When filing Form 1040-A, a taxpayer will most likely be asked to furnish information about wages earned and capital gains realized. Although the filing of Form 1040-A has been simplified, some individuals may still find it difficult to declare their income. Taxpayers with educational problems may find it hard to state their income correctly on the form. Below is an in-depth description of a Form 1040-A and its use.
What is Form 1040-A: U.S. Individual Tax Return?
Form 1040-A, U.S. Individual Tax Return is essentially a streamlined version of Form 1040. It is used as an alternative to the regular 1040 when it would be more convenient to file your tax return as a single taxpayer. This can happen if you:
- Are single and have only wage or salary income, or
- Are married and are filing jointly with your spouse and all the income you earned together is reported on only one W-2 form, or
- Are married and are filing separately but are reporting all the income you earned together with your spouse, or
- You are filing as head of household.
What Is on a 1040-A?
Income: There are several ways you can report your income on a Form 1040-A. It can be done through wages, interest, or unemployment compensation. If you are in a higher tax bracket, you may not want to report your interest or unemployment compensation.
Income Tax Withheld: You must declare all income withheld by the employer on your Form 1040-A before subtracting any other amount. However, if you received a refund from your employer after filing your return, it is important that you include it in order for the IRS to match up all information correctly.
Unemployment Compensation: If you received unemployment compensation, it should be declared on the 1040-A form. This amount will not be taxed until it is repaid or claimed on your return for the previous year. If you did receive a tax refund because of your unemployment compensation, it must be reported as income.
Deductions and Credits: There are a lot of deductions that can be deducted from the income declared in your 1040-A form, such as for IRA and health savings accounts contributions, student loan interest payments, and mortgage insurance premiums.
Lottery Winnings: If you received winnings from a lottery, the amount of your winnings and the name of the person who won them must be declared. For people who cannot make out a winning ticket, this particular type of income should be recorded as "not reported".
How to Report Your Income?
On the 1040-A form, you can choose to report your income either way. If you chose to report it through wages, the employer will be given a copy. The employer will also be required to attach their payment of taxes and penalties if they were withheld or have been paid in cash. You can also request that the 1040-A form be mailed directly to the IRS or that they allow an extension time for filing. If you choose to report your income through interest or unemployment compensation, you must attach the 1040-A form for the IRS together with a copy of Form 1099-MISC and Form 2439.
Form 1040-A: how to fill it out
Filling out Form 1040-A is relatively easy if you have the right guidance.
First, you will need certain information and other forms to prepare Form 1040-A. These include your W-2, as well as records of amounts not deducted, such as gambling winnings and losses or donations made. If your business is an S Corporation, then you must use a form called the "S Corporation Indirect Tax Return." You must also create a form that shows your estimated tax payments and any additional payments made with Form 1040-V (or any other payment voucher).
You must also make sure you have enough income to file Form 1040-A. You must also include wages and salaries and tips on line 1 of Form 1040-A. If you are using line 2 for your filing status, then it is a good idea to include all of your other wages and salaries as well-- that is, not just the amounts from line 1. This will help ensure that you do not run into any problems with the IRS later on in regards to the types of deductions that can be claimed.
How much income a married couple is allowed to claim on Form 1040-A?
The IRS has established procedures in place when determining how much tax each member of the marriage unit can claim during each year. In other words, the actual amount that two members of a married couple can claim per year may be different from the amount claimed for an unmarried person with no children. The basic rule is that each member of a married couple may claim only their own wages and salaries as income, however, they can also include the following:
50% of the other spouse's wages and salaries if they are under 65. If they are over 65, then they may claim 100% of their spouse's wages and salaries if they have not yet claimed this on their own tax return.
100% of the other spouse's earned income if the person claiming the income has claimed their spouse as a dependent on their tax return. This includes earned income in addition to wages and salaries.
50% of unearned income, plus the other spouse's earned income not claimed on their own tax return. The unearned income is any income that is not wages or salaries. It includes taxable interest, dividends, and capital gains.
Takeaway
Filing Form 1040-A is an important step to take if you need to file an income tax return. However, when preparing the form, it is important to do so correctly, so that there are no mistakes that may lead to you having a tax bill in the future. If you want more guidance on how to prepare your Form 1040-A properly, contact a professional tax service today!
