Form 1040 is one of the official documents required by IRS and used by taxpayers in filing for the year’s income tax return and is also considered to be the most complex among the three individual tax forms. However, it does offer a lot of tax breaks that others forms such as Form 1040EZ doesn’t. All types of incomes, expenses, and credits are reported on 1040. It is divided into sections to show transparency in your income, deductions, tax owed or amount of refund if there is any. Others forms or schedules may be required for attachment depending on the type of income that is being reported.
1. Form 1040 Reports All Types Of Income
You will be required to file 1040 if you fall into the following types of income:
A Form 1040 is also used if the following applies to you:
The form allows you to list your “other income” that doesn’t fall into the above categories. The sum of all the income you reported will be called as total income. It is required to report all income you received except tax exempted incomes.
2. Form 1040 Has Transparency On Deductions
Yes. The IRS will give you the authority to claim specific deductions or adjustments from your total income in order to get your Adjusted Gross Income. Some of these adjustments you can take advantage of are one-half of your self-employment, tax payments, and alimony. You may also include IRA contributions and student loan payments among others. It’s important for you to be accurate and of course honest in putting in your deductions because your AGI is a big deal when filing tax returns.
3. Further Adjustments Can Be Done Using Form 1040
Your standard deduction or itemized deduction total plays a great role in making further adjustments towards you AGI. Make sure you include expenses such as mortgage interest, unreimbursed business expenses, or excess medical expenses and others to your itemized deductions to take advantage of the adjustments.
As soon as you are able to calculate the total of your tax deductions and if it exceeds your standard deduction, then your taxable income will be higher if you decide to claim the standard deduction. You really just have to make sure that you chose the best deduction. You may also include yourself and your dependents as tax exemptions and whatever will be the result of that is going to be the income subjected to be taxed.
4. Form 1040 Provides Complete Information On Tax Owed or Expected Refund
Assuming that you now have the total amount of income that is taxable, you can proceed to check up the tables written in your instructions. There will be software that can automatically calculate everything for you, however, if you feel like taking care of it yourself a little more personal, you can contact the most trusted tax preparer in town. In order for you to find out whether you're making additional payments or expect a refund, just compare your total tax withholding to your tax bill found at the bottom of Form 1040. Reducing the amount of tax owed can be done by using tax credits if you are eligible. You have to check carefully before completing your form or have your Accountant do it for you.
