A Short Guide to Different Types of Form 1040
Last Updated April 14, 2023
Why does anyone want to do business? To earn great revenue. But one should also expect income tax in return. If you are self-employed you need to make the tax payments that you owe to the IRS. For this purpose, you need to have a clear understanding of the Form 1040 guide. Any payments (income and self-employment taxes) are reported via Form 1040-ES.
But what is the Form 1040?
How can you fill out the form?
Which small businesses or individuals are entitled to fill out the form?
To answer all the queries, this article is the ultimate form 1040 guide for small businesses in 2021.
Table of Contents
What is a 1040 Tax Form?
The purpose of Form 1040 is to report any taxable income to the government. On such payments tax deductions are also claimed. The rate of tax depends on the taxable income you have. The higher the income is the more tax you will need to pay. The amount of taxes depends on a combination of three factors;
- Taxable income
- Deductions
- Credits
Similar to some other forms, there are different types of Form 1040 used by taxpayers (in America).
With the help of the types of Form 1040, you can determine which one to use to file taxes. However, the 1040 Form is one of the most common tax forms. But it is also a complex form.
The instructions to fill the Form 1040 are instructed in over 100 pages!
It can be a little tiring for small business owners to fill in the form. Instead, you can always hire professional experts like accountants and CPAs to handle the tax forms.
The instructions to fill the Form 1040 are instructed in over 100 pages!
It can be a little tiring for small business owners to fill in the form. Instead, you can always hire professional experts like accountants and CPAs to handle the tax forms.
Who Needs to Use Form 1040?
All small businesses must be attentive here. This one’s for you.
In simple words;
- Form 1040 is also known as a U.S. Individual Income Tax Return.
- It is a two-page document to report, and file the income of small businesses and individuals.
- Taxpayers can calculate their deductions and future the amount they owe to the government.
- If you are a resident of the US, filling the form 1040 is compulsory (if you meet the criteria).
For individuals;
- It is the income tax for W-2 employees.
- Small businesses can also use it to file their business taxes.
- Income and expenses are reported using Form 1040 (if self-employed, sole proprietor, or a partnership).
- Business income is reported with the Schedule C attachment with the personal income tax return.
- A company structured as an S corporation or a C corporation or an LLC seen as a corporation is liable to fill out Form 1120 along with Form 1040.
The following table will help you understand the filing status of the taxpayers.
| Filing Status | Age By the End of the Previous Year | Minimum Gross Income |
| Single | Below 65 | $12,200 |
| Above 65 | $13,850 | |
| Joint Filing | Both spouses under 65 | $24,400 |
| Both spouses above 65 | $27,000 | |
| One spouse 65 or older | $25,700 | |
| Separate Filing (but married) | All Ages | $5 |
| Household Head | Below 65 | $18,350 |
| 65 or older | $20,000 | |
| Eligible Widow(er) | Below 65 | $24,400 |
| 65 or older | $25,700 |
Types of Form 1040 Small Businesses Should Know
There are basic varieties of Form 1040;
If you want to pay the current year’s estimated taxes then Form 1040-ES is provided by the IRS.
Remember that Form 1040 covers the estimated taxes of the previous year. So, to pay income tax, self, employment tax, or another form of taxes you might be liable for are covered under Form 1040-ES.
Who’s the Taxpayer?
You need to be able to calculate your taxes. For instance, take 90% of the tax you owe in the current year and the tax you paid in the previous year. Do a comparison. Focus on the smaller number. So, if you paid $500 last year, this year’s estimate is $1,000 and 90% of the current amount will be $900. The smaller amount is $500.
Not all income is liable to the estimated tax. For instance, if you work as an independent contractor or a freelancer, you will not be obliged to pay these taxes from your income.
Estimated tax payment is the estimation of your current income for the year. Dividends, interests, rents, taxable unemployment compensation, retirement benefits, etc are also exempted from the estimated tax payments.
To avoid the penalty, pay the quarterly tax in a timely manner.
Both Form 1040 and Form 1040-SR are standard forms for taxpayers with/without itemized deductions.
This form was revised and simplified for a better understanding of the taxpayers. It provides greater prominence to senior taxpayers.
Who are the Taxpayers?
If a taxpayer is age 65 (or older) they have the option to use Form 1040-SR. It is almost identical to Form 1040. But it features a larger print and a helping chart. It is designed to help senior taxpayers they can calculate their deductions.
The taxpayer does not have to be retired to use this form. So if you are still working at age of 65 or more then you automatically qualify to file Form 1040-SR. There is no limit on the total income.
Not all residents of the US are American-born. People who are not local residents, live in the US on the basis of a green card, or have undergone substantial present tests are liable for the tax.
Who are the Taxpayers?
Non-resident people with a US-source income will need to fill out this form.
If you are a non-resident dealing with business or trade in the US during the tax year, you need to fill the Form 1040-NR. Also, you will owe special taxes like AMT (alternative minimum tax) or household employment taxes.
Besides, if you also receive amounts from a health savings account, Archer medical savings account, or even a Medicare Advantage MSA, it will make the taxpayer eligible to fill out the form.
In case of Form 1040 filled has some mistakes in it, you will need to revise it. But it will not be the same form. The taxpayer needs a new form for an amendment to the tax return i.e. Form 1040X.
Who are the Taxpayers?
Taxpayers who want to amend their tax returns after filing need to fill out this form.
This form is not for basic mathematical errors. So if a taxpayer made errors in Form 1040, 1040-SR, or 1040-NR, they will need to file Form 1040X. If you are married, you can file it either individually or jointly (as a spouse).
Taxpayers looking to adjust the changes made by the IRS are eligible for the form too. They can make a claim about a loss or unused credit.
You will notice that two versions of Form 1040 are missing from the list.
Form 1040-A and Form 1040-EZ were used for files with less than $100,000 income. Their deductions were also less.
| Types of Form 1040 | Who are the Tax Payers |
| Form 1040-ES | Least deductions of $1000, after deductions and credits |
| Form 1040-SR | Taxpayers are 65 years old or older |
| Form 1040-NR | Non-resident people doing business |
| Form 1040-X | Any taxpayer who needs to amend tax forms |
Note: Treasury department eliminated these versions in 2018.
How to Receive Form 1040?
If you need a copy of Form 1040 then you need to follow a clear set of instructions, forms, and schedules.
- Get the print of the form on IRS.gov.
- Pay a visit to the taxpayer assistance center. Make an appointment first. You will need your photo ID and Social Security Number or Taxpayer Identification Number.
- To get a free form as a taxpayer you can visit a local library or a post office. But it’s best to call before visiting.
- Or you can order forms online or call the IRS. Forms are delivered within 10 business days with no additional charges.
What Schedules are Needed in Form 1040?
Businesses that work with employees with W-2 income only need to file Form 1040. But for a small business owner, it might be a bit complicated. You may need an additional schedule in such a case.
What is Alternative Minimum Tax?
Also known as AMT, it is a substitute for standard income tax for taxpayers. It leads to itemized deductions instead of standard deductions.
These itemized deductions are mentioned in some Schedules attached to Form 1040. AMT ensures that individuals are paying their fair share of the taxes.
Alternative Minimum Tax is also increased;
- If you are single then AMT is $70,3000
- If you are married and filing jointly your AMT IS $109,400
- If married and filing separately AMT is $54,700.
The taxpayers will need to calculate their liabilities twice – for regular income tax and according to AMT rules. Taxpayers have to pay a higher amount for the two (whichever it might be).
Attachable Schedules with Form 1040
Schedule 1 is used to report the additional types of income that you cannot report on Form 1040. These include:
-
- Business income from Schedule C
- Farm income or loss
- Alimony (for divorce decrees executed in 2018 or earlier)
- Taxable refunds of state or local income taxes
- Gains or losses from the sale of business property from Form 4797
- Rental income; royalties; or income from a trust, partnership, or S corporation
- Unemployment compensation
Schedule 1 is also used for you to report above-the-line deductions which are adjustments made to your income. You can take advantage of these deductions without itemizing them. They include:
-
- Educator expenses
- The deductible part of the self-employment task
- Health savings account contributions
- Moving expenses for members of the armed forces
- The deductible part of the self-employment tax
- Business expenses for reservists, performing artists, and fee-based government officials
- Contributions to self-employed simplified employee pensions, savings incentive match plans for employees of small employers, and qualified plans
- Student loan interest deduction
- Health insurance premiums for self-employed people
- Penalties on early withdrawal of savings
- Alimony paid (for divorce decrees executed in 2018 or earlier)
- Tuition and fees deduction
Schedule 1 is only attached to Form 1040 when any of the above-mentioned deductions or incomes apply to your return.
Schedule 2 reports all other types of income besides your standard income tax.
You have to report the following in Part I of Schedule 2:
-
- Alternative minimum tax (calculated on Form 6251)
- Excess advanced premium tax credits that need to be repaid. Subsidies for health insurance purchased on the health insurance marketplace are related to this.
In part II of Schedule 2, you have to report:
-
- 10% penalty for early withdrawals from IRAs, qualified retirement plans, and other tax-favored accounts
- Self-employment taxes
- Household employment taxes
- Unreported Social Security and Medicare tax
- Additional Medicare tax and net investment income tax
- Section 965 net tax liability for deferred income from certain foreign corporations
- Repayment of the first-time homebuyer credit
Schedule 2 is only attached to your form 1040 if these situations are applicable to you.
Part I of Schedule 3 is for nonrefundable credits, including:
-
- Foreign tax credit
- Residential energy credits
- Education credits
- General business credit
- Retirement saving contributions credit
- Credit for prior-year alternative minimum tax
- Credit for child and dependent care expenses
Nonrefundable credits can be used to reduce the amount of tax you owe to zero. But you will not get a refund over and above the amount paid through estimated payments or withholdings.
Part II of Schedule 3 includes other payments and refundable credits. Refundable credits can help you get a refund even if your tax drops below the owed $0. These include:
-
- Excess Social Security and Railroad Retirement Tax Act tax withheld
- The premium tax credit for marketplace health insurance
- Amounts paid with an extension request
- Credit for tax paid on capital gains by a mutual fund company (Form 2439)
- Credit for federal tax on fuels
- Health coverage tax credit
In order to claim these tax credits, you need to complete and file schedule 3.
Other IRS Tax Forms
It is the most commonly used schedule. Any additional income and adjustments made with it are recorded in Schedule A. On page two of Form 1040, itemized tax deductions are mentioned, such as medical expenses, mortgage taxes, and state and local taxes, so taxpayers use this schedule to report the adjustments in their income.
The normal items include capital gains, prize money, unemployment money, and gambling winnings. Also, it includes the student loan interest deduction, IRA deduction, and self-employment tax.
Schedule A is not needed if you claim the standard deduction.
Under the income section, interest and dividend income amounts are mentioned. This schedule is used in specific situations like those who owe alternative minimum tax (AMT) or require to make an advance premium tax credit repayment.
Schedule B is used when you have to report a dividend income and interest that is greater than $1,500. If your received dividend income and interest are less than $1,500, you can use Form 1040, lines 2a and 2b to directly enter the information.
Freelancers, independent contractors, and sole proprietors report their business revenue, expenses, and profits/losses (line 7). Taxpayers need to report the nonrefundable credits using Schedule C.
Child tax credits or credits for other departments are not included in nonrefundable credits. But it does include the foreign tax credit, general business credit, and education credits.
Schedule SE is used to calculate self-employment tax when your profit is at least $400.
When a taxpayer has a taxable investment account it means they have either capital gains or losses.
Usually, Form 1099-B is filled which includes the information. However, Schedule D is used to report the gains and losses.
Reports income/loss from rental real estate, partnerships, S corporations, royalties, trusts, and residual interests in real estate mortgage investment conduits (REMICs).
Taxpayers need to use Part 1 of Schedule E to report the rentals, or royalty income while they need Part 2 of Schedule E to conclude the losses/income from the trusts, partnerships, multimember LLCs, and S corporations.
Farmers working as sole proprietors, LLCs, trusts, and partnerships use the schedule F to report the gross income amount for the farming business, nurseries, selling livestock and crops, and breeding fish. (line 9).
If a taxpayer is a farmer, they can tally their income and expenses under Schedule J. This helps the farmers spread their liability between the bad years and the good years and average the income over three years. So whatever income they want to mention on the form will be covered here.
If household employees such as nannies, housekeepers, cooks, drivers, and gardeners are appointed, you are also responsible for withholding income, medicare taxes, and social security from their wages. You are also responsible for paying federal and state income taxes and payroll to the IRS. Schedule H also called the nanny tax, is used to calculate and report these taxes.
Taxpayers above the age of 65 and older, or individuals with disabilities that have taxable income can reduce their tax liability by claiming the disabled, or elderly credit. The Schedule R helps in determining how much you are able to claim.
| Types of Schedules | Requirements |
| Schedule A | Additional Income and Adjustments to Income |
| Schedule B | Specific tax situations |
| Schedule C | Non-refundable credits |
| Schedule D | Additional taxes on IRAs |
| Schedule E | Income / Loss from rentals |
| Schedule F | Farming Business |
| Schedule J | Farming / Fishing Business |
| Schedule H | Household Employment Taxes |
| Schedule R | Above 65 / Disabled Persons |
Note: If you are self-employed, you must file Schedule 4 under self-employment taxes.
How to File Form 1040?
Filling out Form 1040 is easier. Taxpayers have the option to file taxes – electronically or manually.
Currently, 90% of people use the electronic filing option. It is more convenient and popular. This way the need to visit the post office is eliminated.
Another advantage of filing an e-file is that the IRS issues tax refunds more quickly. Their mailing address is also mentioned in the Form 1040 instructions.
But if you do plan on filing manually, you need access to IRS forms, instructions, and publications on the official website. The only downside of filing manually is that it takes longer to process the returns.
Whichever option you use, April 15th is the due date. If you want more time, you can request a six-month extension. But you still need to pay your due amount by April 15th to avoid any interest charges.
Save Time with Form 1040
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