If you’re a wage earning, tax paying American resident, chances are that you’re already familiar with Form 1040, or one of its variations (Form 1040A, 1040EZ). Form 1040 is the long form for filing a personal federal income tax return. Any person who lives full time in the United States may use the 1040 to file their personal income tax return. Other individuals with simpler tax situations can often use the short 1040A or 1040EZ forms.
Form 1040 has 12 attachments, called “schedules.” We’ll just summarize the schedules here, but you can click on the linked names for a more detailed look at individual schedules. If you have questions around tax time, do the smart thing, and consult a tax professional.
- Schedule A itemizes deductions against your income. Many filers take a standard deduction, rather than calculating their itemized deductions, for two reasons: 1) it’s quicker and easier and 2) it actually saves them more money. For many tax payers, the standard deduction ($6,100 to $12,000 in 2014) is more than their itemized deduction. But if you want to tally up your itemized deduction, you use this schedule to figure up deductions for things like state and local taxes, mortgage interest, and healthcare costs that exceeded a certain percentage of your income.
- Schedule B notes interest and dividend income. This schedule is only required if you made more than $1,500 in interest and dividend income during the tax year.
- Schedule C lists income gathered from self-employment. There’s a shorter version of this schedule for filers who have very straightforward means of self-employment income.
- Schedule D lists a filer’s capital gains, and calculates the tax paid on them using reduced tax rates for capital gains.
- Schedule E shows where a filer reports any income from rental property, royalties, trusts, estates, partnerships, or S-corps.
- Schedule EIC is used to qualify a filer for the Earned Income Credit, a credit for working tax filers with low wages.
- Schedule F lists any income related to farming.
- Schedule H is used to report certain taxes owed if a filer has hired household help within the tax year.
- Schedule J is used when averaging income over several years. Farmers and fisherman typically use this form to account for large shifts in their income from year to year.
- Schedule M will be used in tax year 2014 for reporting non-cash contributions to qualifying charitable organizations.
- Schedule R is used to calculate a credit for the elderly or disabled.
- Schedule SE is used to calculate the self-employment tax owed on income from self-employment, reported on Schedule C or Schedule F.
Needless to say, no two 1040 forms are the same. Most taxpayers will use only one or two of these schedules.
But you’ll need similar documents in order to complete your 1040, including W-2 forms, documentations of mortgage and student loan interest, and 1099 forms, if you did any contract work during the year.
If your taxes are relatively simple, consider using a quick (possibly free) online tax service. Entering information from a couple of W-2s, and taking the standard deduction will take you all of an hour’s work.
But if you’re required to fill out several of the schedules listed above, it may be best to consult a professional (or, at minimum, use a higher-level paid online tax service with an audit guarantee). A good accountant or tax attorney will ensure that you pay everything needed, so you don’t wind up paying expensive back taxes or penalties. Plus, a professional may pay for himself by helping you minimize your tax liability – keeping more money in your pocket to save, spend, or invest.