1040 Line by Line Guide
It’s big, it’s bad, it’s the 1040 and it’s one of the most difficult forms a taxpayer will have to face. Like my other beginners guides, I’m going to be ripping this form a new one. We’re not just going to be talking about the same old stuff here; we’re going to be highlighting the differences between the 1040 and other versions. When we’re done, you should be able to move through this form with confidence and accuracy. I know your chomping at the bit to get started, so let’s tackle this thing before April 15.
Label
You simply fill in your name, street, city, state and zip. Don’t forget to enter your social security number; - the box for it is off to the far left. If you’re married filing jointly your spouse will have to fill in her vitals as well. If you’re feeling especially generous, feel free to give $3 to the presidential election campaign. Whether you’re in the mood or not, don’t worry, it won’t affect your return.
Filing Status
Like the 1040A, this is where you will be very clear about how you’re going to file. Like before, you can still file single or married. You also still have the option to file as married filing separately, head of household (if you live with a qualifying person), or qualifying widow(er). Just check pages 15 and 16 of the 1040 booklet for guidance.
Exemptions
Like the 1040A, this form breaks down exemptions. Boxes 6a and 6b are for you and your darling spouse, but box 6c asks about dependants. Do you have 5 mouths to feed? Go ahead and claim them, just make sure your five mouths have names, have some sort of relation/connection to you and have social security numbers. Also be sure to check pg 17 to see if one or all of your kids qualify for a child tax credit. When you’re done, add up those little bundles of joy and enter the total number in box 6d.
Income
Lines 7, 8, and 9 are looking for wages, taxable interest, and dividends. Just check page 22 to see if your dividends are qualified for a lower tax rate or not. Line 10 is where you enter taxable refunds, credits, or other things that could offset state and local income taxes, for further clarification, check page 23 of the 1040 booklet. The alimony line (11) always makes for a good time and line 12 requires a business income or loss. If you don’t own your own business, no problem you can just leave it blank. If you do own a biz you can call your own, attach a Schedule C or Schedule C-EZ.
Lines 13 -16a is referring to Schedule D (capital gains), other gains/losses (attach Form 4797), IRA distributions, and pension/annuity payments along with taxable amounts of said payments. Line 17 is looking for rental real estate income, royalties, partnerships, trusts, or s corporations. If any of those apply, log it and attach a Schedule E. Line 18 is for all you farmers out there, just don’t forget to add a Schedule F.
Line 19 is looking for any unemployment compensation above and beyond $2,400, while lines 20a and 20b (a.k.a. social security benefits) are a fan favorite. Line 21 is for other income such as compensation for previously deducted expenses or Alaska Permanent dividend funds, check pg 29 of the 1040 booklet for more detail. Add up all this inflow of cash and enter the sum on line 22 to reveal your total income.
Adjusted Gross Income
Educators with expenses check page 29 of the 1040 booklet and put the total on line 23. Line 24 requires certain business expenses for reservists, artists, and fee based government officials. Enter said expenses and attach Form 2106 or 2106EZ for accounting purposes. Line 25 is a common adjustment and refers to a health savings account or HSA. HSA’s work out to be savings equal to your tax bracket multiplied by qualified health care expenses. As long as you’ve planned ahead and attached Form 8889, you get that deduction. If you moved recently, line 26 is for you, just have Form 3903 handy.
Lines 27 – 29 are for those who are self employed; 27 is a tax, (it requires a Schedule SE), 28 is for SEP, Simple and Qualified Retirement Plans, and 29 is for health insurance deductions.
If you had an early withdrawal from a retirement savings plan, enter that amount on line 30. If you paid alimony, the good news is that it’s deductible, just enter it and the recipients SSN on line 31A. Check page 31 of the 1040 booklet to read up on what to do with an IRA deduction and enter anything that applies on line 32.
Student loan interest got you down? You get to deduct any of the interest on line 33. Line 34 is where you deduct all of your tuition and fees, just be sure to attach a Form 8917. Line 35 is for domestic production activities and if it applies just attach Form 8903. Sum up lines 23 through 35 and enter it on line 36. Then subtract line 36 from the previous section’s line 22 and Voila! You’ve calculated your adjusted gross income, which is the driving number of your return.
Tax and Credits
Carry forward your AGI and enter it on line 38. Line 39 is for the blind and those born on or before January 1st 1945. If you itemize, enter it on line 40a, but if the standard deduction of $5,700 (single), $11,400 (married filing jointly), or $8,350 (head of household), is more, simply enter the greater number. Subtract line 40a from line 38 and enter the total on line 41. If line 38 is more than $125,100 (or you were nice enough to provide housing for those that were displaced in the Midwest) check page 37 of the booklet. Otherwise, multiply $3,650 by the total number of exemptions you put down on line 6d and enter the value on line 42. On line 43 subtract line 42 from 41 to figure your taxable income.
Line 44 is the tax on your income, but you'll need to check page 37 for the rundown. Be sure to check the boxes on line 44 if any tax is pertains to Form 8814 or Form 4972. Line 45 is for the AMT, see page 40 and attach Form 6251 if necessary. Line 46 is your total tax, (including the dreaded AMT) and to calculate sum up lines 44 and 45. Line 47 is looking to give you a foreign income tax credit, but you need to attach Form 1116 if you qualify.
On lines 48 - 52 you’re basically going through a bunch of tax credits; which include child and elderly dependent care expenses, credits for the elderly or disabled, education credits, retirement savings contributions, and a child tax credit. Line 52 is looking for mortgage interest credits (Form 8396), qualified adoption expenses (Form 8839), and residential energy property credits (Form 5695).
Line 53 is looking for more credits; specifically the general business credit (Form 3800) and a credit for a prior years minimum tax (Form 8801). If you have a credit that's not listed fill in the blank with the form number and check the box. Line 54 gives you the opportunity to add all your prized credits from lines 47 – 53. After you tally them up, you have to subtract line 54 from line 46 and enter it on line 55. If line 54 is more than your AGI you get to enter a big fat zero on line 55.
Other Taxes
This whole “other tax” section is an entirely new ballgame. Line 56 is a self employment tax, just be sure to add a Schedule SE. Line 57 is for any other unreported Social Security and Medicare taxes, use Form 4137 and Form 8919 to calculate those amounts. Line 58 is any additional tax required on IRAs or other qualified retirement plans. Line 59 refers to AEIC payments and household employment taxes, just attach a Schedule H. Lastly for any other taxes you have no yet disclosed, specify them on line 60. When you’ve got all of that sorted out, (I know, easier said than done) add up lines 55-60 and enter it on line 61.
Payments
Line 62 is where you put your W-2 withholdings. Line 63 is where you put estimated tax payments and the amount applied from last year. Line 64a is for an earned income credit while 64b is looking for noncombat pay election. Line 65 is for an additional child tax credit; attach Form 8812 if it applies. Line 66 is allowing for a refundable education credit, just add Form 8863. Line 67 grants a first time homebuyer credit if you attach a Form 5405 . Even if you’re filing for an extension, let the IRS know how much you’re paying on line 68. Line 69 requires excess social security and tier 1 RRTA withholdings, check pg 72 of the booklet for more details.
Line 70 is about credits from the following forms: (Form 2439) undistributed capital gains credits , (Form 4136) credits for federal tax paid on fuels , (Form 8801) credits for a prior years minimum tax , and (Form 8885) the health coverage credit . When you’re set, add lines 61 – 70 to get your total payments and enter it on line 71.
Fin
Like the Form 1040A and Form 1040EZ, if the payments line (71) is more than your total tax line (60), you're due a refund, just enter the amount on line 72. If the total tax is larger than your total payments, you’ve underpaid and should enter your remaining liability on line 75. All that’s left is to just sign, date, seal, and send. What you and your spouse do for a living is one of the most forgotten items on a return, so please please please remember to fill it in. When set, feel free to turn out the lights, your 2009 tax party is finally over.
