tax credits at this point. For example, you may claim a child tax credit or any other qualifying tax credit.
  • It determines whether you’ve paid all or part of your tax bill. Form 1040 also ascertains if you’ve paid all of your income taxes or you still owe some. If you’ve paid more, you’re due for a tax refund. If you’ve paid less, you owe the IRS and need to pay the full balance by the tax filing deadline in order to avoid penalties and interest. If you owe and cannot pay the full balance, it is recommended that you still file form 1040 on time to avoid a failure to file penalty. Any amounts owed after the filing deadline will still incur failure to pay penalties and interest, even if you apply for an installment agreement with the IRS.

If you need to file your individual income tax returns, you can find Form 1040 on the IRS website. The form is typically available in PDF, where you can fill out manually and mail it in or use the IRS’s Free File Fillable Forms. You can also file your returns using tax software, where you only need to provide the required information.



Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.