Types of 1040 Forms and How to Fill Out These 1040 Forms

Types of 1040 Forms and How to Fill Out These 1040 Forms

by | Apr 16, 2022 | Form 1040

Commonly referred to as the mother of all tax forms, 1040 is the primary IRS tax form utilized by any United States resident for filing personal federal income tax returns. In this piece, we will explain the 1040 form and how to fill it out for individuals.

What is a 1040 form? 

What-is-a-1040-form

Officially known as the “U.S. Individual Income Tax Return,” form 1040 is the standard federal tax income form for the people in the United States to file their taxes with the IRS. The 1040 form serves not only to report one’s income but to claim tax deductions/credits and to calculate tax bills or tax refunds for the financial year.

The 1040 form comprises two pages which contain 23 lines (without attachments.) The first page is where one can record personal identification information. The second page contains spaces for you to report income and calculate applicable deductions, credits, figures, and payments made from withheld wages towards the tax liability.

How to Fill Out a 1040 Form?

How-to-Fill-Out-a-1040-Form

There are two ways of doing this; you can use tax software like TurboTax, TaxACT, or TaxSlayer, in which case, you can input your information sequentially and print out a complete 1040 form from your computer. The other way is to fill out the form by hand, in which case you can download it from the IRS website. 

If you’re looking to learn how to fill out the 1040 form, well, here is a short walkthrough to help you understand the form.

Personal Identification: The first part of the form gathers information about your identity, which tax-filing status you are going for, and the number of tax dependents you have (if applicable.)

Calculate Your Income Taxes: In this section, you may have to sum up all of your income made during the financial year and tally it against any deductions (if applicable.) Undertake this step only if you are confident about your tax bracket; else, seek help from a tax advisor like AOTAX to figure out the details.

Evaluate Your Tax Liability: At the bottom of the form, you will need to fill up the exact amount of income tax you owe the IRS. This stage is where you should deduct any tax credits or prepaid withholdings from your paycheck.

Notify of Any Tax Rebates to the IRS: If you are eligible for a tax rebate using credits or if you have overpaid your taxes, you can fill up your bank details to get a tax refund on your payment.

Pro-tip: If you are an eligible individual who hasn’t received the stimulus check (also known as the Economic Impact Payment), you can get a rebate on your taxes by filling up line 30 on the form 1040. Also, the EIP is not taxable.

What Do You Need to Fill Out the Form 1040?

Okay, here is a list of personal details you should have before filling out the form 1040.

  • Social security number for yourself and your dependents (If any).
  • Date of birth for yourself and your dependents (If any).
  • Statement of wages from your employer and statements of interest or 1099-DIV forms for dividends from banks or brokerages (If applicable.)
  • Proof of any tax credits or tax deductions.
  • A copy of your previous year’s taxes.
  • Your bank account number and routing number (for tax rebates.)

Check out the most effective ways to overcome the problems of filing as a sole proprietor here.

Form 1040 Schedules, What Are They?

There are various schedules for the form 1040 for individuals from varied financial backgrounds. If your financials meet any requirements mentioned below, you may have to add these schedules to your form 1040.

Schedule-1: For individuals with additional income or adjustments to income

Add this schedule if you have any of the following sources or adjustments to your income.

  • Business income (you also need to file Schedule C).
  • Farm income.
  • Rental income (you also need to file Schedule E).
  • Deductible health insurance expenses.
  • Alimony income or payments.
  • Educator expenses.
  • Student loan interest.
  • Unemployment income.
  • Deductible retirement contributions.
  • Deductible moving expenses.
  • The health savings account deduction.

Schedule-2: Added taxes

You are required to add this schedule if you incur any of the following.

  • Household employment taxes.
  • Alternative minimum tax.
  • Self-employment tax.
  • Net investment income tax.
  • Repayment of the first-time homebuyer credit.
  • Individuals with excess premium tax credit repayments.
  • Additional Medicare tax.
  • Additional taxes on retirement plans, IRAs, or other tax-favored accounts.

Schedule-3: Additional payments and credits

Most business owners and other individuals with unique financial backgrounds would need to add this to their form 1040.

  • General business credit.
  • Credit for child and dependent care expenses.
  • Foreign tax credit.
  • Education credits.
  • Retirement savings contributions credit (Also known as the saver’s credit.)

Here Are Some Other Types of Form 1040s You Should Know

While the standard 1040 form is suitable for most individuals, it’s a good idea to learn a few other forms that can come in handy. 

Form 1040-V

Form 1040-V is for those who wish to pay the IRS through the mail rather than electronically. It is also commonly known as the payment voucher.

Form 1040-X

The 1040-X is known as the amendment tax return; this form is helpful if you have missed out on reporting any additional income or made a mistake with your first filing. 

Form 1040-SR

Designed for people above 60, the 1040-SR is functionally the same while being different aesthetically to help seniors process it comfortably. 

Form 1040-ES

The 1040-ES form is best suited for freelance and contract workers who calculate estimated quarterly taxes. It also is helpful for individuals who earn dividends and interest which are not subjected to traditional withholding.

Form 1040-NR

The 1040-NR is suitable for non-residential aliens who engage in business/invest in the US.

With that, we hope that you now have a better idea of the types of 1040s and how to fill out the 1040 form for the IRS. You can relinquish all these complicated steps with just a few clicks to AOTAX! Visit us today by clicking here and get your free tax draft in just 24 hours.
While you are here, learn more about the 12 tax credits and deductions you could be eligible for here.

How to File an IRS Form 1040: A Step-Wise Guide

How to File an IRS Form 1040: A Step-Wise Guide

by | Mar 4, 2022 | Form 1040

March has arrived, and you have more than 40 days to file your income tax forms. After that, it’s time to pay the IRS and claim certain tax credits/refunds. If you are an Indian citizen in the United States or a US resident, we can show you how to fill out the 1040 form in simple steps.

Recommended: New to the US – Here’s what you need to know about filing your taxes as an NRI in the US –

What Exactly is a 1040 Form?

1040 is a tax form used by United States residents to file their federal income taxes annually. Hence, it’s essential to know how to fill out 1040. The form aids in calculating annual income and the claim on deductions and tax credits. 

There were multiple variations of 1040 before 2017. However, since the passage of the Tax Cuts and Jobs Act (TCJA) in 2017, most Americans have been filling out 1040 forms.

Senior citizens can file Form 1040-SE, while non-residents must file Form 1040-NR.

To complete your 1040 form, you have two options:

  1. You can either file electronically, known as e-filing. 
  2. Alternatively, you may print the form, fill it out, and mail it to the IRS (Internal Revenue Services). 

Compared to manual filing, e-filing is simple, convenient, and quick. In addition, when you e-file your tax returns, you can receive your refund faster. Physical or paper filing takes longer to reach the IRS and delays the refund process.

How to Fill Out a 1040 Form?

Don’t be intimidated looking at the form. Trust us; it’s not that challenging. We provide a step-by-step guide (on the same flow as it is on the form) on how to fill out 1040:

Filing status: It’s essential to specify whether you’re filing your 1040 as a single person, a married couple, filing jointly, or filing separately with your spouse. You can also mention if you are the head of the household or a widower. This will help you take advantage of certain standard deductions based on your status.

Personal information: Fill in your full name, address, and social security number in this field. Whether filing jointly or individually, you must also include additional input about your spouse and dependents.

Election contribution: There’s a neat box in the form that now allows you or your spouse to contribute $3 to the presidential election fund. The money will be equally split between Democrats and Republicans. It would not affect your tax refund or liability.

Cryptocurrency

Cryptocurrency: There is a rise in digital or cryptocurrency as a preferred investment mode. For instance, 46 million Americans are among 300 million cryptocurrency users across the globe. As a result, this feature enables you to declare if you have exchanged cryptocurrency in the previous financial year.

Standard deduction: Your standard deduction eligibility is based on your age, filing status, and whether or not you are blind. Fill in the boxes as applicable. Those who are married and filing jointly with their spouse should also mention if they are financially dependent on another. And if you’re a dual-status alien, you should also mention this in the form.

Dependents: In this section, you may fill in the details about your dependents and seek a tax credit. In this section, you should list your dependents, age, and their relationship with you. You should also mention if you are entitled to a child tax credit or a credit for other dependents.

Calculate-Taxable-Income

Calculate taxable income: This section is crucial, and you must fill it in properly. Here is where you list the fruits of your labor from the previous year. This column is where you disclose your earnings from your job. If you are a salaried employee, provide a W-2 form. 

Next, simply tick boxes that show your non-employment income, like earned dividends and interest, annuities, pension, IRA tax rebates, social security benefits, and so on. You can find a list of many other deductions on the IRS website.

Calculate your tax liability: Now is the time to count your blessings in the form of tax credits. These are the taxes withheld by your employer. Subtract the tax credits from the total amount you must pay. 

The tax bill is the final number. If your tax bill exceeds your tax credits, pay the IRS whenever you file your tax returns. You will receive a refund from the IRS if you have overpaid. If you e-filed, your refund will be directly deposited in your bank account. Otherwise, the IRS will mail you a check.

Schedules

To file your income tax returns, you need a simple 1040 Form. There are separate schedules you attach with 1040 in case of additional income, or if you owe the IRS more money, or you would like to claim extra credit. 

These schedules are as follows:

Schedule 1– Fill this schedule if you have earnings from:

  • A business (also file form C) 
  • Alimony payments 
  • Agricultural income
  • Educator expenditures
  • Rental income (file form E)
  • Health savings account
  • Health insurance, 
  • Retirement contribution deductions 
  • Student loan or other sources

Schedule 2 – Fill this if you owe the IRS:

  • Self-employment tax
  • Alternative minimum tax (AMT)
  • Household employment tax
  • Net investment income tax
  • Additional Medicare tax
  • Recovery rebate credit because you did not receive a coronavirus stimulus check, an economic impact payment. 

Schedule 3 – Use this schedule to claim IRS credits and payments. This includes: 

  • Foreign tax credits
  • Child and dependent care credits
  • Education
  • General business incentives
  • Home energy credits, etc.

Those who cannot file federal tax returns by April 18, 2022, can request an extension and file by October 15, 2022. If you must make payments, do this before the April deadline.

Back taxes: If you owe the IRS money for previous years’ taxes, you must send 1040 to the IRS. In this scenario, e-filing is not possible.

Refunds: After the IRS processes your returns, you will receive your refund in 21 days.

If you follow the instructions given above, you will be able to file your taxes in no time. If you have all of your receipts and supporting documentation, you should be OK.

Recommended: The Ultimate Documents Checklist to File US Income Tax Returns – AOTAX.COM

If you are an Indian resident in the United States and are unsure how to fill out 1040, contact AOTAX. Our team of capable tax advisers and preparers at AOTAX can assist you in meeting your deadlines smoothly. 

Top #10 most important things to know about the Economic Impact Payment Information Center

Top #10 most important things to know about the Economic Impact Payment Information Center

by | May 27, 2020 | 1040-NR, 1040-SS, AGI, COVID - 19, Economic Impact Payment, federal government, Form 1040, Tax Payers

Top #10 most important things to know about the Economic Impact Payment Information Center

Under the provisions of the CARES (Coronavirus Aid, Relief and Economic Security) Act of the Federal Government, the citizens in the US have been receiving their Economic Impact Payments (EIP). The Economic Impact Payment which is being received by the Americans is calculated automatically by the IRS.

However, there are many Americans, who have several queries related to the Economic Impact Payments such as their eligibility, amount of payments, by when to expect the EIP, etc. The answers to these queries related to the Economic Impact Payments can be obtained by the common people at the Economic Impact Payment Information Center.

Some of the major things which Americans must know about the EIP Information Center can be listed below.

  1. Eligibility for Economic Impact payment 
  2. Request for EIP
  3. Calculation of EIP
  4. Receipt of EIP
  5. Non-Filer Tool
  6. Social Security
  7. Railroad retirement
  8. Recipients of the Department of Veteran Affairs benefit
  9. Additional Information
  10. Return of EIP

Americans Must Know About The EIP Information Center 

a.Eligibility for Economic Impact Payment

1.US citizens and US resident aliens who are filing tax returns as individuals or heads of households will be eligible for receiving EIP of $1200 whereas those who are married and are filing returns jointly would receive an EIP of $2400.

2. To receive EIP the taxpayers must not be the dependent of another taxpayer, should be having a valid Social Security Number and their AGI (Adjusted Gross Income) must be up to the given limits

  • For single individuals or married couples but filing tax returns jointly, the AGI should be up to $75000.
  • For those taxpayers who are filing tax returns as head of household filers, the AGI should be up to $112,500.
  • For taxpayers who are married and are filing their tax returns jointly, the AGI must be up to $150,000.

3. In case, an individual does not have a valid Social Security Number, is a non-resident alien or has filed Form 1040-NR, Form 1040NR-EZ, Form 1040-PR or Form 1040-SS for the year 2019 will not be eligible to obtain the EIP.

b.Request for EIP

  1. If an individual has already filed the tax returns for 2018 or 2019, then there is nothing more to be done for receiving the EIP.
  2. The IRS would use the information of the 2019 tax returns for calculation of the EIP or would use the information of 2018 in case of non-filing of the 2019 returns.
  3. Taxpayers who have not filed returns for 2019 or 2018 can visit the IRS website and input their payment information in the link provided for Non-filers.

c.Calculation of EIP

  1. Individuals who are eligible for receiving EIP and are filing tax returns with a single status would receive $1200 as the EIP.
  2. If two individuals are filing their tax returns jointly, they are eligible to obtain an EIP of $2400.
  3. The eligible individuals would receive an additional $500 for each qualifying child who has been claimed during the filing of tax returns.

d.Receipt of EIP

  1. If an individual has received his tax refund for the year 2019 or the year 2018 in case of non-filing in 2019 by the method of Direct Deposit, then the IRS would use the latest information ad send your EIP by Direct Deposit.
  2. Moreover, in case of non-receipt of EIP through Direct Deposit the IRS would send the EIP to the mailing address present in the file of the IRS.

e.Non-filer Tool

  1. The Non-Filer: Enter Payment Info Here tool should be used for receiving EIP by those eligible individuals who have not filed tax returns for 2019 or 2018 and do not receive Social Security Retirement, Supplemental Security Income (SSI) or Survivor Benefits, Veteran benefits or any other benefits related to Railroad retirement.
  2. If you have filed your tax returns or you receive federal benefits, then the need for using the Non-filer tool is ruled out.

 

 

 

f.Social Security

The Social Security recipients who might not have filed tax returns for 2019 or 2018 but receive Form SSA-1099 will receive their EIP by the same method as that of the receipt of the Social Security Benefit.

g.Railroad Retirement

The recipients of Rail Road Retirement who might not have filed tax returns for 2019 or 2018 but receive the benefits by RRB-1099 will receive their EIP by the same method as that of the receipt of the Rail Road Retirement Benefit.

h.Recipients of the Department of Veteran Affairs benefit

The recipients of the Department of Veteran Affairs Benefit who might not have filed tax returns for 2019 or 2018 but receive Form SSA-1099 or RRB-1099 will receive their EIP by the same method as that of the receipt of the benefit.

i.Additional Information

Taxpayers need to be cautious about scam artists who would try to use the EIP as a strategy for performing other scams related to stealing. Taxpayers must remember that information about EIP can be obtained only by visiting the official IRS webpage and not by any calls, text, or emails.

j.Return of EIP

  1. For the return of EIP which was in the form of Direct Deposit, check, or money order; money order or personal check must be immediately sent to the IRS with information related to the SSN.
  2. If the payment was received in the form of a paper check, then it can be sent back to the appropriate section of the IRS by writing “Void” on the back of the check.

Hence, taxpayers can avoid calling up IRS for queries related to the EIP and rather visit the Economic Impact Payment Information center for resolving their queries.

References

  1. https://www.irs.gov/coronavirus/economic-impact-payment-information-center
  2. https://www.irs.gov/coronavirus/get-my-payment

 

Answers to the top queries on tax regulations during COVID-19

Answers to the top queries on tax regulations during COVID-19

by | Mar 24, 2020 | COVID - 19, federal government, Form 1040, HSA, IRA, IRS, refund due, state tax, Tax Break, tax deadline, Tax Payers, Tax regulations, tax return, Top queries, US Government

Answers to the top queries

on tax regulations during COVID-19

The outbreak of the pandemic COVID-19 has created huge economic disruption globally. Amidst all the chaos and economic troubles, the US Government has announced certain changes related to the tax filing activities. Amongst these changes, the most important one is the extension in the deadline for federal tax filing to 15th July 2020. This step has been taken by the US Government to provide some relief to concerning handling taxes amidst the trauma spread by the COVID-19.Answers to the top queries on tax regulations during COVID- 19.

Now, with these changes been introduced by the US Government, it is quite obvious for you to have several questions related to the changes made, new tax deadlines and other associated impacts. Let us check out the answers to all the evident questions related to these changes introduced by the IRS.

  • Is there a possibility of state taxes to have a different deadline?

Mostly, a majority of the states have confirmed to the same extended deadline as that of the Federal tax i.e. 15th July 2020. However, there can be some states which will have different tax deadline than that of the Federal tax. You can know in detail about your State tax filing deadline by checking with your respective state tax agencies. 

  • Can I file my tax return according to the original tax filing deadline i.e. by 15th April 2020?

Yes, you can file your tax returns according to the original deadline i.e. 15th April 2020. If you expect a refund from the IRS it is advisable to file your tax returns now to get your refund money soon.

  • Is there a probability of obtaining the tax refund being delayed?

There are no such probabilities of tax refund being delayed and would be processed as normal. If the tax return has been filed by electronic medium or via direct deposit then it would be refunded within a maximum of 21 days. 

  • Is there any specific eligibility for availing this extended deadline for filing a federal tax return?

Any person who has a federal income tax payment or returns due on 15th April 2020 is eligible for availing the relief of the extended timeline. Here “person” can denote an individual, an estate, a trust, a corporation or even a business entity. The payment here refers to the Federal income tax payments for 2019 and the estimated federal income tax payment 2020. It must be noted that the return or tax payment must be due on 15th April 2020 and this relief does not apply to any return/payment due on any other date. 

  • Does this extension in the tax filing deadline means that I can some more time for making contributions to my HSA?

You can make contributions to your HSA anytime until the extended tax filing deadline. Since the tax filing deadline has currently been extended to 15th July 2020you can make your contributions into HSA until then.

  • I have already filed my tax return 2019 which was due on 15th April 2020 and even I have to pay taxes that are not paid yet? What can be done to avoid penalties and interest? 

You can avoid penalties and interest by paying your income tax by 15th July 2020. Interest/penalties will be charged only after 15th July 2020 if the due tax has not been paid. In case of filing the tax return by Form 1040 or Form 1040-SR the amount to be paid will be found on Line 23. If the return has been filed by using Form 1040-NR, the amount can be found on Line 75. For a corporation that is filing a return using Form 1120, the tax amount can be found online 35.

  • Does this extension in the tax filing deadline mean I have more time to make contributions to my IRA for the year 2019?

Contributions into IRA for a particular year can be made till the tax filing due date of that year. Now since the income tax filing for the year 2019 has been shifted to 15th July 2020 you can make contributions to your IRA till 15th July 2020.  

  • What to do if I am not able to pay my taxes due on 15th April 2020 by 15th July 2020 even?

If you are individual and are not able to pay your taxes that are due on 15th April 2020 even by 15th July 2020 then you must request an automatic extension. You will have to request for this automatic extension by 15th July 2020 and can be done by electronically filing Form 4868. Business entities and trusts can file for this extension by filing Form 7004.  

Hence, these are some of the common queries answered related to the extension of the federal tax filing deadline. This effort by the US Government during these times of emergency is sure to reduce stress related to finances up to some extent.

References

https://blog.turbotax.intuit.com/tax-news/your-top-tax-questions-about-coronavirus-covid-19-answered-46591/

https://www.irs.gov/newsroom/filing-and-payment-deadlines-questions-and-answers

  

 

  

What is Standard Deduction all about?

What is Standard Deduction all about?

by | Feb 26, 2020 | Form 1040, IRS, Standard Deduction

What is Standard Deduction all about?

Standard Deduction is meant to ensure that there is at least some income of an individual which is not subject to any income tax. In simple terms, the standard deduction can be said to be a specific amount which reduces your amount of income on which tax is being imposed. It is the flat amount which the tax system lets you deduct from your taxable income with no question asked about it. Usually, your standard deduction would depend upon the tax filing status for which you qualify. Standard deductions are subject to increase every year due to inflation.

Your standard deduction would consist of the sum of your basic standard deduction available and any extra standard deduction for which you qualify due to your age or any physical disabilities. You’re filing status such as your income, whether you are 65 years old or more than that, you are blind or not can affect the standard deduction which you can avail. According to the norms of the IRS, you have an option of either using the standard deduction or itemize your deduction. You cannot avail both at the same time, it is possible to either claim your standard deduction or itemize your deduction at a particular instant of time.

Itemized deductions are certain expenses that are allowed by the IRS for deduction from your taxable income. This can include the amount which you had paid for state tax, local tax, sales tax, real estate tax, personal property taxes, mortgage interest, etc. Also, you can include gifts given for charity and a particular part of the amount you paid for your medical or dental expenses. By itemizing deductions on Schedule A of the Form-1040, you would be able to reduce your taxes. However, it is less complicated to claim your standard deductions as compared to claim the itemized deduction.

How can you claim Standard Deduction?

Claiming Standard Deduction is less complicated and can be done easily by using the Form-1040. In line 8 of your Form-1040, you can put down your Standard deduction or a combined amount of your itemized deductions.

Additional standard deduction

You are allowed for claiming additional standard deductions under the below mentioned scenario.

  1. You can be allowed for an additional standard deduction if your age is 65 years or older than that at the end of the tax year. 
  2. If you are blind on the last day of the tax year, then you are eligible for claiming the additional standard deductions.
  3. In case you or your spouse are 65 years of age or more than that and are blind then you must claim your additional standard deduction.

When are you not eligible for claiming Standard Deduction?

Generally, the standard deductions are available for all but there are certain instances in which a taxpayer will not be eligible for claiming Standard Deduction.

  1. If you are married and are filing your tax return as married but filing it separately and your spouse claims the itemized deduction, then you are not eligible to claim Standard Deduction.
  2. If you have been a non-residential alien or a dual-status alien during a particular tax year, then you do not qualify for a Standard Deduction claim. However, this has an exception to it i.e. if you are a non-resident alien and get married to a US citizen or a resident alien then you can claim the standard deduction if you are filing a joint tax return and will choose to treat the nonresident alien as a citizen of the US.
  3. In case you are filing a tax return for a period that is less than 12 months due to a change in your annual accounting period, you cannot claim a Standard Deduction.
  4.  An estate, trust, common trust fund or partnership entity is not eligible to claim Standard Deduction.

Conclusion

Hence, even though claiming standard deductions are simple to process but they can cost you additional charges. So, the IRS suggests you think carefully about the numbers and which one gives you more deductions before making the claim.

Reference

  1. https://www.irs.gov/taxtopics/tc551
  2. https://www.irs.gov/taxtopics/tc501
  3. https://turbotax.intuit.com/tax-tips/tax-deductions-and-credits/what-are-standard-tax-deductions/L7oiVM1DH