1040 Step by Step Guide

A step by step tutorial for Form 1040. We’ll take you all the way through filing the most complex form in the IRS portfolio.

Form 1040 is probably the most difficult IRS form that you, as a taxpayer, will ever fill in. Below, you can read a set of detailed instructions that will help guide you through this complex but very useful form.

The 1040 can be used by any applicant. It may take longer than any other form to fill out, but this form covers many possible circumstances.

Reading the guide below, you will not only see how to fill out Form 1040, but you’ll also understand the differences between other related forms and the 1040. This way, you’ll know exactly when you need the big bad 1040 and when can you go for “lighter” versions. If you have to file a 1040, at least do it with a clear mind and a lot of confidence. Let’s get to work!

Label

Personal Information

This is where you and Uncle Sam make your official introductions. Fill in your personal data (name and address, including the state and the zip code, as well as your social security number). If you file jointly with your spouse, include his or her data in this section too. Things are still going smoothly with this form, so why not think about being generous? If you want to donate $3 to the presidential election campaign, you can do it here, by ticking the appropriate boxes (one for you and one for your spouse).

filling-status

Filing Status

This part, similar to the respective part on Form 1040A, is where you tell the government how you are going to file. You can do it as single person, married (filing separately or jointly), head of household, or widower with dependent(s). If you’re not sure what your status is, check the instructions in the 1040 Instructions 2016 Booklet (pages 6-9).

exemption

Exemptions

This is where you figure out your exemptions. The first two boxes are reserved for you and your spouse, while 6c is for your dependents. You should write their names, their relationship to you, and their social security numbers. Your child or children may qualify for a child tax credit. For more information see page 17 of the 1040 Instructions 2016 booklet. Then, add all family members and enter the total amount in box 6d.

income

Income

On the first three lines (7-9) you declare your wages, salaries, tips, taxable and tax-exempt interest, and dividends. Line 10 is a little more pleasant. Here you tell the government about refunds, credits or other offsets to your taxes (check page 21 in the 1040 Instructions 2016 Booklet for more detailed information). Line 11 (alimony received) is clear and we assume you don’t especially want to talk about it too much. On Line 12, you enter the income or loss of your business (if you don’t have one, there’s no need to fill that in). If you have a business, include Schedule C or C-EZ with your return.

The next lines (13-16a) refer to capital gains (attach Schedule D), other gains or losses (include Form 4797), IRA distributions, and pensions and annuities with their respective taxable amounts.

On Line 17, you have to enter the details about income from rental real estate, royalties, partnerships, S corporations, trusts, and you need to include Schedule E. The next line (18) is only for those with farm income (or loss - we all know how tricky that business is). If you’re a farmer, include also Schedule F.

On Line 19, include any unemployment compensation  and your social security benefits go on Lines 20a and 20b. If this form was not complex enough for your financials, and you still have some other type(s) of income (e.g. Alaska permanent Fund dividends, awards or prizes, ESA or QTP distributions), include them on Line 21.

Now it’s time to determine your total income. Add everything from Lines 7-21 and write it down on Line 22.

adjusted-gross-income

Adjusted Gross Income (AGI)

Line 23 refers to educator expenses. If you claim such expenses, check the 1040 Instructions 2016 (page 27) for details on how to calculate the total. Line 24 refers to reservists, performing artists and government officials working on a fee basis. Just enter the required expenses and include Form 2106 or 2106-EZ. On Line 25, you have to enter HSA (health savings account) deductions (include Form 8889 to claim the deduction). For more information on whether your HAS income is taxable, see the 1040 Instructions 2016. Line 26 is for you if you moved recently and want to deduct expenses (attach Form 3903).

If you’re self-employed, the next three lines (27-29) are for you. Line 27 is for the one-half of self-employment tax (include Schedule SE), 28 is for SEP, simple, and qualified retirement plans, while 29 is for deductions on health insurance.

On Line 30, you have to enter any penalties from early withdrawals from your savings. If you’re an alimony payer, Line 31 brings some relief: that money is deductible (provided you enter the amount and the recipient’s social security number on Line 31a). The IRA deduction is to be filled in on Line 32 (see the 1040 Instructions 2016 Booklet, page 29, for details).

On Line 33, you can ask for a deduction on your student loan and Line 34 is reserved for tuition and fees deductions (if you include Form 8917). The last one (Line 35) helps you get a deduction from domestic production activities (include Form 8903).

Now it’s time to make the calculations. Add everything on Lines 23 through 31a and 32 through 35, and write the total on Line 36. Then substract Line 36 from Line 22, and there you go: that’s your adjustable gross income (AGI), the most important thing on your return.

1040-tax-credits

Taxes and Credits

You begin by repeating your AGI on Line 38. The next line (39a) is for blind people or those born before 1946. Line 40 is for itemized deductions (Schedule A) or standard deductions (see 1040 Instructions 2016 for more information).

Next, on Line 41, subtract Line 40 from Line 38. Check the amount on Line 38. If it is larger than $155,650 (or if you provided housing for people displaced in the Midwest),see to the 1040 Instructions 2016 Booklet. Otherwise, multiply $4,050 by the number on Line 6d, and enter the total on Line 42. On Line 43 you determine your taxable income by subtracting Line 42 from Line 41 (if the amount on Line 42 is more than the amount on Line 41, just enter zero).

Line 44 shows you the amount of your income tax. Make sure you check the boxes on this line if any taxes are from Form 8814 or 4972.

The alternative minimum tax (AMT) has to be filled in on Line 45, along with attaching Form 6251 if applicable. Next line (47) is the place where you add up Lines 44, 45 and 46.

If you want to claim a foreign tax credit, Line 48 is the place to do it, but you may have to attach Form 1116.

Next, claim your children and dependent expenses credit, on Line 49 (and attach Form 2441). In the next four Lines (50-53) you can also claim different types of credits: education, retirement savings contributions, child tax, residential energy.

On Line 54, other types of credits can be claimed. 

On the next line (55), you add up all your credits (Lines 48 through 54) to determine your total credits. Then, subtract Line 55 from Line 47 and enter the result on Line 56. If the amount on Line 55 is more than the amount on Line 47, just enter zero.

other-taxes

Miscellaneous Taxes

This section is quite a bit different. Line 57 refers to the self-employment tax (Schedule SE needs to be attached). Line 58 is for any unreported social security and Medicare taxes (Form 4137 and 8919 can be used to determine the values). Line 59 looks for additional taxes on IRAs or other qualified retirement plans (Form 5329 may be required).

Everything done? Then add up Lines 56 through 62 and write the total on Line 63 to see your total.

payments

Payments

Additional child tax credits go on Line 67 (Form 8812 should be attached). Line 68 grants a refundable credit for education (include Form 8863). In case you request an extension, write the value of your payment on Line 70. On Line 71, include your excess social security and tier 1 RRTA tax withheld (see the 1040 Instructions 2016 Booklet, page 69, for details).

You’re all done? Then just sum up Lines 64, 65, 66a and through 73 and enter the total on Line 74 to find out your total payments.

To Sum Up

Now you have to sign and date the whole thing, include you (and your spouse’s) occupation, and send it its way to the government. Take a deep breath; the tax ride for 2016 is now over.