Individual Tax Return

Individual tax return or Form 1040 is an income tax return form that married couples or individuals submit to the Internal Revenue Service (IRS) to report the taxable income earned during a particular period. The IRS uses it to determine if tax is overpaid or due for that period.

Besides using this form to report taxable income, one utilizes this form to claim tax credits and deductions. Moreover, they can compute their tax refund for a financial year. Everyone earning money over a specific threshold must file this return, per legal requirements. Individuals can e-file their return or send the form to the federal tax agency via mail.

• Individual tax return meaning refers to a standard IRS form that an individual or a married couple fills out to declare their taxable income to the government.
• The federal tax agency can utilize the information in the tax returns to determine if an individual has overpaid or underpaid taxes for that period.
• One must submit the form within the individual tax return due date to avoid paying additional charges imposed by the IRS.
• Qualifying widowers or widows and the head of a household are two examples of taxpayers who can file taxes as individuals.

Individual tax return meaning refers to a standard Internal Revenue Service (IRS) form that individual taxpayers use to report information, including wages and taxable income. By filing this individual tax return due date, taxpayers can determine whether they overpaid or underpaid their taxes. Individual taxpayers may include:

• Married couples filing jointly or separately.
• The head of a household.
• Qualifying widowers or widows.
• Single filers.

Married couples and single filers must fill out the other required tax forms, for example, any relevant Schedule. For instance, if taxpayers itemize deductions, they must use Schedule A in conjunction with Form 1040. This Schedule would mention tax deductions, like home mortgage interest and charitable contributions.

One must note that every individual taxpayer files their return on a version of Form 1040-SR or 1040. Married people can decide to file their annual returns as an individual or a couple. After filling out the individual tax return due date form, they must submit it to the taxing agency within the individual tax return due date to avoid penalties.

Some taxpayers earning business income must include the earnings in their individual income tax returns. Such individuals may include freelancers running a sole proprietorship business and small business owners with limited liability corporations or LLCs treated as pass-through entities.

These taxpayers may need to file Schedule C to report expenses and business income. However, if individuals own a C corporation or some other form of business taxed as a separate entity, they must file a business tax return and an individual tax return. 

One must remember that individual taxpayers must file state tax returns if the state where they reside levies tax on income. The information provided in such a return is similar to the details in a federal tax return. That said, states have different forms, and the rules may also be different.

As a result, different states may require different information from taxpayers. Most state tax returns evaluate and compute taxes based on the line items copied from IRS tax returns of individual tax return form.

Before taxpayers file individual tax returns, they must go through this checklist. Individuals may highlight the points that apply to them and ensure that the information is available.

#1 - Personal Details

These details tell the IRS who is filing the return and where to deposit tax refund, if any. Such details include

• Date of birth and social security numbers of the taxpayers, their spouse, and dependents.
• Routing number and bank account number for the deposit of tax refund.
• Individuals require a copy of last year’s tax returns.

#2 - Additional Earnings

Individuals must ensure to report all income earned during a period. Typically, the sources of the earnings are as follows:

• Stock options
• Gambling winnings
• Awards and prizes
• Rental real estate, S corporations, royalties, trusts, etc.
• Debt cancellation
• Payments received for jury duty
• Business income
• Scholarships

#3 - Adjustments To Income

Let us look at some items that can help taxpayers reduce their taxable income. This, in turn, can lower the amount of tax payable or increase the tax refund.

• The records of contributions made to an Individual Retirement Account (IRA) and a Medical Savings Account during the year
• Alimony paid by taxpayers for a divorce executed before 2019
• The canceled receipts or checks paid by teachers for classroom supplies
• Records of all moving expenses
• Form 1098-E for the interest paid on student loans
• Receipts for particular energy-efficient home improvements

#4 - Deductions And Credits (If Taxpayers Itemize Their Deductions)

The government provides various deductions and credits to reduce an individual’s tax burden. Let us look at some information required by taxpayers to get such benefits.

• Records of dental and medical expenses
• Rental property expenses or income: profit/loss statement
• Theft and casualty losses: insurance reimbursements and the worth of the damages
• Investment interest expenses
• Adoption costs: SSN of the child; records of transportation, medical, and legal costs
• Charitable donations: The donated property’s value, official charity receipts, out-of-pocket expenses, cash amounts, etc.

#5 - Taxes Paid By The Individuals

The taxes paid by one individual tax return form include the following:

• Local and state income taxes
• Personal property taxes
• Real estate taxes
• Vehicle license fees, depending on the vehicle’s value

#6 - Other Information

Other information includes —

• Estimated tax payments during a year
• Foreign bank account details: bank’s name, account number, location, and the highest account value during the year
• The previous year’s tax refund applied to the current year or/and the amount paid with an extension to file.

It is to be noted that the Standard deduction for senior citizens are as given below:

However, for individual tax return filing, an additional deduction is also available for citizens above 65 years and blind persons. For citizens who are 65 years and above, in 2023, the deduction was $1,500, which increased to $1,550 in 2024. The deduction amount is $1,850 if the person is not married and does not have a surviving spouse, which increased to $1,950 in 2024. These values are inflation adjusted.

Individuals can download the standard IRS form from the federal tax agency’s official website to file individual tax returns. The form may appear confusing to taxpayers. However, it does the following things:

1. Collects Personal Information: Enter all the required details, including the number of dependents, social security number, personal information, tax-filing status, etc.
2. Computes Taxable Income: The form tallies the taxpayer’s annual earnings and the deductions they would like to claim. This step involves the calculation of the taxable income. The government levies tax on this amount. Individuals must check the federal tax brackets to compute their taxable income.
3. Calculates Tax Liability: Next, the taxpayer must enter the tax amount. At this point, they can subtract the tax credits they are eligible for. Moreover, they can subtract the taxes they have already paid during the year through withholding taxes.

Lastly, this form determines whether the taxpayer has paid a portion or the entire tax bill. It helps individuals determine whether withholding taxes and tax credits cover the bill. If they are not enough, the taxpayer pays the remaining amount while filing Form 1040.

There are various types of Form 1040 for individual tax return filing, as given below:

Form 1040-NR

People who are non-residents and also their representative have to file this form. Apart from them, others who has to file it are as follows:

• People who are doing any type of business or trade within the United States.
• In case a person had to file this form but has died before filing it, a representative will have to file it.
• People who represent any trust or an estate.

Form 1040-ES

In case of estimation and payment of quarterly taxes, this form is to be used. Such taxes are for those type of income that are not subject to withholding, like interest, dividend, rent or income from self employment, unemployment compensation, income from pension, etc.

Form 1040-V

This is a statement that is submitted along with the taxpayer’s payment.

Form 1040-X

This is used in case any taxpayer has made any mistake while submitting the forms or forgotten to include any information, then this is used.

Form 1040-SR

This is for senior citizens for individual tax return filing, in which fonts are made larger in size and any kind of shading is avoided. Th standard deduction also has a higher amount for senior citizens. If the senior citizens fill online forms, they will not see the changes, but in paper they are visible.

Let us look at a few individual tax return examples to understand the concept better.

Example #1

In November 2022, the federal court sentenced Juan Enrique Kramer and his wife, Adriana Pastor, to 3 years and 18 months in prison, respectively, for defrauding investors and failing to declare their earnings to the IRS correctly. Promoting a turn-key business venture, Kramer took a predetermined fee of $105,000-$250,000 from the buyers and took the responsibility to perform all the services required to set up a restaurant. That said, he failed to provide such services.

In February, Pastor admitted she signed a tax return falsely stating a net income loss. On the other hand, Kramer admitted that he did not file an individual tax return.

Example #2

Suppose a taxpayer named John has earned $50,000 from different sources during a year. He must file an individual tax return to report his income to the IRS. The federal tax agency will check the information provided in the form to determine whether any tax is due or whether the filer will receive a tax refund.

The above two examples, give us a clear idea about the concept in detail and explains the procedure and rules that one has to follow during the process.

This article has been a guide to what is Individual Tax Return. We explain it with examples, how to file it, along with its checklist. You may also find some useful articles here -

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