While the 1040 is one of the most common tax forms, it’s also deceptively complex. The instructions for Form 1040 are over 100 pages and can be a headache for filing sole proprietorship taxes or for small business owners trying to figure out which tax forms they need.
To guide you through the accountant jargon, let’s look at how to fill out a 1040 form step-by-step, including whether you need to file one and the schedules you might need:
If you work or earn income, you’ll likely need to file a Form 1040. This form, also known as the US Individual Income Tax Return, is how most individuals file their taxes.
The 1040 form is a two-page document for taxpayers to determine, report, and file their income. It’s also here that taxpayers calculate their deductions and ultimately figure out how much they owe in federal income taxes.
Generally, the Form 1040 requirements require you to file a tax form for 2023 if:
You can report your business income and expenses using Form 1040 if you’re self-employed, a small business owner who runs your company as a sole proprietorship, or your company is a single-member LLC. If your company is an S corporation or C corporation, you’ll need to prepare a separate corporate tax return.
To start, you’ll want to gather all your personal information, as well as several other documents. Your personal information includes your name and Social Security number for you and your spouse and any dependents.
You’ll also want to gather all your information during this step as well. Other items you’ll need include income documents like W-2 and 1099 forms, as well as proof of any tax deductions like mortgage interest or medical expense receipts.
Boxes 1-15 will be for reporting your income. Your income can include items like:
Other items that qualify as income include Social Security benefits and capital gains or losses. Box 8 of the income section includes additional income from your Schedule 1, which is a form for additional types of income that do not appear on page one of the 1040 form.
For example, Schedule 1 includes items like rent and royalty, alimony, business income or loss, income from S-corps, or unemployment.
For your 1040 form, you can either choose standard or itemized deduction. Most filers choose the standard deductions, but if you have itemized deductions that are greater than the standard deduction, you can itemize them with Schedule A.
The IRS standard deduction amount for 2023 is $13,850 if you are single or married filing separately, $27,700 for married filing jointly, or $20,800 for the head of household.
Meanwhile, itemized deductions include expenses like:
Note these are different from self-employed tax deductions, which you’ll include on your Schedule C.
Also, you may benefit from the Qualified Business Income (QBI) deduction, aka Section 199A deduction, if your business is a pass-through entity.
Taxpayers with simpler tax returns, such as those with just W-2 income and the standard deduction, will likely only need to file Form 1040. However, small business owners, self-employed individuals, and others with unique situations will likely need to file an additional schedule and attach it to their 1040 form.
Here are some of the most common schedules that you might need to append to your 1040 form:
Note that you might also need to use other schedules, such as Schedule EIC for Earned Income Credit, Schedule F for farm profit or loss, or Schedule H for household employment taxes.
Now, it’s time to calculate your tax liability. First, you’ll need your taxable income, which is your adjusted gross income minus standard or itemized deductions.
Then, use your taxable income to calculate the amount of tax you owe using the applicable tax rate from the tax tables. The tax you owe is your taxable income times the tax rate. However, this isn’t necessarily what you owe. Your tax liability is what you’ll need to pay the IRS.
The tax liability is the amount of tax you owe minus tax credits and tax withholdings. Tax credits can include items like the child tax credit, while withholdings include taxes you had withheld during the year.
While Form 1040 instructions include tax tables for calculating your tax liability, using tax software can help you automatically calculate this.
FYI: If your tax liability is negative, the IRS owes you a tax refund. If the number is positive, that’s how much you owe the government.
Now that you know how to fill out a 1040 form, it’s time to file it with the IRS. Luckily, this part is much easier than filling it out. You can file your tax forms with the IRS via mail or go paperless this tax season and file electronically.
Filing electronically, also known as e-filing, can mean you get a refund quicker, especially if you send the refund to your bank account. No matter how you file your 1040 form, the tax due date.
If your tax situation is complex, you can request a six-month extension for more time to file, but you still have to pay your tax liability by the tax due date to avoid interest charges.
Whether you fill out your 1099 and 1040 forms on your own, use software, consult an accountant, or do all three, it’s a good idea to know the tax laws. But if you don’t want to read through all the IRS instructions on how to fill out a 1040 form, there are tools to help simplify the process for you.
Consider using accounting software like QuickBooks to keep track of your expenses during the current year—making it easier for you to complete the various schedules and file your taxes accurately.
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