The 1040A: box-by-box
No matter how hard you try, you just
can't file the 1040EZ form this year.
Don't be too upset about
losing the option to file the easiest tax return. Your tax chore still
might not be too bad if you can file the next step up: Form
Yes, the 1040A is longer. But it could get you
a couple of extra tax breaks. So let's get started, box-by-box.
If you received a tax package from the IRS with a peel-off label,
just stick it on here. If any of the information is incorrect, make
the corrections -- clearly -- directly on the label.
If you didn't receive a tax package, fill in
all the information requested. Remember, joint filers must include
both husband's and wife's information.
And don't forget your Social
Security number (numbers, for married couples) in the boxes
provided at the upper right-hand corner of the form. Even if you're
married and decided to file separately, you must enter your spouse's
tax ID number underneath yours. And make sure your entry is correct.
The IRS won't process a return that's missing a Social Security
number. That could mean penalty and interest payments for you.
You also get the chance to give $3 to the Presidential
Election Campaign Fund. It doesn't matter if you (and your spouse)
check "Yes" or "No." It won't affect your tax
Now on to filing status. Here, unlike the EZ, you get all the Internal
Revenue Service status options on lines 1 through 5: single, married
filing jointly, married filing separately, head of household and
qualifying widow or widower with a dependent child.
Each status has specific requirements and offers
different tax advantages. Also, the standard
deduction amount is different, as are the final tax amounts
due. So review
your status and pick the one that fits your needs and gives
you the best tax result.
Next, let's start cutting away at your impending tax bill.
The exemptions section of the form (line 6 and
all its sublines below) tells the IRS how many people depend on
you for support. Technically, if you're married filing jointly,
your spouse isn't your dependent. But when you file, each of you
is counted as an exemption, so check boxes 6a and 6b. Later in the
filing process, this will help reduce your taxable income.
Your dependents are, in most cases, people who
live with you. But there are instances where you can provide substantial
support and claim a person as a dependent even if they lived elsewhere.
It's important to accurately claim
dependents so that you get the full benefit of the exemptions.
The IRS also will check to ensure your dependents are valid. To
that end, the agency requires you to enter their names on line 6c,
along with their Social Security numbers and relationships to you.
On the extreme right, you'll see several lines
regarding your dependents. Enter the appropriate numbers on each
line. At line 6d add these up and put the total in the box. This
is the number you'll eventually multiply by $3,050 and subtract
to get your taxable income amount.
Now to the main reason the IRS wants any return from you: Just how
much money did you make last year?
To make these monetary entries a little easier
(on you and the tax examiner who'll be reviewing your return),
the IRS allows you to round off cents to whole dollars. Drop amounts
under 50 cents to the last dollar and increase amounts from .51
to .99 to the next dollar. If you round off one entry, you must
round off all entries.
On line 7, most of us enter the dollar amount from the W-2, Wage
and Tax Statement, we got from our employer. If you had several
jobs, you should have a W-2 for each. Add the salary amounts from
all and put the total here.
Any other income you made, even if you didn't
get a W-2, also goes here. This includes, but is not limited to,
wages as a household employee, any tip income you weren't required
to report to your boss, allocated tips, dependent care benefits,
employer-provided adoption benefits, certain scholarship and fellowship
grants and disability pensions. Much of this "other" money
will be reported to you (and copied to the IRS) on various
other forms, usually with 1099 somewhere in the title.
Don't overlook this "other" income.
The IRS certainly won't and will come asking if your income amount
is less than what's reported by your various employers and other
And don't forget to attach copy B of all your
W-2 forms in the space indicated on the return.
On line 8 you report what you earned in interest. The IRS wants
to know about all of it, even if you don't owe taxes on it.
Taxable interest amounts, generally from bank
accounts and similar savings instruments, go on line 8a. This money
usually is reported to you (and the IRS) in box 1 of the 1099-INT
form sent by your financial institution. If
your total exceeds $1,500 then you'll have some more paperwork to
complete: detailing your earnings on Schedule
1. But if the interest is less than that, just enter it on line
If you got any tax-exempt interest, again usually
delineated on financial statements, put that on line 8b. There's
no threat of an extra form for this money, regardless of the amount.
If you received ordinary dividends, you'll get a 1099-DIV showing
the amount in box 1a. That amount goes on line 9a of this tax return.
If the total is more than $1,500 or if you received ordinary dividends
as a nominee (that is, they were registered in your name but the
actual money belonged to someone else), you must fill in and attach
1, Part II.
Because of tax-law
changes last May, you'll see a new line on the 2003 Form 1040A.
The new line 9b is where you'll enter qualified dividends; these
will appear in box 1b on your 1099 statement. Qualified dividends
now are taxed at 15 percent (or 5 percent for taxpayers with lower
incomes). Details on what constitutes a qualified dividend can be
found on page 25 of the Form
You'll also notice that the area on line 9b
where you enter qualified dividends is inset, meaning that this
amount is not included when you total your income in a few more
lines. Don't worry; the IRS will get back to it. You'll have a special
worksheet to account for these earnings and to ensure that you pay
the appropriate, lower tax on them.
Capital gains distributions
Investors who received taxable capital gain distributions but had
no other capital gains transactions to report can now file the 1040A.
Simply put the distributions amount shown on your fund or broker
statement on line 10a. (If your 1099 statements report nontaxable
distributions that you must report as capital gains, you can't use
this form; you must file the longer Form 1040.).
You'll also see a new line 10b on the form this
year. Those tax-law changes that affect your dividends also apply
to capital gains. In this case, capital gain distributions received
after May 5, 2003, are taxed at 15 percent instead of 20 percent
(or, for lower-income investors, 5 percent instead of 10 percent).
As with qualified dividends, the amount of your eligible distributions
will be tallied on the separate tax computation worksheet.
If you took money from an individual retirement account, you
report it on line 11, a and b. This is from any IRA -- traditional,
Roth or a self-employed IRA plan. You should have a 1099-R showing
the amount distributed
and whether it was taxable or non-taxable. Don't overlook that taxable
amount entry on the "b" portion of line 11; it's not always
the same as the total distribution.
As with IRA distributions, the IRS wants to know about any pension
and annuity payments you received. These, too, will be reported
on a 1099-R form.
If your pension or annuity is partially taxable
but your 1099 doesn't show just how much, follow the instructions
Publication 939, General Rule for Pensions and Annuities,
to determine the taxable part. Once you've computed that figure,
it goes on line 12b and the total payment on line 12a.
Line 13 covers income from two very different, but common, sources:
- Unemployment compensation: You must
pay federal tax on unemployment benefits. The paying agency should
have sent you a Form 1099-G showing the amount paid to you for
- Alaska Permanent Fund dividends: Since
1982, Alaska residents have received an annual payment from their
state as their share of oil sales. This amount is reported here.
Add them up and put the total on this line.
If you received Social Security payments, you should have received
a Form SSA-1099. Some of these benefits
may be taxable. This also is where you would report Railroad
Retirement Board payments, detailed on Form RRB-1099.
To determine just how much of your Social Security
or railroad benefits are taxable, use the worksheet on page 29 of
Note that for lines 11, 12 and 14, the "b"
portion -- the taxable amount -- is entered on the far right so
it can be added up at the bottom of the page. Be sure that's the
number you put in this right column; not the "a" figure,
which includes any non-taxable payments.
On line 15 you put the total of lines
7 through 14b. This is your total income.
Adjusted gross income
This total income amount, however, is not what your tax bill
is based on. Rather, you use your adjusted gross income to figure
your taxes. This next section is where you actually make those adjustments.
Line 16 is a tax
break for teachers and other public and private school employees
who spent their own money on classroom materials and supplies. Up
to $250 of qualifying purchases may be claimed here. If both you
and your spouse are teachers, you can claim up to $500, but only
if each of you spent the maximum credit amount. If you spend $300
and your spouse spent $200, your deduction is $400.
If you contributed to a traditional
individual retirement account, part or all of it may be deductible.
Line 17 is where you report -- and subtract -- that amount. Use
the worksheet on page 30 of the 1040A instruction booklet to calculate
the amount of your IRA deduction.
Remember, it's only a traditional IRA that offers
the possibility of a deduction. You can't deduct contributions to
a Roth account or any company retirement plans, such as a 401(k)
Student loan interest
For 2003 returns, you get to deduct up to $2,500 you paid in
interest on a student loan. The loan must meet certain guidelines,
primarily determined by your income and what the loan money was
used for. Check out the 1040A instruction booklet for the requirements,
as well as the worksheet on page 31 to figure out the exact amount
to enter on line 18.
Tuition and fees
If you continued your education but didn't have to go into debt
to do so, line 19 offers you a way to write off some of your schooling
costs. You can claim here up to $3,000 in eligible tuition and fees.
As with the student loan deduction, there are limits.
And if you claim the Hope or Lifetime Learning
tax credits to pay some school costs for a student named as a dependent
on your return, you cannot use the tuition and fees adjustment for
that same student. Similarly, you can't use this deduction on expenses
you already paid with tax-free scholarship, fellowship, grant, or
education savings account funds, such as a Coverdell education savings
account, tax-free savings bond interest or employer-provided education
assistance. Uncle Sam doesn't like taxpayers double-dipping in the
Adjusting your income
After taking your available adjustments on lines 16 through
19, enter the total on line 20. This figure, when subtracted from
your total income amount on line 15, gives you your adjusted gross
income, which you enter on line 21. AGI
is the key to many other tax steps. It determines whether you get
certain credits or can use the full value of exemptions.
Tax, credits and payments
Most importantly, your AGI is the starting point (yes, the starting
point even though you've now moved to the form's second page) for
figuring your taxable income. You want to get your taxable income
as low as possible, because the less you have, the smaller your
To begin this whittling process, take your line
21 AGI amount and re-enter it on line 22.
Elderly and blind credits
Taxpayers who are 65 or older or visually impaired of any age need
to take care to check the boxes on lines 23a. There is one for each
spouse for couples filing jointly. And don't forget to enter the
number of the boxes you check in the larger box to the right. If
you are able to check the boxes, you'll get a larger
Conflicting spousal deductions
If you're one of the small group of taxpayers who is married
but files separately from your spouse, don't overlook line 23b.
You'll need to check this box if your spouse itemizes on his or
her separate return, because that choice means you
can't take the standard deduction; the IRS requires you to enter
zero as your standard deduction amount on the next line.
In this case, you might consider itemizing yourself
so you'll have the chance to get at least some deductions. If you
do, you can stop reading now and head over to Bankrate's discussion
of the long Form 1040 and Schedule
A because that's what you'll have to file.
If you can use the standard deduction, the amount for your filing
status goes on line 24. For 2003 returns, single filers can deduct
$4,750; married couples filing jointly or qualifying widows or widowers
get $9,500; heads of households get $7,000; and married filing separately
taxpayers who both opt for the standard deduction are allowed $4,750.
You have to use another instruction book worksheet
(page 33) to figure your standard deduction if you checked any of
the line 23 boxes or if someone can claim you (or your spouse if
filing jointly) as a dependent.
Once you've found the correct standard deduction,
subtract it (line 24) from line 22 and enter the amount on line
Next, you get to take tax advantage of all those people who depend
on you. Multiply the number of exemptions you entered on the front
page (line 6d) by $3,050. That amount goes on line 26.
When you subtract line 26 from line 25, you'll have your taxable
income. It goes on line 27. If you have lots of exemptions and the
math results in a negative number, enter zero. That means you have
no taxable income.
But don't stop. If
you had taxes withheld, you must file a return to get that money
back. And there are some special
tax credits further down the form that may even get you a refund
check. We'll discuss them shortly.
First, let's deal with those filers who aren't
as lucky as you and do have a tax bill.
The IRS gets down to the collection business on line 28. If
you, like most filers, entered a dollar amount on line 27, go to
the Tax Table beginning on page 58 of the instruction book to find
your tax due and put that amount on line 28. This should be sufficient
for most filers. A few, however, will have to fill out additional
forms and worksheets.
This is the case if you find you might owe the
minimum tax. This parallel taxation system was designed 35 years
ago to ensure that wealthy taxpayers didn't use loopholes to escape
paying their fair share of taxes. However, many middle-class filers
find they owe the AMT, in large part because the system isn't indexed
for inflation. Check page 34 of the instructions; if you find you
must figure the AMT, you'll have to use the worksheet on page 35.
You'll also have to use a worksheet (the one
on page 34) if you had qualified dividends or capital gains distributions.
But this extra paperwork should help cut your taxes, rather than
add to them. This is where you use the
amounts you entered on lines 9b and 10b and figure their taxes at
the new lower rates.
Now on to tax credits. Credits are a great tax
break. You subtract them directly from the tax you owe (line 28).
If you have enough in tax credits, you could cut your tax bill to
zero. And a couple could get you a refund even if you owe no tax.
Child and dependent
First on Form 1040A come the credits that can wipe out your
tax bill. One of these is the credit
for child and dependent care expenses, used generally to help
offset what you paid someone to care for your young child, any other
dependent or a spouse who couldn't care for himself or herself.
To determine if you're eligible to receive this credit and how much
it will be, you'll need to fill in and attach Schedule
2. If you can use this credit, the amount goes on line 29.
Elderly and disabled
You may be able to take the credit for the elderly or disabled
if you are 65 or older or retired on permanent and total disability.
If so, you'll need to fill out Schedule
3 and enter this credit amount on line 30.
The IRS offers two education
tax breaks: the Hope Credit and the Lifetime Learning Credit.
If you're eligible for either (or both), you enter the amount on
The Hope Credit can reimburse some schooling
costs for you, your spouse or a dependent. There is one major limit.
Only expenses for the first two years of post-secondary education
The Lifetime Learning Credit, however, lives
up to its name. It covers college juniors, seniors, graduate students
and even adults returning to college. In fact, you can take this
credit to help offset the cost of a non-college course you take
that's designed to help improve your job skills.
Education tax credit specifics are in Form
8863, which must be filed with your return to claim these credits.
Next on 1040A is the retirement
savings contributions credit, a tax break designed to reward
lower-wage earners who contribute to retirement accounts. An eligible
filer could use the credit to reduce his tax bill by as much as
$1,000. The actual tax break depends upon a worker's income, filing
status and just how much he puts into a retirement plan. Basically,
the lower the income, the bigger the credit.
Of course, any offer of a smaller tax bill generally
involves a bit more work on the taxpayer's part. To see if you can
claim the saver's credit, check out page 36 of the instruction book.
If you're eligible, you'll need to complete Form 8880 to determine
the amount to enter on line 32 of your 1040A.
Child tax credit
tax credit, worth $1,000 per youngster, is one of the easiest
tax breaks to get. You claim it directly on your tax return, no
added forms to file.
OK, it's not that easy. There are eligibility
requirements, including income thresholds and dependency requirements
for your kids.
And if you're one of the nearly 24 million parents
who got an advance payment of this credit last year, you have a
little more work to do on your 2003 return. The credit you can claim
on line 33 of your Form 1040A must be reduced by your advance payment
amount. So if you got a $400 advance payment last year, you can
only claim $600 on your return this year. You're not being shorted:
Your total credit still is $1,000 -- you just got it in two payments,
once in the early check and again on your return.
On pages 37 and 38 of the 1040A
instructions, you'll find additional details on filing for the
child tax credit and the worksheet to figure the amount to enter
on your 2003 return.
If you became Junior's proud parent thanks to adoption,
up to $10,160 of those costs may be credited on line 34. Fill in
and attach IRS Form
8839 to claim this tax break.
Getting full credit
Add credits on lines 29 through 34 and enter the sum on line
35. Subtract that amount from your tax due on line 28 and put the
result on line 36. It's possible you could have more in credits
than you owe in taxes. These credits, however, are nonrefundable;
that is, they will only take your tax bill down to zero. If that's
the case, enter zero on line 36.
Advance earned income
Some taxpayers are eligible for the earned
income credit. This is a tax break for workers who don't earn
much. Rather than waiting to collect this
credit at tax-filing time, some employees get their credit amounts
early as wage supplements. In these cases, the advance earned income
credit amounts are reported on their W-2 statements and should be
entered on line 37.
The advance payments then are
added to line 36 to get your total tax due. That amount goes on
to determine what you've already paid Uncle Sam -- and possibly
get money back from him!
Tax withheld, estimated
you know from looking at your paycheck, you've already sent the
IRS a good chunk of money through payroll withholding. This annual
amount is reported on your W-2. Put that figure on line 39.
If you also got income that was reported on
any type of 1099 form and taxes were withheld from those earnings,
be sure to add it to your W-2 amount above.
And if you paid estimated
taxes (Form 1040ES) throughout the year, that total goes on
The earned income credit
If you didn't get advance earned income payments but are eligible
for this credit, you take it now on line 41. Check out the 1040A
instructions (pages 40 to 44) for details on the credit and a worksheet
to figure your exact amount. You may be able to get a tax refund
if you qualify for the EIC even if you owe no tax.
More kid credit
The same money-back potential is available on line 42 with the
child tax credit. Use Form
8812 to figure out if you can claim this extra credit.
Now add lines 39 through 42 and put the result
on line 43. This lets the IRS know your total tax payments.
If line 43 is more than your tax due shown on line 38, you paid
too much. Put that amount on line 44. As soon as you complete this
form, the IRS can get busy processing your refund check.
Most people want all of their refund immediately,
but the IRS asks on line 45a just to be sure. Put here the amount
of your overpaid taxes you want back.
The IRS encourages you to get your cash via
direct deposit instead of a mailed check. If that appeals to you,
you need to enter your account information on lines 45b, c and d.
These are the spots for your bank's routing number, your account
type and your specific account number. If you have any question
about what goes here, check with your financial institution.
Just in case you decided a few lines earlier
not to take all your tax refund, the IRS asks on line 46 if you'd
like to have part of it applied to this year's estimated tax payments
(more on this later). If so, put the amount here. Make sure that's
what you want. You can't change your mind later and ask for it back.
Amount you owe
If you weren't able to fill in lines 44 through 46, sorry. That
means you owe tax.
Find out just how much by subtracting line 43
from line 38. Enter the difference on line 47. If the amount is
under $1, then Uncle Sam says "don't bother." For anything
more, though, the IRS will be expecting your payment, either by
check, money order or credit
Estimated tax penalty
Before you can wrap this up, the IRS wants to make sure it got
all it was due, when it was due. The system is pay-as-you-go, meaning
you can't hold onto all your earnings until April and then send
the IRS one big tax payment. That's the reason for paycheck withholding.
Some people, however, get cash during the year
without having any taxes taken out. In these cases, quarterly estimated
tax payments are made. If you don't pay enough to cover what
you earned in each period, you could owe a penalty.
That's generally not a problem if line 47 shows
you owe $1,000 or less. But just to be sure, check out page 52 of
the instructions to see if you have a penalty to pay on line 48.
Third party designee
Hang on. We're heading down the home stretch. The next section allows
you to name
someone else to handle any questions about your return.
By checking the "yes" box, you allow
the IRS to contact your tax pro, your mom, your cousin the CPA or
anyone else you want to solve problems related to your return. You
are not authorizing your appointed representative to receive your
refund check. Neither can he or she bind you to anything regarding
your tax return.
Details on naming a designated tax representative
can be found on page 52 of the form's instructions.
We're almost done. Sign and date the form and don't forget to enter
your occupation and daytime telephone number. Both husband and wife
must complete this section for a joint return.
Since you've read this far, you probably didn't
pay a pro to fill out this form. But if you did, he needs to complete
the box just below your signature.
Finally, pop your 1040A, along with any necessary
attachments (and check if you owe), into the mail. Mission accomplished!
Michele Erbrick assisted with this
-- Updated: Feb. 6, 2004