February 8, 2022
There are two pages, twenty or so lines, and a lot of stress to fill out in one form. Let’s meet the IRS 1040.
Tell me more.
During tax season, you file your tax return and tell the government how much money you made that year. Include any discounts that you are eligible for. Filling out the form determines if you are owed money by them or if you owe them money. Here’s a breakdown to ensure you don’t make mistakes or break down.
1. Filing status
Consists of five options on Form 1040. Most of the words you will recognize, such as single, married, and widowed. Most couples find that filing jointly is the best option, but it means that you’re both equally liable for any owed money. When you live with a dependent other than your spouse, you may be considered the head of the household. If you’re not sure, the IRS can help you.
2. Basic info
You put here things like your name, age, mailing address, social security number, etc. Add your spouse’s name and SSN if you’re filing jointly.
If you check the box for “Presidential Election Campaign”, your bill won’t change. The majority of people leave this blank. However, for every yes check, the IRS contributes $3 to a public fund that major candidates from both sides of the aisle can access.
3. Dependents
Generally, anyone whose expenses you cover. You can check the Child Tax Credit if your child is under 17 years of age. You can also claim the other box for any dependents you care for that are not your children on a 1040.
4. Income & Deductions
Get those W2s and 1099s ready. Line 1 is for your normal wages. Lines 2-6 include everything else, including interest, dividends, capital gains, distributions from IRAs, and Social Security benefits. Use Schedule 1 form and Line 7a if you have a side business. Total everything on Line 7b.
There is one final decision: whether to itemize your deductions or not. The government lets you deduct those expenses from your taxable income. It won’t cost you anything to get the standard, flat-rate deduction, but you should probably figure out if itemizing will save you more money. The Schedule 1 and Schedule A forms can be helpful if decide to itemize.
5. Tax & Credits
The government might be giving you a dollar-for-dollar tax break if you do something it likes. It will also refund any federal income you have already paid.
6. Doing the Work
Now it’s time to put it all together. Then you can see what you owe, or what you are getting back. Hope it helps.
7. Sign, Seal, Deliver
You’ve got it. Once you’ve sent it off, you’re free to think about anything except taxes until next year.
You can keep more money in your pocket by understanding what Form 1040 is and completing it correctly.
