What Is a 1040 Form and How Do I Complete It?
The Gist:
What's a 1040 Form? It's the primary form used when filing individual income tax returns. It helps you report income, deductions, other taxes, tax credits, and your final tax liability or refund.
Filing status determines certain deductions and credits. For instance, singles got a standard deduction of $12,950 in 2022.
Exemptions reduce your taxable income. You claim one for yourself, your dependents, and possibly your spouse.
The IRS identifies 14 different income types, plus a miscellaneous category. Each type might require additional forms.
Deductions are expenses that can be subtracted from your gross income. Examples include self-employed health insurance and IRA contributions.
Based on your Adjusted Gross Income (AGI) and other factors, you might qualify for tax credits that reduce your tax liability.
It is important to report any other forms of taxation, like the 15.3% tax rate on self-employment income. It is also important to report taxes already paid or refundable credits.
Refunds are the amount you get back, which might include additional credits like the Earned Income Credit.
In this Article:
In Short:
The 1040 form is an official Internal Revenue Service (IRS) document used when filing individual income tax returns. It's structured to guide you through the process, from reporting your income and deductions to calculating your final tax liability or refund.
It encompasses various types of income, deductions, and credits and calculates the total tax owed or refund due for the taxpayer. The form is divided into sections where taxpayers can report their income and deductions, calculate their tax liability, and indicate any payments or credits. Depending on the complexity of one's financial situation, there are different versions of the Form 1040 (such as the 1040A and 1040EZ). Filing the 1040 form annually is a requirement for most U.S. residents and citizens, and it serves as the primary way the federal government tracks individual income and collects taxes.
Have you ever asked yourself the question of “What is a 1040 form for taxes?” Well, if you have, you’re not alone. When you file an individual income tax return, you’ll use Form 1040 to report your income, deductions, “other taxes,” tax credits, and ultimate tax liability. Your 1040 provides the basics, and it dictates which other forms you need to attach to your tax return.
The ultimate goal of the 1040 is to figure your tax liability (how much you need to pay in taxes) or tax refund (how much you’ll get back). You start with your different forms of income, and then apply any relevant deductions and credits (as well as other taxes besides federal taxes that apply to you).
If you use a tax filing software, it will calculate all of this for you. However, it’s important to understand how the different sections of your income tax return can affect each other. Here’s what the 1040 flow looks like:
Filing status > Exemptions > Income > Deductions > Tax and Credits > Other Taxes > Payments > Refund
The Form 1040 follows this order for a reason: Each detail that you provide about yourself, your income, and your spending will affect how much you owe in taxes (or how much you’ll get back).
What Is A 1040 Form: From the Top
1040 Meaning: Filing Status
Your filing status will help you calculate certain deductions and credits that you can take later on. For example, if you are single, you receive a standard deduction of $12,950 in 2022. If you’re married filing jointly, you receive a standard deduction of $25,900.
Exemptions
What is a 1040 form exemption? Well, exemptions are used to determine by how much your taxable income should decrease. You typically claim an exemption for yourself, and one for each of your dependents (plus one for your spouse, if you’re filing jointly).
Income
There are 14 different kinds of income that the IRS asks you to report, as well as a miscellaneous income category. A few examples are:
Wages
Tips
IRA distributions
Dividends
Business income
Different types of income may mean filing additional forms or paying a different tax rate, so it’s really important to report each type of income correctly. For example, if you have business income from being self employed, you’ll attach Schedule C: Profit or Loss From Business to report your business income (or loss).
What is a 1040 form deduction?
Some of the expenses you have during the tax year qualify as deductions, meaning they can be subtracted from your gross income. When you deduct an expense, that means you don’t have to include the money that you spent as income (and that you pay less in taxes).
Staying on top of your deductions can drastically reduce your taxable income, so familiarizing yourself with every possible deduction could pay off in the long run. Some examples include:
Self-employed health insurance
Alimony paid
IRA contributions
One-half of self-employment tax
Filing taxes is like math class — you have to show your work. That’s why you have to report each deduction that you claim, instead of just reporting one income amount with deductions already factored in.
Once you calculate your income minus deductions, you’ve arrived at your Adjusted Gross Income (AGI). You want your AGI to be as low as possible, because it’s used to determine your eligibility for lots of different tax credits further down on the 1040.
Tax and Credits
Based on your AGI and several other factors (for example, filing status), you can qualify for several different tax credits. Credits reduce your tax liability, or the amount that you owe the government in taxes. For example, if your tax liability is $5,000 and you qualify for $100 from the Child Tax Credit, your tax liability would be reduced to $4,900.
Other Taxes
If you engage in activity that is subject to other forms of taxation, you have to report it in this section of your 1040. For example, self-employment income is subject to a 15.3 percent tax rate.
Payments
This is where you report any taxes you’ve already paid, as well as refundable credits that can be used to reduce your tax liability. For example, if you’re an employee of a company that withheld your federal taxes for you, then this counts as a payment towards your overall tax liability. Your employer is essentially paying your income taxes on your behalf, and this payment reduces the amount that you owe in taxes when you file in April
Refund
This is the fun part. In addition to getting your money back, you may be entitled to a refund based on a government program. For example, this may happen if you have taxes withheld from your paycheck, but then qualify for an additional refundable credit like the Earned Income Credit.
Tade Anzalone heads up Stride’s tax and finance support and is a registered tax return preparer and 2017 Annual Filing Season Program Participant. In addition to her years of experience helping people navigate complicated finance and tax obligations, she has degrees in Government, Psychology, and Spanish from Georgetown University.
Disclaimer: The information contained in this Guide is not offered as legal or tax advice. The U.S. federal income tax discussion included in this Guide is for general information purposes only and is not a complete analysis or discussion of all potential tax consequences that may be relevant to a particular individual. In light of the foregoing, each individual should consult with and seek advice from such individual’s own tax advisor with respect to the tax consequences discussed herein. Any information contained in this Guide is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the U.S. Internal Revenue Code of 1986, as amended.