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FAQs About the IRS 1040 Tax Form

Mona Bushnell
Mona Bushnell
business.com Staff
Updated Jun 26, 2020

Here's everything you need to know about tax form 1040 and reporting income.

  • Regular part-time and full-time employees who receive paychecks use the 1040 tax form to pay income taxes. Freelancers and independent contractors use the 1099-MISC form.
  • Investing pretax dollars in a retirement savings account can help you reduce your taxable income so you owe less in taxes.
  • Good tax software can help you determine if you'll save more money by taking a standard deduction or by itemizing each tax credit.

Tax season is in full swing, and if you're a small business owner or one of the millions of Americans who balance a side hustle with a primary gig, figuring out all the forms you need to get in order can be a daunting task.

This FAQs guide is all about the 1040 tax form, what it's for, who needs it and where you can find it.

What is the 1040 tax form?

Form 1040 is the U.S. Individual Income Tax Return form, the purpose of which is to report your taxable income to the government, as well as to claim any tax deductions or credits. The rate at which you are taxed depends on how much taxable income you have: The higher your taxable income, the more you pay in taxes. The amount in taxes you either owe or get back depends on a combination of your taxable income, deductions and credits, and how much you've already paid in taxes throughout the year.

There are different versions of the 1040 that have been used by American taxpayers. According to the Internal Revenue Service, you can utilize their checklist to determine who can use the form when filing taxes. Most significantly, the 1040-A gave income guidelines. Although the regulations fluctuated each tax year, individual and joint filers could use the 1040-A if reported income was under $50,000 for the tax year.

The filer may also have capital gain distributions, but there couldn't be any capital gains or losses. Itemized deductions were not permitted on the 1040-A form, and the only type of adjustments made to the tax filer's income would be from an IRA or student loan account. The 1040-A form was abbreviated when compared to a standard 1040, but longer than the 1040-EZ, according to H&R Block. The form was created to help filers make fewer errors when completing the information. Also, the form was intended to cut down on any processing delays from the IRS. The 1040-A is being phased out and no longer being used to file taxes. Now, taxpayers are being asked to file either a 1040 or 1040-SR.   

What is the difference between IRS Form 1040 and 1040-SR?

The 1040-SR reflects a recent change to federal tax laws. In January of 2020, the IRS announced that seniors would now be able to file taxes using the 1040-SR. The form was created due to the Bipartisan Budget Act of 2018 as a way for older adults to file a simpler to read and understand tax form.

Taxpayers who are at least age 65 have the option to file the 1040-SR. The form uses bigger fonts to help improve readability. There is also additional spacing to make text clearer and stand out on each page of the form. Instructions on how to fill out each line of the 1040-SR are provided in easy-to-read text. Instruction for each line is the same for the 1040 and 1040 SR. When you fill out the 1040-SR, make sure you have the same information as you've previously used for your 1040. Collect the following from you and your spouse before going through the document:

  • Social Security numbers
  • Dependent Social Security numbers and dates of birth
  • Wage statements
  • Interest or dividend statements
  • Tax credits or deduction records
  • Bank account routing and account numbers   

Keep in mind that 1040-SR will only appear differently when printed. Electronic versions will not have an altered appearance with the larger text. Deadlines are the same for both forms and you can request an extension in the same manner for a 1040 or 1040-SR.

How can I decrease my taxable income?

The easiest way to pay less money in taxes is to decrease your taxable income without decreasing your earnings. Contributing to a tax-advantaged account, like a 401(k) or IRA, is the most accessible way to decrease your taxable income. The money you put into tax-advantaged accounts is essentially subtracted from your taxable income, so it not only helps you grow your money through compound interest, but it also shelters your money from the taxman.

Who needs an IRS 1040 tax form?

Anyone who has taxable income for the last tax year needs to fill out Form 1040. Taxable income can be regular income from a job or income from investments, unemployment, rental properties, alimony and some types of trusts. If you have a highly complex income situation, you may want to consult with your lawyer or accountant before filing taxes, as failure to report income on your taxes can result in an audit.

Is the 1040 tax form for federal or state taxes?

You must pay both state and federal taxes for each tax year. Form 1040 is for income tax, which is a federal tax. In addition to income tax, you must pay state taxes, but other tax forms cover those.

What is the difference between a 1040 tax form and a 1099 tax form?

Form 1040 is the standard income-reporting form for regular employees and most people who receive a paycheck from one company regularly. Form 1099 is something freelancers, contractors and self-employed people get from their clients; it shows how much a person has received in exchange for goods and services, from one or multiple clients. If a contractor has many clients, they will receive a 1099 form from each client.

How do I get a 1040 tax form?

Before filing your tax return, you should make sure you have all the forms you need. If you haven't gotten a 1040 form for the last tax year yet, you can download it from the IRS website. If you have a disability and require accessible versions of the 1040 or any other tax forms, there are also links to accessible files and instructions

Can I download tax forms online?

Yes. You can download all your tax forms online from the IRS website. There are also accessible versions of the tax forms you'll need to complete your tax return. There's no reason to wait to file your taxes; the sooner you finish the tax preparation process, the sooner you'll get your tax refund.

How can I avoid filling out tax forms?

There are two main ways to avoid filling out tax forms. First, you can use tax preparation software that allows you to answer questions in a user-friendly format rather than by filling it out manually on a tax form.

The other option is to take all your income and deduction documentation to a tax professional and have them file your return for you. Both software and a tax professional may cost you money to file your returns, but if you receive a sizable tax return, you should be able to pay for your services from that.

Are there free tax preparation services?

Yes. If your yearly income is below $69,000, you can file your federal and most likely your state taxes for free. The IRS has a complete list of resources for free lower-income tax filling here. AARP also maintains a repository of free filing options available to people at certain income thresholds.

If your income is over $69,000, you can still file your federal taxes for free. Free forms for people above this income threshold are also available on the IRS website.

What is a standard deduction?

The standard deduction is available to all people who file taxes, and it's the best route to take if you don't have any other tax credits or major deductions. Even if you do have deductions, it is likely the standard deduction will limit your taxable income more than your itemized deductions.

Married people who are filing jointly are eligible for a $24,800 deduction, heads of household are eligible for an $18,650 deduction, and both single filers and married people filing separately are eligible for a $12,400 deduction. Good tax software will allow you to input your itemized deductions and tax credits to see if they total more than the standard deduction.

Will I get a bigger tax return filing jointly or filing separately from my spouse?

As with anything in taxes, there are exceptions, but most married couples are better off filing jointly. The standard deduction for couples filing jointly is $24,800, and the deduction for married couples filing separately is $12,400.

Filling taxes separately can be financially beneficial in less common situations, like when a couple wants to keep tax liability separate, when one partner has extensive deductions that are limited by adjusted gross income, or when one or both partners receives income-based repayment for unpaid student loans.

What's the right form for filing an income tax return?  

Form 1040 is also referred to as the income tax form. If you are a regular part-time or full-time employee who receives paychecks, the 1040 is what you need. If you have to report income from multiple jobs or sources, you may need other forms, such as Form 1099-MISC.

How do I report self-employment income on my tax return?

If you are a contractor or freelancer, you still have to report your self-employment income to the IRS. Such workers often owe money on income they have already received because taxes have not been preemptively removed, the way they are for standard employees of an organization or company. To report your self-employment income, you'll need Form 1099-MISC, which you should receive from any companies that have paid you for services. A separate form is required for each organization you've done work for during the last tax year.

How can I receive my tax refund payments?

The IRS allows tax filers to receive their tax refunds either in check form or as a direct deposit to a checking account. Some tax software, like TurboTax, will offer users additional options, like advanced loans. These payments offer instant access to some of your money in exchange for insanely high interest rates or transaction fees, much like what rip-off check cashing and payday loan stores offer.

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Mona Bushnell
Mona Bushnell
business.com Staff
I'm a Staff Writer for business.com and Business News Daily.