By Mika Bhatia
Filing taxes can be a complicated process — it can be confusing to know what forms you have to fill out and what they entail.
That's why we've created this overview of Form 1040 — the standard federal income tax return form filed by U.S. taxpayers. Read on to learn what's included on the form and whether it's relevant for you.
Here’s what this article will cover:
1. Who should file Form 1040?
2. When to file Form 1040
3. What’s included on Form 1040
4. How the IRS defines “income”
5. Adjusted gross income
6. Deductions and exemptions
7. What a tax schedule is and whether it’s relevant for you
There are three forms U.S. citizens and residents use to file individual federal income tax returns: Form 1040EZ, Form 1040A and Form 1040.
Of the three, Form 1040 is the longest and most complex to fill out, and you should do so only if you don't meet the conditions to fill out the simpler Form 1040EZ or 1040A.
You may be required to use Form 1040 under any of the following circumstances:
- You have taxable income of $100,000 or more.
- Your income falls under certain categories, such as business income or farm self-employment income. Additionally, if you work in a hospitality role or another role and you receive tips, and you didn’t report all these tips to your employer, you’ll need to file Form 1040.
- You plan to itemize deductions. This means listing out specific expenses you’ve incurred to try to reduce your taxable income, which should then generally reduce the amount of tax you owe. By itemizing deductions, you forfeit the standard deduction the government already offers you based on your income, age and filing status. You might benefit from itemizing your deductions if you paid interest or taxes on your home or you made large charitable contributions, among other things.
- You plan to claim certain tax credits, which may reduce your taxes dollar-for-dollar. Common tax credits include the Earned Income Tax Credit, which is a benefit for working people with low to middle income, or an education credit, which is a benefit for individuals enrolled in higher education.
- You owe household employment taxes, which would be the case if you have employees who work in your private household. These could include housekeepers, maids or gardeners who are not independent contractors.
For a full list of conditions that require you to file a Form 1040, check out the IRS website.
The filing due date for Form 1040 in 2017 is April 18. If you file late, you may have to pay interest and penalties.
You can file a 1040 directly with Credit Karma Tax — there's no need to print out or mail in the form, and the process is completely free.
If you're unable to meet the deadline, you also have the option of applying for a six-month extension to file your tax return, using Form 4868. This extension needs to be filed by the April 18 deadline.
However, it's important to note that you still have to pay your taxes by April 18 to avoid penalty and interest charges. If you file with Credit Karma Tax, we’ll help walk you through the process to figure out how much you owe, or you can do so yourself using a Form 1040-ES.
Note: If you’re due a tax refund, there isn’t a penalty for filing your Form 1040 late. But if you owe tax to the government, you may have to pay one penalty for filing late and another for paying late.
For filing late, you’ll usually pay 5 percent of your unpaid taxes for every month or partial month that you’re late, up to 25 percent of the unpaid tax amount. For paying late, you’ll usually pay a half percent of your unpaid taxes for every month or partial month that you’re late, also up to 25 percent of the unpaid tax amount.
Form 1040 is a two-page form divided into sections where you report your income and deductions. Filling out the form should help you figure out whether you owe the government tax or are due a refund, and how much this amount should be.
Here's a brief overview of what you can expect to see on the form.
Form 1040 includes a section for filling out all your income for the year. (If you're filling out a Form 1040 for 2016, you'd report income you earned between Jan. 1, 2016, and Dec. 31, 2016).
Income may include:
- Unemployment compensation.
- Social Security benefits.
Adding up these amounts equals your total income.
Form 1040 also helps you determine your adjusted gross income (AGI), which is your total income minus any adjustments to your income.
These adjustments might include things such as educator expenses (any unreimbursed expenses you paid for if you’re a K-12 teacher or educator), certain business expenses, or tuition and fees. Subtracting your adjustments from your total income yields your AGI.
Deductions can lower your taxable income and, in turn, the tax you owe the IRS.
If you're eligible for exemptions — things that may reduce or altogether eliminate the amount of tax you owe, such as having a dependent — you'll also include them here.
Amount owed or refund due
At the bottom of Form 1040, you'll calculate — based on everything you filled out above — whether you owe a tax payment to the IRS or whether you should expect a refund. In 2015, the IRS issued more than 100 million refunds to American taxpayers.
Along with Form 1040, you may have to fill out a tax schedule, which is a form to fill out when you have specific types of income or deductions.
If you choose to itemize your deductions, you've earned self-employment income or you’ve made charitable contributions, for instance, you'll likely need to fill out a schedule.
What you include on your schedules generally affects the numbers you use on your Form 1040.
When you use Credit Karma Tax, we’ll walk you through the different schedules to help you cover your bases.
About the Author: Mika Bhatia is a Staff Writer for Credit Karma. She’s worked in financial services and tech, and has now found the perfect union of the two at Credit Karma. When she’s not busy coming up with credit-related analogies, she’s most likely supporting the Warriors, enjoying a fine cup of British tea or doing yoga (goal: completing a headstand without toppling over). Follow her at @MikaBhatia!
Disclaimer: We know taxes are complicated, so we provide this information for general educational purposes only. It isn’t intended to be personalized legal, financial or tax advice, and we don’t guarantee the accuracy, completeness or reliability of this content. If you have questions about your personal tax situation, consider contacting an accountant, tax attorney or financial advisor. Come back to Credit Karma Tax when you’re ready to file your taxes for free!