What is 1040 IRS Form

This is one of the official documents used by U.S. taxpayers to file their annual income tax returns. The form is divided into sections. There is a section to report income and another to report deduction. The income section helps to determine the amount of tax owed and the expected money to be paid. The deduction section determines the amount you would be paid when tax is deducted.

From the above, the sections or forms you fill would depend on the type of income you want to report.

How To Report Your Income

The first page of the 1040 IRS form is where you calculate your Adjusted Gross Income (AGI) and Taxable income. In this page, you would be required to fill in your source of income, your wages and salary, interest, tips, dividend, taxable alimony, taxable state and local tax refunds, capital gains, business income, farm income, IRA and pension distributions, Social Security benefits and unemployment income.

If your source of income does not match any of the above, on the form, there is a box titled "other income," where you can fill in your other source of income. It is very important to fill in all your sources of income irrespective of where it comes from. The source of income can only be exempted if it is tax-exempt.  The sum of all your sources of income is referred to as 'total source of income."

How AGI Is Deducted On The 1040 IRS Form

To arrive at your AGI, the IRS permits you to claim some special deduction or adjustment from your total income. Allowable adjustment entails one-half of your self-employment tax payments, IRA contributions, deductible alimony payment made, saving plan contribution, payments of student loan, interest, and health among others.

Since there is a lot of deduction limitations affected by your AGI, obtaining the AGI  is very important.

How To Report Deduction On The 1040 IRS Form

This is done on the second page of the form. The form starts with AGI and allows you to reduce this further to either the total of your listed deduction or the standard deduction. Itemized deduction covers expenses like local and state income taxes or sales taxes, mortgage interest, excess medical expenses, charitable contributions and many more.

If after you have filled in the itemized deduction and the total does not exceed the standard deduction for your filing status, when you claim the standard deduction, your taxable income would be lower. Your taxable income is the amount subjected to income tax.

How To Calculate Your Tax And Claim Credit.

• To get the amount of tax you are owing, simply referred to the tax tables in your instructions.

• Next, at the bottom of the Form 1040, compare your total tax withholding to your total bill. This would help you know if you are required to make an additional payment or expecting a refund.

• If after the comparison, you are eligible for any of the tax credit listed on the form, simply reduce the total amount of the tax you are owing by each credit you are entitled to. Do this before completing Form 1040.