Individuals, businesses, estates, trusts, and taxpayers age 65 or older all have their own tax returns for reporting this income and claiming deductions and credits. Generally speaking, the average taxpayer files their return via Form 1040.
Example of a Tax Return
Form 1040 calculates the amount you personally owe in income tax, taking various factors into consideration. Your total tax owed will depend on your filing status and how much you’ve already paid to the IRS during the tax year. Employed individuals have income taxes withheld from their paychecks, and their employers forward that money to the government on their behalf. You can file your tax return online, or you can mail in a paper copy. You might find that you have to submit with your tax return additional forms known as “schedules,” to your Form 1040 tax return if your sources of income or claimed deductions are other than very basic. Examples of this kind of income include gambling winnings or unemployment compensation. Some forms are lettered schedules, such as Schedule A, which is used for itemized deductions, and some are numbered, like schedules 1-3, which cover additional income, taxes, and credits.
Do I Need To File a Tax Return?
Not everyone is required to file a tax return. It’s only required if you earn more than the standard deduction for your filing status or if you owe some other type of tax, such as the alternative minimum tax. For example, when filing your taxes for tax year 2022 in 2023, the standard deduction for a single filer under age 65 is $12,950. Generally speaking, you don’t have to file a tax return if you earned $12,950 or less. Here’s how it breaks down for all filing statuses for tax year 2022:
Single: $12,950Head of household: $19,400Married filing jointly: $25,900Qualifying widow(er): $25,900
The standard deduction rule doesn’t apply to married taxpayers who file separate tax returns. They must file a Form 1040 if they have just $5 in income. For example, you must file a return regardless of age if you and your spouse did not live together at the end of 2022, and your gross income was even just $6. Separate rules apply for taxpayers who can be claimed by another taxpayer as a dependent, as well. Unmarried taxpayers who are age 65 or older are entitled to an additional $1,700 standard deduction, raising the threshold for having to file a return. You might want to file a tax return even if you don’t have to, as doing so may result in a tax refund, such as if you overpaid through withholding or estimated tax payments. You might also want to file if you qualify for the Earned Income Tax Credit, which would likely also result in a refund.
Sections of a Tax Return
The Form 1040 tax return consists of two pages you have to fill out. Your income, credit, and deduction information is bracketed between a section at the top for your identifying information—the filing status you’re using, as well as your name, address, and Social Security number—and a signature area at the end.
Income Section
The first part of your tax return covers taxable income, and each one is labeled. For example, there’s a line where you enter “wages, salaries, tips, etc.” This information is on any Form W-2s you received. Other lines and boxes are set aside for things like taxable interest or Social Security benefits you might have received. You’d complete and submit Schedule D with your return if you had capital gains or losses during the year, and transfer this amount to your 1040. You’d complete the first part of Schedule 1 and submit it with your tax return if you had any sources of income that don’t have their own lines.
Deduction Section
The next section of your Form 1040 tax return covers deductions. Deductions reduce your taxable income, which reduces how much you owe. There are two main deductions here: the total of your standard or itemized deductions and any qualified business income. Once you total up these various deductions, you’ll subtract them from your income to arrive at your taxable income.
Tax Credits and Taxes Paid
Page 2 of Form 1040 calculates the tax you owe on your taxable income. This is where the amount that has already been withheld from your paycheck, as well as any estimated tax payments you made during the year, will be recorded and subtracted. Certain refundable tax credits can be deducted here as well, because they act just like payments made.
Tax Return vs. Tax Refund
Your tax return is a calculation of what you owe the IRS—or what the IRS owes you. Your tax refund is a payment made to you by the IRS because you overpaid over the course of the year or were eligible for one or more refundable tax credits. For example, suppose you are an unmarried individual who falls into the single filing status, and you work for an employer. Your gross income before any deductions was $35,000 for 2022. You had $3,500 withheld from your paychecks throughout the course of the year. If you had no adjustments to your income and only took the standard deduction of $12,550, your taxable income would be $22,450. Based on this taxable income, your taxes owed would be $3,570, but since you already paid $3,500 in taxes throughout the year, you would owe just $70 and would not get a tax refund. However, if everything were the same, but you had $4,000 withheld from your paychecks throughout the year for taxes, you’d get a tax refund of $430 from the IRS.
