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Understanding the Individuals IRS Forms

Understanding the Individuals IRS Forms

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Understanding the Individuals IRS Forms
IRS forms are filled out by individual taxpayers, businesses, government entities, and charities to report income and calculate taxes owed to the federal government. The IRS forms are the necessary documents used by the Internal Revenue Service to levy federal taxes. 
Each of the above listed groups of taxpayers requires completion of varying forms. The alternate forms exist to organize the levying process; all types of landowners, employees, enterprises, and organizations must pay taxes to the federal government to fund public projects and pay off the national debt. For instance the 1040, is the necessary starting point and most well-known IRS form for the individual taxpayer.
The Form 1040 is the IRS form that documents an individuals Federal income tax return. The form 1040 was first published for use in 1913, 1914, and 1915 to raise revenue for the United States federal government. After successfully generating sufficient funding through the levying of the personal income tax, the form 1040 became an annual staple in 1916. 
Depending on the individuals situation and complexity there are various forms of the form 1040. For example, individuals who do not invest in the stock market (no capital gain or loss) or incur zero itemized deductions, can use a simplified IRS form known as the Form 1040A (short form) or the Form 1040EZ (easy form.)
Income tax returns and other IRS forms for the individual taxpayer are due by April 15th of the subsequent fiscal year. Excluding attachments or add-ons, the standardized Form 1040 consists of two full pages. The first page of the IRS form requires information about the individual tax payer, his/her dependents, adjustments to income, and income items. The second page is used to calculate allowable deductions, credits, tax owed given the income, and implements funds previously withheld from wages or payments made towards a tax debt.
The form 1040 contains 11 attachments, known as schedules, which vary in necessity based on the taxpayer's situation. Listed below are the IRS forms attached to the Form 1040, their purpose, and the specific tax levied.
         Schedule A-Used to itemize allowable deductions made against income. Itemized deductions are eligible expenses that taxpayers report on their IRS forms to decrease their taxable income. After computing the adjusted gross income, taxpayers will review a lost of allowable deductions, appropriately itemize them, and then subtract the itemized deductions from their AGI amount. Once the calculations have been made the individuals taxable income amount is finalized. 
Examples of allowable itemized deductions include:Medical expenses that exceed 7.5% of the taxpayer's adjusted gross income, premiums for medical insurance, necessary travel expenses, payments for prescription drugs, charitable contributions, state property taxes (property and income), and investment interest. To save time and dependent on situation, taxpayers may choose to take a standard deduction, which is between, $5,150 and $14,300. 

         Schedule B-IRS form that calculates interest or divided income. Schedule B is required only if the amount received from dividends or interest exceed $1,500 during the tax year. Dividends refer to corporate profits "kicked-back" quarterly to investors of corporations. 

         Schedule C-IRS form that lists all income and expenses related to self-employment. Depending on ease of situation, a streamlined form (C-EZ) is available for sole proprietors. 

         Schedule D-Used to file capital gains and losses incurred during the taxable year. Schedule D is used to calculate the taxable amount given the special rates applied to capital gains. Capital gains are profits which result from investments into an asset, such as real estate, stocks, bonds, or mutual funds. 

         Schedule E-Used to report income and expenses emerging from the rental of royalties or real property. Pass-through entities (partnerships, trusts, estates) are also reported on this IRS form. 

         Schedule EIC-IRS form which documents an individuals Earned Income Tax Credit. Designed to encourage low-income workers and offset the levying burden of payroll taxes, the EIC offers tax credits to individuals who receive a low annual income while disabled, raising a family, furthering an education, or, sharing a residence. 

         Schedule F-IRS form used to report expenses and income related to farming.

 

         Schedule H-Used to document taxes owed to due employment of household aid. 

         Schedule J-IRS form that calculates average farm income over a period of several years. 

         Schedule M-IRS forms applied in 2009 and 2010, used to claim the $400 "Making Work pay" tax credit.  

         Schedule R-Used to calculate tax credits for the elderly or disabled.

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