Form 1040 Filing

What does Form 1040 mean?

The Inland Revenue Service (IRS) Form 1040 filing is held by every individual in the USA. It is also known as the most common Form of filling out the income tax return outlining the gross income earned in the last financial year and how much of that income is to be taxed according to the guidelines of the Inland Revenue Service. Earlier, there existed a diverse variety of Form 1040, but since 2019, it has consolidated into one single Form. The most commonly used term that defines Form 1040 is the USA Individual Income Tax Return. Form 1040 not only depicts the additional taxes that need to be paid by the individual taxpayer but also provides a clear framework for claiming the tax deductions, surplus credits, and any tax refund or bill for the last financial year for which the tax is being calculated. Sometimes, individual taxpayers are also liable for the supplemental filing of Form 1040.

How many types of Form 1040 are filed?

Some of the tax forms that survived after the 2019 consolidation for meeting the requirements of providing unique details to the Inland Revenue Service are as provided

Form 1040- NR

Form 1040-NR is a form required to be filled by

• The representatives of the non-resident aliens carrying their business or trade in the USA;
• The representative of the person deceased authorized to file Form 1040- NR;
• The legal representative of an estate or a trust authorized to file Form 1040- NR.

Form 1040- ES

Form 1040- ES is to be filed by those individuals who are

• Either authorized to pay quarterly taxes, like freelancer or self-employed individual
• Those who own a rental property
• For income that isn't subject to any withholdings like dividends, rents, interests, pension income, and unemployment compensation.

Form 1040- SR

Form 1040- SR is a paper form drafted in 2019 for senior citizens above the age of 65. The draft of the Form is different in colour, size, font, and table explaining the tax deductions, making it convenient to read and fill it out by the seniors of the nation.

Form 1040- V

It is known as the payment voucher, which stands as an additional form used for the payment of the balance through mail for the amount you owe to the Inland Revenue Service.

Form 1040- X

Form 1040-X is used to amend the previous tax form if mistakenly filed and is commonly known as the amended tax return.

When can you file the Form 1040?

Most individuals who are either citizens or permanent residents are eligible to file Form 1040, which is required for the income tax return. The Form is to be filled out irrespective of the fact that the individual is self-employed, a government employee, a dependent, etc. The requirement suggests the individual with what income and age can apply, as explained below

When you are a W-2 employee

If you are a W-2 employee working with a regular employer assisting their business or organization to grow, then you need to refer to the table below as guided by the Inland Revenue Service

When you are a self-employed

If you are self-employed, working in the capacity of an independent contractor, freelancer, or business owner, then the requirement to file the income tax return through Form 1040 will increase if you owe a net income of at least $400 or more. It is also mandatory to file the income tax return under the head of self-employed even if you are already employed, working below the income of $13,850 annually, and also operating a side venture with a net income of $399.

When you act as the dependent

Dependants of an individual are authorized to file the income tax return for the earned (including salaries, wages, etc.) and unearned income that includes taxable interest, ordinary dividends, unemployment compensation, taxable social security benefits, pensions, annuities, and other capital gain distributions of unearned income from a Trust. The table below provides clarity regarding when a dependent is to file Form 1040.

When other conditions apply

The other conditions responsible for filing the Form 1040 are as provided below

• When an individual has an average wage of $108.28 or more through a Church or an organization fully controlled by the Church,
• When you or your spouse has received Archer MSA or Medicare Advantage MS;
• When you hold certain taxes of a special nature like household employment taxes, alternative minimum tax, owing taxes on IRA, social security, and other Medicare taxes.;
• When you receive Health Savings Account or other health account distributions.

The procedure of filing the Form 1040

The procedure for filing Form 1040 requires the E-file of the tax form to be submitted back to the IRS through mail or an online portal. The procedure attracting the filing of Form 1040 includes the following steps

Details of Documents required for filling Form 1040

Form 1040 comprises 2 pages that are required to be filled out for the filing of the individual's income tax return. The details requested on the first page of the Form are as follows

• Details of your legal status (whether filing a tax return as a single individual, married, head of household, or other qualifying and surviving spouse)
• Foreign address of the taxpayer (if any)
• Date of birth of the taxpayer
• Facsimile of Social Security Number, i.e., SSN of the taxpayer
• Occupation of the taxpayer
• Facsimile of SSN of your spouse or any dependents (if any)
• Details of the dependents and Identity Protection PIN (if issued)
• Facsimile of Form 1099-G (if unemployed)
• Record/ Statements of income, also known as tax documents, like 1099 or W-2 (only for W-2 employees)
• Record of other expenses, description of assets, and estimated tax payment, i.e., facsimile of Form 1040-ES
• Facsimile of W-2G (for gambling income)
• Facsimile of Form 1099-R(for pension), 1099-INT(for interest), 1099-DIV(income), 1099-OID(for dividend), 1099-SA(for health saving account)
• Any proof of the tax credit or any other deductions
• Facsimile of tax return of past financial year
• Details of the bank account (including routing number)
• Facsimile of Statement of Interest from capital gains of the last financial year for which the taxpayer is taxed, etc.

Report your Income

The next step is recording the sources of the gross income for the taxpayer's last financial year. All the gross income that needs to be recorded provided below lines 1 to 7 are as given

• Wages, salaries, and tips (only for W-2 employees)
• The interest, dividends, pensions, annuities, Individual retirement account distributions, and other social security benefits
• Any additional income sources as specified in Schedule 1, like alimony from a divorce decree before 2019, business income, profit and loss from the sale of the property of the business, any royalties, real estate rent, or other income gained from a partnership firm or C-corporation or trust, unemployment compensation, and other income generated from farm.
• Any additional income gained as a freelancer as provided under line 10, etc.

Calculate AGI after applied deductions

The AGI, which stands for Adjusted Gross Income (which is either equal to or less than the gross income), is calculated after making the relevant deductions on the income of the last financial year. It is the most popular method used by the federal authorities of the USA, like the Inland Revenue Service, to calculate and differentiate the total income of the taxpayer that he owes at the end of the financial year and the total tax paid on the gross income. There are two types of deductions made on the gross income of the taxpayer for calculating the income tax for the last financial year, namely

Above the line Deductions

It is done under Schedule 1, line 26 of the Form, specifying the necessary adjustments to the income before the calculation of the AGI. Some of the necessary adjustments or deductions reducing the AGI are

• Educator expenses
• The portion deducted from the self-employment tax
• Any contributions made to the retirement plans for the self-employed individual
• Any Capital losses
• Benefits gained in the health savings account
• Interest on the student&rsquos loan
• Health insurance premiums for the self-employed
• Any other demand or alimony paid before 2018.

Itemized Deductions and Standard Deductions

Itemized deductions are used for itemizing or claiming the deductions from the gross income, which is mostly preferred when the total itemized deductions are bigger than the standard deductions. The itemized deductions include

• Certain medical and dental expenses
• Local and State Property and income taxes
• The rate of interest on the home mortgage
• Gifts for charitable purposes (of certain amounts)
• Loss due to any casualty or theft, like loss of property or vehicle due to a disaster.

Standard deductions, also known as below-the-line deductions, are the set amount that may reduce the taxpayer's taxable income. It is the more widely used method of calculating the deductions from the gross income after 2017.

The standard deductions that apply to the taxpayers for the year 2024 are

• If you are a single individual or a married individual still filing the separate income tax return, a deduction of $14,600 applies
• If you are a married individual jointly filing the income tax return or a qualifying widow(er), a deduction of $29,200 applies
• If in case you are head of the household business, then a deduction of $21,900 applies
• If the individual is above 65 years of age and blind, then a deduction of $1,850 applies.
• If the individual is unmarried, above 65 years of age, and blind, then a deduction of $1,550 applies
• If the individual does not have a surviving spouse, is above 65 years of age, and is blind, then a deduction of $1,950 applies.

Calculation of the tax liability

The next step is to calculate your tax liability as provided on the second page of Form 1040, as per the instructions given under Schedule 2 of the Form. Some other taxes that need to be calculated and charged from the AGI are:

• The alternate minimum tax
• The self-employment tax
• Uncontrolled social security and Medicare tax on wages
• Additional Medicare tax
• Income tax on the net investment
• The household employment tax or other flavoured accounts
• Other additional taxes, like add. Tax on HSA distributions, add. Tax on Archer MSA distributions, golden parachute payment, etc.

Claim tax credits

Claiming the tax credits (that either increases or decreases the amount of refund) by listing all the tax payments made for the last financial year is the next crucial step for every taxpayer, which is mentioned on page 2 of Form 1040. The tax credits are further categorized under 3 heads infusing the process of credit refund, namely:

• Refundable Tax Credit, where the taxpayer is eligible to get an extra credit refund than the amount in the original tax bill.
• Partially-refundable Tax Credit, where you are only eligible to get the difference amount if the amount in the tax bill is lower than the amount in the partially-refunded tax credit note.
• A non-refundable tax credit is when there exists no tax refund, but it negates and lowers the amount of the original tax bill.

Some important examples of the tax credits or refunds that must be recovered by individual taxpayers are:

• Child tax credits for dependents
• Any healthcare credits
• Recovery Rebate credits
• Retirement savings contribution credits
• Residential energy credits
• Education credits
• Earned Income tax and saving credits
• Foreign tax credits, etc.

The claiming of the tax credits is complete after receiving the refund in the mentioned bank accounts (details are provided in the refund section). Also, determining how much an individual owes is another crucial step required to be completed before submitting Form 1040 by managing and paying any difference between the total taxes paid (mentioned in Line 19) and the taxes owed (mentioned in Line 19).

Sign and Submit the Form 1040

The next and last step is to sign Form 1040 and submit it either using the online portal or through the mail (address provided in the IRS instructions). Though filing income tax returns through online portals is considered more convenient and secure, leading to faster credit refunds.

Why choose Enterslice?

Enterslice, with a well-experienced team for taxation, is keen to provide in-depth assistance with the filing of Form 1040. The professional team works in consonance with our well-structured team, which is comprised of global experts and compliance officers. Our team not only covers the management of federal taxation but also assists in corporate, state, and local tax filings. We at Enterslice are capable of providing the following

• Simplified and hassle-free filing of Form 1040
• Guarantee minimum tax credit refund
• Provide faster filing of the tax Form 1040
• Promises long-term customer services
• Maintains the regulatory guidance in filing the Form 1040.