Posted 10 Sep 2022 , 09:10

Individual Tax Filing Requirements in the USA

Individual Tax

What is Form 1040

For Individual tax filing, form 1040 is a standard form prepared and filed by the resident individuals of the United States by April 15. Form 1040 is required to be filed when the income of an individual is above the threshold or there are some cases where they have to file the return under the law.

Page 10 of the IRS Instruction form 2021 provides a detailed threshold for various individuals to check filing requirements. Form 1040 can be filed online or by paper. A person who is a non-resident alien for tax purposes needs to file Form 1040-NR. A resident senior citizen has the option to file a 1040-SR instead of a standard Form 1040.

Paper Filing

There are two ways to fill out the paper form. First way is to, Take the printout of forms, schedules, and instructions from the IRS Website and fill it out. The second way is to fill out the form using a compatible PDF Writer.

When the taxpayer has to add additional information with the form then they opt for paper filing more. All the papers including forms, schedules, and other documents require to be filed in a single envelope by registered mail. Make sure you do not staple the tax payment voucher or check with the form. The IRS does not accept the same.

Electronic Filing

Three ways to file returns online are:

  1. Via the free e-filing tool provided by the IRS
  2. Via the tax compliance software
  3. Filing via a tax professional.

Most tax preparers use tax compliance software to file returns electronically on behalf of taxpayers.But,if taxpayers choose paper filing, they have to attach Form 8948 and also explain why they are choosing to file by paper.

U.S. Individual Tax Return: Form 1040

  • General Information before reporting your income
    • As the first task the taxpayer has to choose filing status while filling out the form.
    • Other required information by the form is Name, Spouse Name, Social Security Number, Spouse’s social security number, and address.
    • Taxpayers have to tick the box for availing of the standard deduction also.
    • For claiming the dependent deductions, taxpayers have to fill out the dependent’s details, social security number, and relationship with them and check the box for a child tax credit or credit for other dependents in the given table.
  • Above the standard deduction lines
    • Line 1 is about reporting the wages. Taxpayers can report the wages from W-2 provided by the employer.
    • Line 2 to 6a are adjustments to reduce the adjusted gross income. These incomes are mostly tax exempted.
    • This includes Tax Exempted interest, Qualified Dividends, IRA Distributions, Social Security benefits, and Ordinary dividends.
    • Line 7a is for reporting capital gains.
    • Line 8 is for reporting other income by attaching Schedule A. It includes reporting other income like alimony, business income, rental income, farm income, gambling income, prizes, and stock income.
    • Line 11 will calculate your adjusted gross income by subtracting the taxable income and by adding the Schedule A income.
  • Standard Deduction or Itemized Deductions
    • In form 1040, you have the option to claim the standard deduction or itemized deductions.
    • In general, taxpayers opt for a deduction that is greater than both. Itemized deduction includes medical expenses, state income, property taxes, mortgage interest, charity contributions, and casualty losses.
    • If the taxpayer is a business owner then he can also avail of qualified business income deduction by attaching Form 8995 or Form 8995-A.
  • Calculation of the tax liability
    • The Taxpayer has to calculate tax liability on page 2. Instruction provided by the IRS will be helpful while calculating the tax liability.
    • Before calculating tax liability, it is important to complete schedule 2. This includes alternative minimum tax, self-employment tax, taxes on IRS distributions, and household employment taxes.
    • If taxpayers have other tax credits like a foreign tax credit, education credits, retirement savings contribution credits, and credit for dependent expenses then they have to attach this calculation in schedule 3.
    • Line 25 to 30 is for claiming the tax you have already paid and claiming earned income and child tax credit.
    • Line 34 to 36 is for refund. If the total of taxes paid is more than your tax liability. You can claim a refund by providing your bank account details.
    • Once the taxpayer completes and signs the form it is ready to be submitted to the  IRS.

Form 1040: Schedules

Schedules are provided as additional information with form 1040 for additional income earned or deduction taken by the taxpayers. Following is the list of schedules that can be attached to form 1040.

Schedule A To claim Itemized allowable deductions
Schedule B To report Interest and Dividend Income
Schedule C To report Income and Expenses related to sole proprietors
Schedule D To report the Capital Gains
Schedule E To report income from rental properties, royalty, and pass-through entities
Schedule EIC To claim Earned Income Credit
Schedule F To report farming Income and expenses
Schedule R To avail the credit for disabled or the elderly people
Schedule SE To calculate self-employment tax for income earned from self-employment
Schedule 8812 To calculate child tax credit

Filing Form 1040 is quite complicated when the taxpayer has multiple sources of income and a lot of calculations are required when you choose to file it by paper.

At Nimblefincorp we have a dedicated team of professionals who can take the guesswork out of your accounts and help you to file your taxes within the deadlines. Make an appointment with our tax professional just with one click.

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