Understanding 1040 Tax Form

In most cases, a taxpayer's tax will be calculated using either:

• the Tax Table, or
• the Tax Rate Schedules

The Tax Table or Tax Rate Schedules are included in the tax return instructions.

Tax credits reduce a taxpayer's actual tax liability. The tax credits in this section of the tax form 1040 are called nonrefundable tax credits which means that if you don't owe any taxes, then you will not get a tax refund.

Other Taxes

Certain additional taxes such as unemployment tax or social security tax on tips are shown here. These taxes are added to a taxpayer's tax to arrive at the total tax.

Payments

Generally, as a taxpayer receives income, he or she is required to pay at least 90% of his or her income tax liability during the tax year. Withheld taxes are paid to the IRS from money due to the taxpayer from the income payer such as the employer. Estimated tax payments are tax payments the taxpayer pays directly to the IRS. Payments also include refundable tax credits such as earned income credit.

Refund

A taxpayer is entitled to a tax refund if the tax payments he or she made (plus any refundable tax credits) are greater than the total tax.

Amount You Owe

If the taxpayer has not paid the full amount of the tax he or she is liable for, he or she must pay the additional tax amount to the IRS with his or her tax return. In some cases, the taxpayer may even owe the IRS a tax penalty.

Third Party Designee

The taxpayer can allow the IRS to discuss his or her tax return with a friend, family member, or any other person or the paid tax preparer by checking the box 'Yes' in the Third Party Designee section and completing the requested information about the third party designee.

Sign Here

Don't forget to sign your tax return. The taxpayer must sign and date the tax return and give his or her occupation. If a taxpayer is married and filing jointly, both spouses need to sign the tax return even if one of the spouses did not have any income. If you paid someone to prepare your tax return, then that paid tax preparer must also sign your tax return in the section called 'Paid Preparer's Use Only'.