By the end of the tax season of 2021, the IRS expects that at least 160 million individual tax returns will have been filed. In most cases, those tax returns are IRS Form 1040s or Form 1040-SRs. So, it helps to understand what a Form 1040 is and what kind of information it includes.
Read More: Form 1040: What's Changed for Your 2020 Tax Return
1040 Form: Meaning
The IRS Form 1040 is the individual income tax return form. If you intend to file taxes individually, this is the form that you must complete. It may be accompanied by other forms, whose information supports what is in it. But without it, you would have not filed your taxes.
When filing taxes for the year 2021, you have the option of using Form 1040-SR, which is available for those born before January 2, 1957, who qualify as seniors.
Often, Form 1040 may be accompanied by other forms that are relevant in helping the IRS determine your liability and money owed or due.
Read More: Form 1040: What You Need to Know
Below is a summary of the Form 1040 Schedule forms numbered one to three, which you may also need to complete when filing taxes.
1. Form 1040 Schedule 1
You need to complete Schedule 1 when you have additional income to claim, such as gambling winnings, prize money and unemployment compensation. The form is also relevant when you need to claim deductions like student loan interest, educator expenses or self-employment taxes. And then, you can account for the values in Form 1040.
2. Form 1040 Schedule 2
When you owe extra taxes, such as self-employment, household employment or retirement account taxes, you must fill out Schedule 2. Also, when making an extra advance premium tax credit repayment, you need to complete this form.
In addition, when you owe alternative minimum taxes, the IRS expects Schedule 2 to be attached. Some of the information will show up on Form 1040 in the end.
For example, when accounting for alternative minimum tax and excess advance premium tax credit repayment, you will include the sum of the values in line 3 of Schedule 2. And then, you will copy that resulting value in Form 1040 line 17 when computing your taxes.
3. Form 1040 Schedule 3
Schedule 3 comes in handy when you need to claim credits that you did not claim on Form 1040 or 1040-SR. These include general business, foreign tax and education credits. Other credits you can claim include health coverage tax credit, qualified sick and family leave credits and net premium tax credits.
If you have other payments to account for, such as excess Social Security tax withheld or an amount paid with a request for tax filing extension, you must fill the form too.
Information on Federal Taxes Form 1040 Line 10
More often than not, the information that appears on Schedules 1, 2 and 3 will show up in some form on your Form 1040 or Form 1040 SR. And one such type of information is the adjustments to income.
For example, when you have adjustments to income, such as educator expenses and student loan expenses, you will calculate the sum of all those adjustments on line 26 of Schedule 1. And then, you will copy that total on Form 1040 line 10 to help you calculate the final Adjusted Gross Income (AGI).
The AGI is a very important value for tax filing. It is actually considered the most important number on your tax return. Without it, it would be extremely challenging to obtain the deductions and credits you can claim when filing taxes. In addition, it influences your total tax liability.
Usually, the AGI is obtained by subtracting adjustments to income from your gross income. But those adjustments must be accounted for on other forms, such as Schedule 1.
Also, not all adjustments are allowed when calculating the AGI. So, it is important that you determine what is permissible in your case. For example, if you are not an educator, you cannot claim educator expenses.
Remember, your AGI will either be equal to your gross income or less. At no point can it ever exceed the sum of all your earnings.
Read More: How to Calculate Adjusted Gross Income
If you don’t file Form 1040, then you should be filing corporation taxes. However, under certain circumstances, you don’t need to file either personal or corporation taxes if you don’t meet the tax filing thresholds. But remember, not filing may make you miss out on the tax refunds due to you even though you don’t owe taxes.
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