Almost everyone in the United States needs to file IRS Form 1040. But for business owners, independent contractors, and the self-employed, there are some specific details you should know about. Read on for the information you need for a stress-free tax filing.
What is Form 1040?
Form 1040 is how individuals file a federal income tax return with the IRS. It’s used to report your gross income—the money you made over the past year—and how much of that income is taxable after tax credits and deductions. It calculates the amount of tax you owe or the refund you receive.
This form can handle multiple sources of income and more complicated tax situations that an independent contractor or freelancer might face.
If you’re a sole proprietor, you’ll include Schedule C with your Form 1040 to report income or loss from your business.
IRS Form 1040
Who needs to file Form 1040?
Most people in the U.S. need to file Form 1040 no matter if they are self-employed, work for someone else as an employee, or live off income from investments. In general, you must file a Form 1040 if:
|Your filing status is . . .||At the end of 2019 you were . . .||And your gross income was at least . . .|
65 or older
|Married filing jointly||Under 65 (both spouses)
65 or older (one spouse)
65 or older (both spouses)
|Married filing separately||Any age||$5|
|Head of household||Under 65
65 or older
|Qualifying widow(er)||Under 65
65 or older
However, if you have net earnings of at least $400 from self-employment, you must file a tax return. That means most independent contractors, freelancers, and business owners have to file Form 1040, even if they don’t meet the gross income thresholds shown above.
For more advice on who needs to file, check out Chart A, B, and C in the Instructions for Form 1040.
What about 1040EZ and 1040A?
Before 2019, there were shorter versions of Form 1040 for filers with simpler returns. These were Form 1040EZ and 1040A, but they no longer exist. The IRS now requires most taxpayers to use Form 1040. However, taxpayers age 65 and up may be able to file using Form 1040-SR.
How to get Form 1040
The IRS offers a PDF version of Form 1040 that you can download and fill out manually, but your best bet is probably using one of the popular tax software programs. The software will walk you through filling out the form, any necessary schedules that go with it, and help with the math.
Whichever method you choose, the form is divided into sections where you can report your income and deductions to determine the amount of tax you owe or the refund you’ll receive.
How to fill out Form 1040
To get started filling out Form 1040, you’ll first need to gather all of your tax documents, including W-2s, 1099s, and other records of your income and deductions.
Once you have your tax documentation in hand, you have three main options for filling out and filing Form 1040:
- Do it yourself using IRS Free File
- Do it yourself using commercial tax software
- Hire a paid tax preparer to do it for you
How Bench can help
A one stop shop for bookkeeping and tax filing is a reality with Bench. Our expert team of bookkeepers will record every revenue and expense to provide you with up-to-date monthly financials. Then once it’s tax season, your books get sent over to a tax professional for a final review and filing. Learn more.
If you plan on doing it yourself, read on.
Report your income
On the first page of Form 1040, you’ll provide your (and your spouse, if married) name, Social Security number, address, and information on your dependents.
Then you’ll move on to report all sources of income you received for the year. Lines for many common types of income, such as wages, interest and dividends, retirement income, and capital gains are provided.
If you have any additional income sources, you’ll also need to complete Schedule 1 to report:
- Business income (in which case you’ll also need to complete Schedule C)
- Gains or losses from sales of business property
- Rental real estate, royalties, or income from a partnership, C corporation or trust (in which case you’ll also need to complete Schedule E)
- Farm income
- Unemployment compensation
The sum of all income sources is your total income.
Claim your deductions
Deductions from your total income reduce your taxable income. Deductions on your Form 1040 fall into two broad categories:
1. Above-the-line deductions
Above-the-line deductions (also known as adjustments to income) get their name because they appear above the line for adjusted gross income (AGI) on Form 1040. These deductions reduce your AGI, and you don’t have to itemize to claim them.
- Educator expenses
- Contributions to health savings accounts
- The deductible portion of self-employment taxes
- Contributions to self-employed retirement plans and IRAs
- Self-employed health insurance premiums
- Student loan interest
- Alimony paid
If you qualify for any above-the-line deductions, complete Schedule 1.
2. Itemized deductions or the standard deduction
When you file Form 1040, you have the option of itemizing deductions or claiming the standard deduction by completing Schedule A. Typically, if your total itemized deductions are greater than the standard deduction available for your filing status, you’ll opt to itemize.
Itemized deductions include:
- Medical and dental expenses
- State and local income and property taxes
- Home mortgage interest
- Gifts to charity
- Casualty and theft losses
If you own a business, you may also benefit from the qualified business income deduction. Your total income, less all available deductions, equals your taxable income.
Calculate your tax liability
On the second page of Form 1040, you’ll calculate your tax liability. If you’re preparing your return by hand, you’ll need to consult the IRS Instructions for Form 1040 to determine your tax using the tax tables.
There are a handful of other taxes that will require you to also complete Schedule 2.
- The alternative minimum tax
- Self-employment tax
- Additional taxes on early distributions from IRAs and other tax-favored accounts
- Household employment taxes
Page 2 is also where you claim tax credits and list the tax payments you’ve already made for the year. Some tax credits, such as the Child Tax Credit, the Earned Income Credit, and the additional child tax credit, go right on Form 1040.
You’ll need to complete Schedule 3 if you have other tax credits, including:
- Foreign tax credit
- Credit for child and dependent care expenses
- Education credits
- Retirement savings contributions credits
- Residential energy credits
Once it’s signed, you can file Form 1040 electronically or through the mail.
Where to mail Form 1040
If you want to file a paper return, the address to which you’ll send your return depends on the state in which you live. You can find that address in the IRS Instructions for Form 1040.
However, if you’re able, e-filing is the preferred way to file IRS Form 1040. The IRS recommends that all eligible taxpayers file their returns electronically because it’s easier, more convenient, and more secure than paper filing. It can also help you get your tax refund faster. You can e-file your return using IRS Free File if your adjusted gross income is $66,000 or less. Otherwise, most tax prep software and tax professionals are authorized to electronically file Form 1040.
Form 1040 filing deadline
You’ll need to submit Form 1040 to the IRS by April 18, 2022. If you need more time, you can request an extension.
Other tax forms you may need
Above, we’ve listed a few common forms and schedules you may need to attach to Form 1040, but there are several more you may need to complete. Review the IRS Instructions for Form 1040 for any other forms you need.
Also, if you’re not a sole proprietor, you may need to file a separate tax return for the business.
Partnerships and multi-member LLCs file Form 1065 to report the income and expenses of the partnership. Your share of the partnership or LLC’s taxable income will be reported on Schedule K-1 of Form 1065, and you’ll need Schedule K-1 to complete your Form 1040.
S corporations file Form 1120S to report the income and expenses of the corporation. Your share of the corporation’s taxable income will be reported on Schedule K-1 of Form 1120S, and you’ll need that K-1 to complete your Form 1040.
C corporations file Form 1120 to report business income and deductions. A C corporation pays its tax with Form 1120. So while you’ll still need to file your Form 1040 individual income tax return, you won’t need to report your business income there, just your personal income.
If you make a mistake on Form 1040
If you made a mistake on your 1040 and need to make an amendment, you can do that on Form 1040X. You have three years from the date you file your federal tax return to make a correction.