What is Form 1040?

Form 1040 is like a final exam…

When you take your finals in college, it’s basically a summary of everything you’ve learned throughout the year. The results of the final exam will determine your grade for the class. Likewise, your 1040 is a summary of all the money you earned that year. The results of your 1040 form determine whether you recieve a refund or owe money to the federal government.

The goal of the 1040 form is to break down your earnings, deductions, and tax liability. Ultimately this information will determine whether you’ll get a tax refund, or whether you’ll owe the Internal Revenue Service (IRS) money at the end of the year.

Most people pay income taxes throughout the year, deducted from their paychecks. The IRS has a pay-as-you-earn policy, meaning they expect you to pay most of your taxes on your income as you earn it. That’s why your employer takes money out of your paycheck for income taxes rather than the IRS allowing you to pay a lump-sum bill at the end of the year.

The purpose of the 1040 form is to report what you earned throughout the year and to figure out whether you’ve paid enough in taxes. The amount you pay in taxes on your income over the course of the year is a result of your W-4 form — The W-4 is a form you fill out when you start a new job to indicate to your employer how much they should withhold in taxes from each paycheck.

Then after the year ends, you’ll get a W-2 form from your employer. This form shows how much you earned that year, and how much you paid in taxes. You use the information on this form to file your taxes. You usually have until April 15 to submit your 1040 form for the previous year’s income.

Let’s break down the information you’ll need to file your taxes.

• Personal information: On the 1040 form, you’ll share all of your personal information, including your name, address, and social security number. You’ll also enter your filing status (single, married filing jointly, married filing separately, or head of household).
• Dependent information: You’ll add the first and last name and social security number of any dependents, as well as their relationship to you.
• Wages, salaries, and tips: You’ll add the wages, salaries, and tips you earned during the year. This information appears on your W-2 form, and you’ll attach a copy of your W-2.
• Other income: You also have to share any other income you brought in during the year, including interest, dividends, retirement income (such as from an individual retirement account or Social Security benefits), and capital gains.
• Tax credits or deductions: You’ll indicate if you’re claiming the standard deduction. In 2022, the standard deduction is $12,950 for a single person and $25,900 for a couple. (In 2023, the standard deduction rises to $13,850 for a single person and $27,700 for a couple.) If you’re itemizing deductions instead, you’ll add your deductions. You’ll also indicate the credits you’re claiming. Credits include the Earned Income Tax Credit (or EITC, which provides a tax credit to those working but earning under a certain level of income) and the child tax credit.
• The amount you owe or the IRS owes to you: Once you’ve added all your other information, you’ll be able to calculate whether you get a tax refund, or whether you still owe the IRS some money.

If you’re worried about whether you’ll end up owing the IRS money when you file your taxes, there’s some good news. In 2020, 74% of those who filed taxes ended up getting a refund from the federal government.

If you are eligible for a refund, you can receive it either by bank direct deposit or through a check you receive in the mail. For those who do end up owing money to the government, you can pay online using direct pay, which is when the money comes directly out of your checking or savings account. You can also pay by credit or debit card — though you’ll pay an extra fee to do so. You can even pay by old-fashioned check made payable to the U.S. Treasury.

The IRS allows people who owe income taxes to set up payment plans to help them spread out the amount they owe. You can set up an installment agreement if you are an individual who owes $50,000 or less in taxes or a business that owes less than $25,000 in taxes.

According to the Internal Revenue Service (IRS), more than 90% of people e-file their annual tax returns. Many of those people either use commercial tax software or hire a tax preparer to file their taxes for them.

For taxpayers using software or a tax preparer, you won’t have to hunt down a copy of the 1040 form. Commercial tax software usually has you answer questions about your finances, and then automatically enters that information into a 1040 form, which you can then file electronically and print a copy off for your personal records.

If you’re one of the people who hire a tax preparer, you’re also in luck. That tax preparer should find and fill out the 1040 form on your behalf, and then electronically file it with the IRS.

For the taxpayers who fill the form out themselves, it’s not hard to find. The IRS houses all tax forms, including the Form 1040, on their website. You can fill it out and file it electronically, often for free through IRS Free File, or you can mail the form.

The IRS Form 1040 is a fairly basic form. It’s less than two full pages long, and has space to enter most of the information you’ll have to share with the Internal Revenue Service (IRS). For some people, though, the 1040 form leaves off some critical information the IRS wants. For that reason, they have different schedule forms that you can file in addition to your 1040 form.

• Schedule 1: On this form, you enter any additional income or income adjustments you have. Extra income might come from business, rental, alimony, or unemployment income. Income adjustments include deductions for health savings accounts (HSAs), retirement contributions, and student loan interest payments.
• Schedule 2: This form allows you to enter any additional taxes you owe, such as self-employment taxes, household employment taxes, taxes on retirement plans and other accounts, or the alternative minimum tax.
• Schedule 3: On this form, you’ll claim any credits that aren’t on the standard 1040. These credits might include education, business, or foreign tax credits.
• Schedule A: This form is for anyone itemizing their deductions (this is when you opt-out of taking the standard deduction to list the individual deductions you’re claiming)

These are the most common schedule forms you might need. There are many others you might fill out for a variety of reasons. The other forms address financial topics such as business profits and losses, capital gains, and income for farmers and fishermen.

The different forms might seem confusing. If you’re using tax software or a tax preparer to file your taxes, you won’t have to worry about which forms you should and shouldn’t file. You’ll simply provide the necessary information, and they’ll take it from there.