When tax time rolls around, it is important that you make sure that you fill out your 1040 tax forms correctly. The 1040 is the most widely used official document for filing annual income tax returns. Most people will receive the document in their mailboxes sometime during the month of January but if you don't want to wait you can also find printable copies of them online.
The form is divided into several sections, each one detailing what information you need to provide. There will be a section where you can list all of your income for the year and a separate section that allows you to detail all of your taxes paid. Depending on how much income you may have received you may need to attach additional forms, schedules, and reports to support the information you've provided.
How to Report Your Income
Reporting your income is always done on the first page of the 1040 tax forms. If you follow the detailed instructions that come with the form, you will be able to calculate the Adjusted Gross Income (AGI) by entering the information on the different types of income you may have earned. This could include your wages and salary, any tips you may have earned, stock dividend payouts, taxable refunds, business income, capital gains, pension payments, unemployment income, or Social Security benefits. There is an extensive list of types of income you may receive so it's impossible to list them all but by following the prompts, you should have no problem in reporting them all in the first section of the form.
Claim Your Deductions
The next section of the 1040 tax forms is where you can claim your tax deductions. You will be given the option to claim the standard deduction or to list the itemized deductions on your form. Those who have mortgages, dependents, medical expenses, or business expenses will likely opt to file the itemized deductions as this often helps them to reduce the amount of the tax to be paid. If the total of your itemized deductions is lower than the standard deduction then your taxable income will be reduced and you'll have to pay more in taxes. However, if your itemized deductions are higher than the amount of taxes your pay will be reduced. Some people choose to use both forms to see which one will reduce their tax liability more and then submit the forms that work best for them.
Tax Preparer or Software
There is a dividing line when choosing between hiring a professional tax preparer or accountant to prepare your taxes or to use a software program. The answer is a personal one as it will depend on how much money you have to spend, how complicated your tax preparation may be, and whether or not you have the time to do it. For most people, the more complicated their tax calculations are the more likely they will hire a professional accountant or tax preparer to take care of them. There is less risk of problems and complications in the end.