What is a 1040?

in Tax Information

In the United States, a set of tax forms have been created to provide a uniform way for all citizens to report their yearly income. The most common of these is called the 1040 Form and exists in several variations, such as the 1040EZ and 1040A. Using these versions, the majority of Americans are able to prepare their tax filings each year. For the standard 1040, there are a series of eleven attachments, also called schedules, that are used to determine how much income tax is owed or whether a refund will be issued for overpayment.

The history of the 1040 form goes back to the 1913 and the initial version created during this year was used until 1915. Starting in 1916, it was determined that creating a specialized 1040 for each year would be a better practice to be easily adjusted to changing tax laws. Since 1916, each year has had a specific form 1040 for Americans to use. From the early years until recently, the new form was mailed to each house in the United States and included a booklet with instructions on the correct way to fill it out. In modern times, tax forms can be obtained from many locations, such as from online resources or local libraries.

The easiest way to file taxes using the 1040 form is to utilize one of the previously mentioned alternative versions. The 1040A is a much simpler version and a person that earns less than $100,000 in the previous year may use the form. The difference is that the 1040A has a standard deduction that eliminates the need for many of the 1040 schedules. In a similar vein, the 1040EZ is a simplified version and represents the absolute easiest way to file. However, there are some limitations. In addition to the same $100,000 income ceiling and standard deductions, a person can only file with a 1040EZ if they are single or joint filers and have no dependents.

In contrast, the standard 1040 is a much more complicated form. At the same time, they offer a filer the best opportunity to take advantage of an itemized deduction as well as numerous tax credits. There are many situations that will necessitate using the standard 1040 form to file, such as the existence of a dependent, capital gains income, or self-employment. The various schedules are designed to provide a clear way to itemize income and deductions to come up with the yearly income tax. For example, Schedule F is used for expenses and income that are directly related to farming enterprises. After going through all of the schedules, a person will be able to find all of the credits that they are eligible for and use them to offset the cost of the income tax.

The 1040 form goes through changes each year as new tax policies and credits come into effect. With each year, people that are required to file their income must learn about the recent changes or entrust their tax preparation to an expert. This latter option is becoming increasingly common as the relatively cheap services are the best way to make sure that the filer has listed all income and credits correctly.

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