Federal Income Tax

Federal Income Taxes for Beginners

The US Individual Income Tax Return (Form 1040) is your federal income tax return. The federal income taxes for beginners can be tough especially if you’re just stepping into adulthood and wondering how to do taxes yourself –know that it’s nothing to overcomplicate. The US taxes might seem like a mixed batch of different things, but once you simplify everything, it becomes a lot easier to understand.

In this article, we will go over Form 1040, your tax return in other words, and explain everything you need to know about how to file it while answering commonly asked questions.

What is Form 1040?

Form 1040 is your federal income tax return. All taxpayers must use Form 1040 to report the total income earned during the tax year and figure out their tax liability. Before you get to how much owed to Uncle Sam, there is a lot to be done though.

Rather than thinking about your federal income tax return as one tax form, think of it as multiple forms and Form 1040 is what summarizes everything. There are a lot of other tax forms that can and must be attached to a tax return such as Form W-2 which reports income earned through employment. So Form 1040 isn’t the only tax form you’ll need to submit your tax return to the Internal Revenue Service.

A simple guide to your federal income taxes

Now that you know what Form 1040 is, we can focus on how to prepare a federal income tax return with step by step explanation of how you get to the taxes owed. Figuring out how much you owe in federal income taxes is important because it will determine whether you will receive a tax refund or pay the IRS.

Gross Income – Adjusted Gross Income – Taxable Income

Your gross income is how much you earned in total, during the tax year. Starting from January 1st of the tax year to the end, all the income earned must be reported on the federal income tax return you file. Since saying the IRS here is how much I made wouldn’t be efficient, the IRS wants you to attach the tax forms that report your income. 

Information Returns 

You will receive tax forms from the individuals and establishments that made payments to you such as your employer, clients, financial institutions, etc.

These kinds of tax forms are referred to as information returns as it informs you and the Internal Revenue Service about how much you earned. Aside from Form W-2 which we mentioned above, the most common tax form that reports income is 1099 Forms which have plenty of variations that report different kinds of income. Read more on information returns.

Calculate Adjusted Gross Income

Once you add all the income reported on the information returns issued to you, figure out adjusted gross income by reporting additional income and subtracting the adjustments you can claim on Schedule 1. This tax form is filled out by most taxpayers. Your adjusted gross income is important because it will help to determine eligibility for deductions and tax credits.

So you will calculate adjusted gross income after figuring out the total gross income and subtracting the adjustments you can take on Schedule 1–Additional Income and Adjustments to Income.

Calculate Taxable Income

After figuring out your adjusted gross income, go further down the line and calculate taxable income. Your taxable income refers to the total income you will pay taxes. Figure out taxable income by subtracting the deductions you can claim. 

Standard Deduction and Itemized Deductions

The tax deductions can be divided into two different divisions. You can either take the standard deduction or itemize deductions using Schedule A–Itemized Deductions. 

The easiest way to understand which deduction type you should claim on your tax return is by measuring the amount of itemized deductions you can take on Schedule A. If it’s more than the amount you’re given with the standard deduction which is fixed and the amount depends on your filing status, itemize. If not, take the standard deduction instead. Getting to the bottom of what’s going to benefit you the most is as simple as that. 

Tax Liability and Tax Brackets

You got your gross income, calculated adjusted gross income, and got to your taxable income finally. It’s now time to calculate the total amount of taxes owed. Use the tax brackets to calculate your total tax bill. The tax brackets work simple enough but here is a quick explanation.

Assume you’re in the 24 percent tax bracket. This doesn’t mean you will just pay 24 percent of your taxable income in total. You will only pay 24 percent for the highest portion of income which exceeds the 22 percent bracket amount.

You will pay gradually and make your way up to the 24 percent tax rate. Here are the tax brackets for the 2021 tax season which you’ll file a tax return for the 2020 tax year. 

10%$0 to $9,950$0 to $19,900$0 to $14,200
12%$9,951 to $40,525$19,901 to $81,050$14,201 to $54,200
22%$40,526 to $86,375$81,051 to $172,750$54,201 to $86,350
24%$86,376 to $164,925$172,751 to $329,850$86,351 to $164,900
32%$164,926 to $209,425$329,851 to $418,850$164,901 to $209,400
35%$209,426 to $523,600$418,851 to $628,300$209,401 to $523,600
37%$523,600 or more$628,300 or more$523,600 or more

Assume your taxable income is $50,000 and for this example we’ve given, you will pay:

  • 10% of 9,950: $950
  • 12% of 40,525: $4,863
  • 22% of 9,475: $2,084.5

In this calculation, the total taxes owed would be $7,897.5

Taxes Paid and Tax Refund

As the final part of your federal income tax return, you will put the taxes paid during the tax year side by side with your tax liability. You might think for a second and wonder about how you’ve paid taxes. 

The federal law requires employers to withhold federal income taxes from their employees’ income when processing payroll. This is how you’ve paid taxes during the tax year. What if you’re self-employed and don’t work for an employer though? You must’ve made estimated tax payments. If you haven’t made any quarterly federal estimated tax payments, but you are required to file a federal income tax return, know that you will incur underpayment penalties. 

Regardless though, most people make the necessary payments they need to make to the Internal Revenue Service. Because you are paying taxes before you even know how much you owe to Uncle Sam, you might’ve overpaid and this is why we have such a thing as tax refunds in the US tax code. If the taxes paid is more than the amount owed, the IRS will issue you a tax refund. See how to track the status of your tax refund.

Frequently Asked Federal Income Tax Return Questions

When to file a federal income tax return?

The Internal Revenue Service expects taxpayers to file their returns by April 15. If you aren’t quite ready to file your return by this deadline, you can request more time from the IRS by filing a tax extension which will give you six more months to file a return, but you must pay any remaining tax owed by April 15 despite the extension. So it only applies to filing a return.

Where can I file my federal income tax return online?

A tax return can be filed online (electronically) through a tax preparation service. The Internal Revenue Service and different tax preparation services have agreements where you can file your tax return for free which normally costs money. OR you can file a paper tax return and mail it to the IRS without any cost if you’re not eligible to free file but you also don’t want to pay.

Where is my federal income tax return?

Track the status of your tax refund – as well as your tax refund using the IRS’ Where’s My Refund online tool. This online tool will enable you to see the whereabouts of your tax return. Use the online tool at the IRS website by providing your personal information to verify your identity.


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