Which Tax Form Should I Use?

Preparing your annual federal income tax return can be a confusing and intimidating experience. Many taxpayers pay someone else to prepare their returns simply because they don't know where to start. The 800 forms and schedules produced by the Internal Revenue Service address a bewildering assortment of tax situations, and finding the right one can seem impossible.

Fortunately, there is a logic behind the IRS forms and schedules. Most individual taxpayers will start with the same tax form: Form 1040, U.S. Individual Income Tax Return. That is the return that every U.S. citizen and permanent resident must file, regardless of whether you made the minimum wage or made millions on Wall Street.

But before we get to a discussion of Form 1040, we should first explain the difference between a tax form and a tax schedule. In most cases, a tax form is the document you file with the IRS to provide it with information about yourself, your business, or other organizations you may be operating. A schedule is a form that you fill out to supplement the information provided on a form. There are few situations where you must file a tax schedule that doesn't accompany a form.

Before You Start

Regardless of whether you will use a tax professional or prepare your own returns, there is some information that you will need to prepare your taxes. In the past, you often needed to submit copies of the information statements you may have received, but these days, the IRS is already getting a copy of most of them, so you don't need to worry about sending them in with your return. Examples of documents you will need include:

• Form W-2 that employers must send out each January reporting amounts they paid you in the previous year
• Form 1099 reporting that you had nonemployment income, including income from investments
• Social Security numbers or tax identification numbers of everyone in your household
• Copies of last year's federal and state income tax returns in case you need to provide information reported on those returns
• Bank account information and a credit card or debit card so you can direct-deposit any refund and make any necessary tax payments
• Statements of student loan interest paid and payments to retirement accounts

While most taxpayers take advantage of the standard deduction, those who plan to claim itemized deductions must have documentation of the specific deductions they plan on claiming.

If you run your own business or are self-employed, you will need more information about payments you may have received from customers and any deductible business expenses.

Form 1040

Despite only being two pages long, Form 1040 can be an intimidating document that asks for a great deal of information you may not have at your fingertips or may not apply to you. Additionally, in several common tax situations, you must include various schedules with your form that can be almost as complex as Form 1040. This is why many Americans turn to tax professionals or tax preparation software to guide them through the process.

Before the Tax Cuts and Jobs Act in 2017 eliminated the form, many taxpayers under 65 who did not have dependents and earned less than $100,000 a year could file a simplified return using Form 1040EZ. But now, all taxpayers under age 65 must use the standard Form 1040. The Form 1040-SR still provides a simplified return option for seniors, regardless of whether they have retired.

You will use Form 1040 regardless of whether you are single, married, or head of household (generally a single individual with one or more dependents). If you are married, you can file a joint Form 1040 with your spouse to make tax preparation easier. This also allows you to take advantage of the lower tax rates for married couples filing jointly.

You can each file your own return as "married filing separately," where each spouse is taxed individually, and you can't take advantage of the lower tax rate for married couples. Generally, taxpayers only file as married filing separately when they are separated, going through a divorce, or one spouse may be in trouble with the IRS.

Even if you had little income during the previous tax year and aren't required to file a federal income tax return, it is a good idea to file a Form 1040. It is needed to claim federal benefits, like the earned income tax credit, which can give you a refund even if you owe no taxes.

Filling Out Form 1040

While it may feel intrusive, you are legally required to provide all the information the IRS requests on any tax form, including Form 1040. Hundreds of taxpayers have challenged the IRS' right to collect this information in court. To date, none has been successful.

Most of those taxpayers ended up paying additional penalties and interest. The bottom line is that, no matter how you feel about the U.S. income tax system, it's always cheaper and easier to pay your tax bill each year and not challenge the IRS.

Information you must provide on Form 1040:

• Your full name and the full name of your spouse and any dependents
• Social Security number for you, your spouse, and dependents
• Filing status
• Income earned from all sources
• Health care coverage information
• State and local tax payments
• Information on self-employment income

You may also need to submit information on additional schedules that must accompany your Form 1040. Common schedules include:

• Schedule A reporting itemized deductions
• Schedule B reporting income from interest and dividends
• Schedule C reporting self-employment income
• Schedule D reporting capital gains and losses
• Schedule SE that is used to calculate self-employment tax

Calculating Your Tax

You will use the financial information you reported on your Form 1040 to calculate your adjusted gross income (often called "taxable income"), which determines your tax bracket and how much tax you must pay. Adjusted gross income is calculated by taking your total income and subtracting certain adjustments, such as IRA contributions and student loan interest. These are called adjustments because taxpayers are entitled to claim them, even if they don't itemize their deductions.

Once you have your taxable income, you will turn to the Form 1040 instructions for the tables that show how much tax you will pay on that amount. Fortunately, if you use tax software, your tax due will be calculated automatically, which spares you the effort of looking through the pages of tax tables included in the instructions.

Filing Your Returns

While more than 90% of taxpayers use tax professionals or tax software to prepare their returns e-file, some taxpayers still prefer to file by mail. There are many advantages to e-filing, but the IRS can't require you to do so. Where you mail the returns depends on where you live, so check out the Form 1040 instructions for the mailing address for your state or use the list of filing addresses on the IRS website.

Additional Forms You Might Need

While the Form 1040 covers nearly all individual income tax situations, if you own a business, you may need to file one of these forms:

• Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return
• Form 1065, U.S. Return of Partnership Income
• Form 1120, U.S. Corporation Income Tax Return
• Form 1120-S, U.S. Income Tax Return for an S Corporation

Trusts and large estates must also file tax returns using Form 1041, U.S. Income Tax Return for Estates and Trusts.

Don't Forget State Tax Forms

Most states require residents to file a state tax return. If you live in one of these states, you must submit more forms when filing your state taxes. Each state will have its own rules on the paperwork required. It is important to research which forms you need.

Additional Questions? Talk to a Tax Lawyer

Tax forms and the process of filling them out can get convoluted as sometimes it's hard to know which form to use, let alone what information to report. Reviewing your financial situation with an experienced local tax attorney can give you peace of mind and help you reduce your tax bill. Reach out to an experienced tax law attorney in your area.