Form 1040 (officially, the "U.S. Individual Income Tax Return") is one of three IRS tax forms (see variants section for explanations of each) used for personal (individual) federal income tax returns filed with the Internal Revenue Service (IRS) by United States residents for tax purposes.
Income tax returns for individual calendar year taxpayers are due by Tax Day, which is usually April 15 of the next year, except when April 15 falls on a Saturday, Sunday, or a legal holiday. In those circumstances, the returns are due on the next business day. An automatic extension until Oct. 15 to file Form 1040 can be obtained by filing Form 4868.
Form 1040 consists of two full pages (79 lines in total) not counting attachments. The first page collects information about the taxpayer(s), dependents, income items, and adjustments to income. In particular, the taxpayer specifies his/her filing status and personal exemptions on this page. The second page calculates the allowable deductions and credits, tax due given the income figure, and applies funds already withheld from wages or estimated payments made towards the tax liability. At the top of the first page is the Presidential election campaign fund checkoff, which allows individuals to designate that the federal government give $3 of the tax it receives to the Presidential election campaign fund. The instructions booklet for Form 1040 is 104 pages as of 2014.
- 1 Filing requirements
- 2 Variants
- 3 Schedules and extra forms
- 4 Estimated payments and withholding
- 5 Payments, refunds, and penalties
- 6 History
- 7 Analogs in other countries
- 8 In popular culture
- 9 References
Who must file?
Form 1040 (or a variant thereof) is the main tax form filed by individuals who are deemed residents of the United States for tax purposes. The corresponding main form filed by businesses is Form 1120, also called the U.S. Corporation Income Tax Return.
An individual is considered a resident of the United States for tax purposes if he or she is a citizen of the United States or a resident alien of the United States for tax purposes.:6 An individual is a resident alien of the United States if he or she passes either the Substantial Presence Test or the Green Card Test, although there are also some other cases; individuals who have taxable income in the United States but fail the criteria for being resident aliens must file as nonresident aliens for tax purposes.:3 While residents of the United States for tax purposes file Forms 1040, 1040A, or 1040EZ, nonresident aliens must file Form 1040NR or 1040NR-EZ. Note that there is also a "dual status alien" for aliens whose status changed during the year.
Resident aliens of the United States for tax purposes must generally file if their income crosses a threshold where their taxable income is likely to be positive, but there are many other cases where it may be legally desirable to file. For instance, even if not required, individuals should still file a return in order to receive a refund on withheld income or to receive certain credits (e.g. earned income tax credit).:6
The form may be filed either by paper or online.
Anybody who can file Form 1040 (regardless of whether they need to) is allowed to file on paper.
Form 1040, along with its variants, schedules, and instructions, can be downloaded as PDFs from the Internal Revenue Service website. Finalized versions of the forms for the tax year (which in the US is the same as the calendar year) are released near the end of January of the following year.
Paper forms can be filled and saved electronically using a compatible PDF reader such as Adobe Acrobat Reader, and then printed. This way, it is easy to keep electronic copies of one's filled forms despite filing by paper. Alternatively, they can be printed out and filled by hand. A combination of the approaches may also be used, with some content filled in electronically and additional content written in by hand. As a general rule, where possible, it makes sense to fill electronically, but in some cases filling by hand may be necessary (for instance, if additional notes of explanation need to be added, or the font used for electronic filling is too large to fit the information in the space provided.
The only parts of the form that cannot be filled electronically are in the signature lines. These include the signature, date, and phone number.
The paper form 1040, along with all relevant schedules and additional forms, must be sent in a single packet by mail or courier to an IRS address determined by the US state you are filing from and whether or not you are enclosing a payment; the addresses for the three forms (1040, 1040A, 1040EZ) are identical.
The IRS allows US residents for tax purposes to file electronically in three ways:
- Those with incomes of $62,000 or less may file electronically using IRS Free File, a free e-filing tool.
- It is possible to prepare one's tax return using a tax compliance software approved by the IRS and have the software file the return electronically.
- One can use a tax professional who has been accepted by the IRS for electronic filing.
Many paid tax preparers are required to file individual tax returns electronically, and most tax compliance softwares file electronically on the taxpayer's behalf. Even those who are not so required need to file Form 8948 if they choose paper filing, providing an explanation for why they are not filing electronically.
If one is not eligible for IRS Free File, it might cost hundreds of dollars to file electronically, whereas paper filing has no costs beyond the time cost, the cost of printing the forms, and the cost of mailing the forms. Furthermore, the available existing electronic filing options may not offer sufficient flexibility with respect to arranging one's tax return, adding attachments, or putting written notes of explanation that can help preempt IRS questions. In addition, electronic filing makes one's tax return more likely to be audited because it is already in a format accessible to the IRS, whereas of paper returns, only 40% are transcribed, so that the remaining are not even in the running for being audited. For these reasons, law resource NOLO as well as Forbes argue that the more complicated one's tax return, the better it is to file on paper.
Form 1040 must be signed and dated in order to be considered valid. If filing jointly with a spouse, both must sign and date. If a return is submitted electronically, individuals must use either a Self-Select PIN or Practitioner PIN.
If an individual decides not to file a return, the IRS may (after it has sent several reminders) file a substitute return. This is a "worst case scenario" for the taxpayer, since the substitute return does not consider many types of deductions and exemptions. In other words, it is still advantageous to file—either before the substitute return or in response to it—in order not to pay more than necessary.
In addition to the standard Form 1040, there are also two variants: the 1040A and 1040EZ ("easy"). There is also the 1040X, which is used to make amendments to the 1040. Form 1040 and 1040A use the same line numbering up to and including line 9; Form 1040EZ uses completely different line numbering. Line numbering is important to keep in mind since many state income tax returns reference line numbers on the 1040.
Additional restrictions are placed on who can use a form in going from the standard 1040 to the 1040A, and in going from the 1040A to the 1040EZ. A form with less restrictions can always be used in place of one with more restrictions, but not the other way around. Tax compliance software such as TurboTax are able to determine which form to file.
The 1040A (nicknamed the "short form") is a shorter version of the standard Form 1040. It is limited to taxpayers with taxable income below $100,000 who take the standard deduction instead of itemizing deductions. The 1040 can always be used instead of the 1040A, but the 1040A can only be used when the restrictions apply.
A taxpayer who uses the 1040A tax return can only have income from the following sources:
- Wages, salaries, and tips.
- Interest and ordinary dividends.
- Capital gains distributions.
- Taxable scholarships and fellowship grants.
- Pensions, annuities, and IRAs.
- Unemployment compensation.
- Taxable social security and railroad retirement benefits.
- Alaska Permanent Fund dividends.
Several other restrictions apply as well.
The 1040EZ (officially called "Income Tax Return for Single and Joint Filers with No Dependents", but nicknamed the "easy form") is a simplified, six-section version of the 1040. Its use is limited to taxpayers with taxable income below $100,000 who take the standard deduction instead of itemizing deductions. The 1040 or 1040A can always be used in place of the 1040EZ, but not the other way around.
Other restrictions for 2005 include:
- Filing status must be single or married filing jointly.
- Filer must be under age 65 on January 1 and not blind at the end of the year of the filing.
- Filers must not claim any dependents (other than themselves).
- No adjustments to income can be claimed.
- The only credit that can be claimed is the Earned Income Credit (EIC).
- The only income to report for the tax year consisted of wages, salaries, tips, taxable scholarship or fellowship grants, unemployment compensation, or Alaska Permanent Fund dividends, and filer's taxable interest was not over $1500. But if the filer earned tips, including allocated tips, that are not included in box 5 and box 7 of one's Form W-2, filer may not be able to use Form 1040EZ.
- Filer did not receive any advanced EIC payments.
For the tax year 2006, there was also the EZ-T variant. It was used to only claim the Phone Long Distance Tax credit, when they otherwise are not required to file.
The 1040X (officially, the "Amended U.S. Individual Tax Return") is used to make corrections on Form 1040, Form 1040A, and Form 1040EZ tax returns that have been previously filed.
Generally for a tax refund, this form must be filed within 3 years after the date that the original version was filed, or within 2 years after the date that the tax was paid, whichever is later. For a 1040X based on a bad debt or worthless security, it must be filed within 7 years after the due date of the original version. A 1040X that is filed immediately before the due date of the original version is considered "on time".
Form 1040X is similar to Form 1040 except that it has three columns: one column to list the amounts from the original version, one column to list the net increase or decrease for each line being changed, and the last column to list the new amounts.
Certain "financial timing" type changes cannot simply be made with the 1040X, and must be requested through the much more complicated Form 3115 (Change of Accounting Method). The least obvious (and most common) example of such a restricted change is in correcting past years' business or rental depreciation. Beyond that, Form 3115 also lists over 50 other specific change types. Many of those include classic bookkeeping concerns, such as when to recognize revenue and expenses.
Schedules and extra forms
Form 1040 has 14 attachments, called "schedules", which may need to be filed depending on the taxpayer. For 2009 and 2010 there was an additional form, Schedule M, due to the "Making Work Pay" provision of the American Recovery and Reinvestment Act of 2009 ("the stimulus").
|Type||Explanation||Lines where schedule is referenced or needed in Form 1040|
|Schedule A||Itemizes allowable deductions against income; instead of filling out Schedule A, taxpayers may choose to take a standard deduction of between $6,300 and $12,600 (for tax year 2015), depending on age, filing status, and whether the taxpayer and/or spouse is blind.||40|
|Schedule B||Enumerates interest and/or dividend income, and is required if either interest or dividends received during the tax year exceed $1,500 from all sources or if the filer had certain foreign accounts.||8a, 9a|
|Schedule C||Lists income and expenses related to self-employment, and is used by sole proprietors.||12|
|Schedule D||Is used to compute capital gains and losses incurred during the tax year.||13|
|Schedule E||Is used to report income and expenses arising from the rental of real property, royalties, or from pass-through entities (like trusts, estates, partnerships, or S corporations).||17|
|Schedule EIC||Is used to document a taxpayer's eligibility for the Earned Income Credit.||66a|
|Schedule F||Is used to report income and expenses related to farming.||18|
|Schedule H||Is used to report taxes owed due to the employment of household help.||60a|
|Schedule J||Is used when averaging farm income over a period of three years.||44|
|Schedule L||(Until 2010) was used to figure an increased standard deduction in certain cases.||N/A|
|Schedule M||(2009 and 2010) was used to claim the Making Work Pay tax credit (6.2% earned income credit, up to $400).||N/A|
|Schedule R||Is used to calculate the Credit for the Elderly or the Disabled.||54|
|Schedule SE||Is used to calculate the self-employment tax owed on income from self-employment (such as on a Schedule C or Schedule F, or in a partnership).||57|
|Schedule 8812||Is used to calculate the Child Tax Credit.||52, 67|
In most situations, other Internal Revenue Service or Social Security Administration forms such as Form W-2 must be attached to the Form 1040, in addition to the Form 1040 schedules. There are over 100 other specialized forms that may need to be completed along with Schedules and the Form 1040. However, Form 1099 need not be attached if no tax was withheld. In general, employer-sent forms are used to substantiate claims of withholding, so only forms that involve withholding need to be attached.
Estimated payments and withholding
For most individuals, withholding is the main way through which taxes are paid. However, income that is not subject to withholding must be estimated using Form 1040-ES. (It may be possible to avoid filing Form 1040-ES by increasing one's withholding and instead filing a Form W-4.)
Estimated payments can be made using the Electronic Federal Tax Payment System.
Payments, refunds, and penalties
There is a three-year limit to when individuals can claim a tax refund. However, payments that are due must be paid immediately.
There is a penalty for not filing a tax return by April 15 that depends on whether the individual got a filing extension and the amount of unpaid taxes. However, since the maximum penalty is 25% of unpaid taxes, if an individual has paid all their taxes, there is no penalty for not filing.
In addition to making sure that one pays one's taxes for the year by Tax Day, it is also important to make sure that one has paid partial taxes throughout the tax year in the form of estimated tax payments of employer tax withholding. If one has not done so, then a tax penalty may be assessed. The minimum amount of estimated taxes that need to be paid to avoid penalties depends on a variety of factors, including one's income in the tax year in question as well as one's income in the previous year (in general, if one pays 90% of the current year's tax liability or 100% of the previous year's tax liability during the tax year, one is not subject to estimated tax penalty even if this year's taxes are higher, but there are some caveats to that rule). Employer withholding is also treated differently from estimated tax payment, in that for the latter, the time of the year when the payment was made matters, whereas for the former, all that matters is how much has been withheld as of the end of the year (though there are other restrictions on how one can adjust one's withholding pattern that need to be enforced by the employer).
Original form structure and tax rates
The first Form 1040 was published for use for the tax years 1913, 1914, and 1915. For 1913, taxes applied only to the last three quarters of the year. The original Form 1040, available on the IRS website as well as elsewhere, is three pages and 31 lines long, with the first page focused on computing one's income tax, the second page focused on more detailed documentation of one's income and the third page describing deductions and including a signature area. There is an additional page of instructions. The main rules were:
- The taxable income was calculated starting from gross income, subtracting business-related expenses to get net income, and then subtracting specific exemptions (usually $3,000 or $4,000). In other words, people with net incomes below $3,000 would have to pay no income tax at all. The inflation calculator used by the Bureau of Labor Statistics estimates the corresponding amount in 2015 dollars as $71,920.
- The base income tax rate on taxable income was 1%.
- High earners had to pay additional taxes. The first high-earning tax bracket, $20,000-$50,000, has an additional tax of 1% on the part of net income above $20,000. Thus, somebody with a taxable income of $50,000 (over a million dollars in 2015 dollars according to the BLS) would pay a total of $800 (1% of $50,000 + 1% of $(50,000 - 20,000)) in federal income tax. At the time (when the United States as a whole was much poorer) these higher taxes applied to fewer than 0.5% of the residents of the United States.
For 1916, Form 1040 was converted to an annual form (i.e., updated each year with the new tax year printed on the form). Initially, the IRS mailed tax booklets (Form 1040, instructions, and most common attachments) to all households. As alternative delivery methods (CPA/Attorneys, Internet forms) increased in popularity, the IRS sent fewer packets via mail. In 2009 this practice was discontinued.
In 1954 the tax return deadline was changed to April 15.
Form 1040A was introduced in 1941 to simplify the filing process.
Form 1040EZ was introduced by the Internal Revenue Service for the 1982 tax year. The title of the 1982 form was "Income Tax Return for Single filers with no dependents."
Electronic filing was introduced in a limited form in 1986, with the passage of the Tax Reform Act of 1986, and starting 1992, taxpayers who owed money were allowed to file electronically. The Electronic Federal Tax Payment System, jointly managed by the IRS and Financial Management Service, started in 1996 and allowed people to make estimated payments.
Changes to complexity and tax rates
The complexity and compliance burden of the form and its associated instructions have increased considerably since 1913. The National Taxpayers Union has documented the steady increase in complexity from a 34-line form in 1935 to a 79-line form in 2014, while Quartz created an animated GIF showing the gradual changes to the structure and complexity of the form. The NTU table is below:
|Tax year||Lines, Form 1040||Pages, Form 1040||Pages, Form 1040 Instruction Booklet|
The increase in complexity can be attributed to an increase in the number and range of activities being taxed, an increase in the number of exemptions, credits, and deductions available, an increase in the subtlety of the rules governing taxation and the edge cases explicitly spelled out based on historical experience, and an increase in the base of taxpayers making it necessary to offer longer, more explicit instructions for less sophisticated taxpayers. As an example, whereas the initial versions of Form 1040 came only with a rate schedule included in the tax form itself, the IRS now publishes a complete tax table for taxable income up to $100,000 so that people can directly look up their tax liability from their taxable income without having to do complicated arithmetic calculations based on the rate schedule. The IRS still publishes its rate schedule so that people can quickly compute their approximate tax liability, and lets people with incomes of over $100,000 compute their taxes directly using the Tax Computation Worksheet.
In addition to an increase in the complexity of the form, the tax rates have also increased, though the increase in tax rates has not been steady (with huge upswings and downswings) in contrast with the steady increase in tax complexity.
Analogs in other countries
See also List of countries by tax rates.
In popular culture
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