Form 1040 is one of the most commonly recognized forms published by the IRS, submitted by individual tax filers who need to report their income to the federal government. If you’ve ever filed your taxes yourself or reviewed your federal taxes in the spring, you’ve likely encountered the 1040 tax form.
While this form might be common, many people still have questions regarding what it’s used for and how to fill it out. Here is what you need to know about Form 1040.
Uses for a 1040 Form
A 1040 form is where you report your gross income and determine how much money should be taxed after credits and deductions. For example, if you’re employed full-time by a single company, your only source of income might come from this employer. You would report your gross income from your W2 form provided at the end of January.
Tax credits and deductions come from a variety of sources. You may earn a tax credit by investing in clean energy or have deductions relating to your children or other expenses throughout the year. The IRS 1040 form walks you through the process of listing these deductions or credits and subtracting them from your gross income to determine how much you owe in taxes.
For example, a tax filer might report $75,000 in gross income but also $15,000 in credits or deductions. This means the true taxable income is actually $60,000—the net between income and credits or deductions.
Do I Need to File a 1040 Form?
The vast majority of people will need to fill out a 1040 form regardless of their income level and employment type. The only people who do not need to fill out this form are people over 65 and under 65 who fail to meet certain income thresholds.
For example, a single person under 65 who earned less than $12,000 would not need to file a 1040 tax form. This is considered below the poverty line, so the income should not be taxed.
However, you will need to fill out a 1040 form if you are self-employed and made at least $400 in net earnings, regardless of your income level. Completing this form allows you to file your tax return and report your earnings to the IRS.
How Can I Prepare to Complete Form 1040?
This form is one of the most common forms submitted to the IRS each year—but that doesn’t mean it’s easy to fill it out. It may take time for you to gather your necessary materials before you’re ready to submit a 1040 tax form to the IRS.
The most important step when submitting your taxes is to gather your documents beforehand. This step will prevent you from forgetting potential deductions or estimating your income—which could cause you to over- or underpay. A few documents you’ll need include:
- W2 forms from employees—and 1099 forms from clients, if you’re a contractor or self-employed.
- Miscellaneous taxable sources of income, like contest winnings, unemployment benefits, jury duty fees, and severance pay.
- Relevant tax credits and deductions. These include credits for your dependents (children) and for expenses throughout the year like charitable donations or loss from theft.
If you keep these records organized year-round, then you can easily find them during tax season. Plus, saving these receipts can also help in the event that the IRS audits your taxes—or asks for confirmation on specific amounts or forms.
Where Can I Find Form 1040?
The IRS has a copy of Form 1040 hosted on their website that you can download and use to gather your information. By familiarizing yourself with this form, you’ll be prepared to fill it out when the time comes. Once you’re ready to fill it out, use the IRS Free File system if you earn less than $72,000 to submit your taxes. You will be directed to a partner site to help you submit your information.
If you use a tax software provided by TurboTax, H&R Block, or a similar company, the tool will likely ask you several questions relating to your income and expenses and will create a 1040 form for you.
Start Gathering Your Tax Materials Now
While you have until Thursday, April 15, to complete your personal tax filing this year, there’s no reason to wait. If you complete Form 1040 and file your taxes early, you increase the chances of getting your tax return faster if you’re owed money. At the very least, you can put the tax process behind you and focus on growing your income in 2021.
At Sunrise, we’re here for you this spring with our Tax Assist resources. Use our expert tax checklist to pull the materials you need and our tax estimator tool to better understand what you owe. We want to make it easy to find the right forms and help you understand what you need to report.