IRS 1040: Your complete guide this tax season

Before we get started with exploring the various types of the 1040 form and the entire filing process, here’s an important update for you.

The tax filing deadline for individuals has been extended to May 17, 2021. The quarterly estimated tax payments are still due on April 15, 2021. 

Table of contents

S.no.	Content
1	What is Form 1040
2	Filing Form 1040
3	Types of Form 1040
4	Prerequisites for filing Form 1040
5	One-stop solution for small businesses
6	1040 Filing process Starting sections Calculating your total income  Calculating your total tax Calculating tax refund
6.1 6.2 6.3 6.4
7 7.1 7.2	Understanding various schedules for Form 1040 Lettered schedules Numbered schedules
8	Making corrections after submitting Form 1040

1. What is a 1040 tax form?

The IRS 1040 form, or the mother of all tax filing forms,  is one of the official documents that U.S. taxpayers are required to use to file their annual tax returns. The 1040 form is segmented into sections where you categorically input your income and deductions. 

This will then automatically determine the amount of tax you owe or the tax refund you can expect to receive. Depending on the type of income you report, it may be necessary to attach additional forms, also known as schedules.

The 2020 form 1040 is a two-page form that has been greatly simplified from years past because of the 2017 tax reform. 

The biggest change is that a new Line 30 has been added for the Recovery Rebate Credit. This is for taxpayers who didn't receive payments or could have received a larger payment from the government when economic impact payments (stimulus checks) went out in 2020, during the COVID-19 pandemic. 

Key takeaways

• Form 1040 is the main form used by the majority of US taxpayers

• Form 1040 is less than two pages long, but you need to attach additional schedules (forms) if you have certain types of income, credits, or deductions

• There are various types of Lettered & Numbered schedules you need to use along with Form 1040, as per any situation applicable to you.

• The form has 38 lines in total. Adding data in them will help in calculating important amounts like taxable income and tax refund.

• There are 2 main prerequisites: Form W2  & Form 1099 

• You can file your 2020 taxes between February 12, 2021, and May 17, 2021

2. Filling Form 1040

The first question most taxpayers ask is, how to get form 1040? The IRS offers a PDF version of Form 1040 that you can download and fill out manually. The next big question is, where to file 1040?

The safest and simplest method to file your taxes is electronically through an online tax filing service. E-filing is safer because you don’t have to worry about any data discrepancies or anything getting lost in the mail. 

• The IRS estimates that 21% of paper returns have errors, while less than 1% of e-filed returns have mistakes. 

You can either do it yourself via the IRS portal or do it via an online tax filing software. The best part about using an online software is that you will be guided throughout the entire filing process.

3. Types for Form 1040: Choosing the right tax form

For the majority of taxpayers, 1040 is the appropriate tax filing form to use. However, if any of the following situations apply to you, you may require additional forms known as schedules ( discussed later in the blog):

1. You own a business. Self-employed taxpayers have a variety of filing options to choose from. 

• If you operate as a sole proprietor, you must use Schedule C

•  if you operate as an S or C corporation, you must use Schedule E 

2. You are not a resident of the United States. If you are an immigrant and do not meet the requirements to file as a resident alien, you must use Form 1040-NR.

3. You are a senior citizen (above 65 years of age): You can use the Form 1040-SR as it is designed with a larger, easier-to-read print than the Form 1040. 

4. Prerequisites for filing Form 1040: 

To get started filling out Form 1040, you’ll first need to gather all of your tax documents. 

This includes;

• W-2s: Form used to report wages paid to employees and the taxes withheld from them. 

• 1099s: Form used to record income you received as an independent contractor or through some other source.

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6. Form 1040 filing process

Form 1040 is a relatively simple two-page form. The first few sections are for personal and filing information, followed by 38 numbered lines and then a signature section. 

If you’re e-filing, your filing service should walk you through the entire process. However, it’s still useful to understand exactly what you’re doing when you file.

6.1 Starting sections:

First section: Personal information

This section includes your tax filing status, name, address, and Social Security number (SSN). There’s also room for your spouse’s information in case you’re filing a joint return. If you have an Individual Taxpayer Identification Number (ITIN) instead of an SSN, enter that on the SSN line.

Second section: Standard deductions applicable

This section about your standard deduction. This varies based on your filing status, age, and whether or not you’re blind. This section has seven boxes to help determine the amount of your standard deduction. Check the ones that apply to you. 

Third section: Dependents

This section is to add your dependents and has room for each of their SSNs, their relationship to you, and a box you can check if the dependent qualifies you for the child tax credit.

6.2 Calculating your total income

Lines 1 through 9 help you calculate your total income for the year. Each line asks you to enter the amount you made from a different type of income. If a line doesn't apply to you, either leave it blank or write in a zero.

Line 10 to line 15 asks for additional information, as per any actions taken by you or any situations applicable to you.

6.3 Calculating your annual tax bill

Lines 16 through 24 help you calculate your “total tax” i.e. how much tax you owed for the year before factoring in certain tax credits. 

Line 25 to line 33 ask for additional information, as per any actions taken by you or any situations applicable to you.

6.4 Calculating your tax refund or bill

The next five lines are where you write in the total amount of your refund or tax bill. If the total tax you paid (line 33) is more than the total tax you owed (line 24), you will get a refund. 

Line 35 is for direct deposit of your refund. You will write in your bank account number, the bank routing number, and what kind of account it is (checking or saving). 

7. Understanding the various schedules (forms)

There are 2 sub-types of schedules available; one is lettered schedules and the other is numbered schedules

7.1 Lettered schedules

• Schedule A reports itemized deductions

• Schedule B reports interest and dividend income

• Schedule C reports business revenue, expenses, and profit (or loss). 

• Schedule D reports asset sales procured from capital gains or losses

• Schedule E reports income or loss from rental real estate, partnerships, S corporations, royalties, trusts, estates, and residual interests in real estate mortgage investment conduits (REMICs).

• Schedule F reports the amount of gross income from a farming business.

7.2 Numbered schedules

There are three numbered schedules associated with Form 1040. The 1040 schedules you may need to file as a small business owner or self-employed person are:

• Schedule 1: reports income or adjustments to income that can’t be entered directly on Form 1040

• Schedule 2 – reports additional taxes like alternative minimum tax or self-employment tax

• Schedule 3: claims credits such as the general business credit and foreign tax credit.

You’ll attach each schedule with Form 1040 and send them to the IRS. You should file Form 1040 and other tax forms within the tax deadline itself. 

8. Making corrections after submitting Form 1040

If you ever discover an error on a tax return, you may be able to amend your return by filing a Form 1040X. When you prepare the 1040X, it's not necessary to complete a brand new tax return. Form 1040X only requires that you update the boxes that will change.

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