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The 1040: box-by-box

Do you plan to itemize deductions, have numerous income adjustments, owe or paid taxes in addition to your income taxes or can claim several tax credits? Then welcome to Form 1040, the granddaddy of all federal income tax returns.

If this is the first time you've filed a 1040 instead of the shorter 1040A or 1040EZ forms, you'll immediately see the differences. Don't be intimidated. Yes, it's longer, but you'll also find many similarities to the simpler forms, especially the 1040A.

And there is some good news. The 1040 gives you more opportunities than the other forms to cut your tax bill.

So sharpen your pencils and let's go. Here's a box-by-box description of Form 1040.

Label
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 the information requested, including your first name, middle initial and last name. Joint filers must each fill in this information. Then add your home address, including ZIP code.

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 Internal Revenue Service won't process a return that's missing a Social Security number. That could mean penalty and interest payments for you.

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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 either way.

Filing status
Now on to filing status. You get five choices, one each 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 has specific requirements and offers different tax advantages. Also, the standard deduction amount is different, as is the final tax due. So review your status and pick the one that fits your needs and gives you the best tax result.

Exemptions
Next, you start whittling away at your impending tax bill. The exemptions section of the form (line 6 and all its sublines below) lets the IRS know 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 other 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.

Income
Now to the main reason the IRS wants a form 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're rounding off one entry, you must round off all entries.

Wages
Most people will enter on line 7 the amount shown in box 1 of the W-2 wage statement they got from their employers. If you had more than one job, you should have multiple W-2s. Add them all up and enter the total here.

If you got other types of income, such as tips or money for household work you did, that goes on line 7, too, even if you didn't get an official statement.

Remember: Attach copy B of all your W-2s here.

Interest income
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 part 1 of Schedule B. But if the interest is less than that, just enter it on line 8a.

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.

Dividend income
If you received ordinary dividends, you'll get a 1099-DIV showing the amount. It goes on line 9. 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 part 2 of
Schedule B.

Because of tax-law changes last May, you'll see a new line on the 2003 Form 1040. 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 23 of the Form 1040 instructions.

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 work sheet to account for these earnings and to ensure that you pay the appropriate, lower tax on them.

Taxable refunds
Did you get any 1099-G forms? These statements are issued by governments to report money you received. The most common example is a state tax refund. If you used your state income tax payments as an itemized deduction to lower your federal tax bill, any state refund you get usually is taxable. Enter the amount on line 10.

Alimony
Divorce has many financial implications, including taxes, for both parties. If you receive alimony
payments, they are taxable and you need to enter the amount you received on line 11.

Business income
Self-employed taxpayers, whether it's a main job or a little freelance work on the side, must report that income (and expenses) on either Schedule C or C-EZ. The profit reflected on either of those forms is entered on line 12 of Form 1040. If you recorded a business loss instead, then put that (in parentheses) on line 12.

Capital gain or (loss)
If you sold a stock, regardless of whether you made or lost money on it, you have to file Schedule D. This two-page form can be confusing, but it also can save you some tax dollars. It allows you to calculate any long-term gains at a lower tax rate. If you sold an asset at a loss, that bad investment could help reduce any gains, or even part of your other taxable income. After you figure your gain or loss on Schedule D, transfer the final amount from there to your 1040's line 13. Again, put parentheses around any loss amount.

Investors who received capital gains distributions from mutual funds but had no other capital gains transactions to report don't have to worry about Schedule D. These distributions are reported on the 1099-DIV statements you get from your fund managers. If this is your situation, simply put the distributions amount on line 13 and check the small box on that line.

A bit of a preview here: If you had capital gains or capital gains distributions, you're going to have to do a special computation to figure your tax bill on page 2 of the 1040. But don't be too upset. This extra math is going to give you a lower tax bill because it will factor in the lower capital gains rate for your earnings.

Those lower rates that affect your dividends also come into play for any distributions entry you make on the new line 13b. In this case, earnings 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.

Other gains or (losses)
Line 14 is only for taxpayers who sold or exchanged assets they used in their trade or business. In this case, you'll also have to file Form 4797 along with the 1040.

Individual retirement account money
If you took money from an individual retirement arrangement, you report on line 15. This is from any IRA -- traditional, Roth or a self-employed IRA plan. This also applies to retirement money you rolled over into another tax-deferred account.

Put the total distribution (money you took out or rolled over) on 15a and the taxable amount on 15b. You should have a 1099-R showing the amount distributed and whether it was taxable or non-taxable.

Pensions and annuities
Similarly, you should have a 1099-R if you received any pension money. This includes transfers of 401(k) accounts from one employer to another. The total distribution goes on line 16a, with the taxable amount on 16b.

You don't have to enter anything on line 16a if your pension payments are fully taxable.

If your pension or annuity is partially taxable and your Form 1099-R doesn't show the taxable part, it's up to you to figure the taxable part. The IRS provides details on how to do this in Publication 939. Even if your 1099-R shows a taxable amount, it may be to your advantage to check out this publication as well as the worksheet on page 26 of the 1040 instructions. The computations may give you a lower taxable pension amount.

Also, if any tax was withheld from your pension or IRA, attach the 1099-R forms that show that amount along with your W-2s.

Rent, royalties and other income
Income from the house you rent goes on line 17, after you've figured the exact amount by completing Schedule E. Earnings from royalties, partnerships, S corporations or trusts also are reported on this schedule and 1040 line.

Farm income or (loss)
Farmers must use Schedule F to report income gained or lost from that operation. Attach it and put the final amount on line 18.

Unemployment compensation
Unemployment compensation is subject to tax. If you received these benefits, you should have received a Form 1099-G. Enter the total on line 19.

Social Security benefits
Did you reap some of your well-earned federal retirement benefits last year? Then you should have received a Form SSA-1099. Railroad retirement benefits treated as Social Security are reported on the similar RRB-1099.

Use these statements and the worksheet on page 28 of the 1040 instructions to figure if any of your benefits are taxable. Report the total distributions on line 20a and the taxable portion on line 20b.

Other income
Line 21 is where you enter any other taxable income you've not yet told the IRS about. This is not self-employment earnings. Rather, it includes prizes and awards, gambling winnings, jury duty fees, Alaska Permanent Fund dividends, qualified state tuition program earnings and reimbursements or other amounts received for items deducted in an earlier year. List the type and amount of income, using a separate sheet if necessary, and attach it to your return.

But don't get carried away. Believe it or not, not all income is taxable. Child support, money or property you inherit or receive as a gift and life insurance proceeds you receive as a beneficiary are some of the few items that escape IRS attention.

Total income
Want to know exactly how much you got last year from all these various income sources? So does the IRS. Add lines 7 through 21 and enter the sum of your total income on line 22.

Now let's get to work cutting that amount!

This next section of the 1040 allows you to adjust your income by taking several above-the-line deductions. They get their name because they are listed at the bottom of page one of the 1040, just above the page's final line (number 34 on the 2003 return) where you enter your adjusted gross income.

By taking all these deductions you can, you'll cut your adjusted gross income. That, in turn, cuts your overall bill because figuring your AGI is the first step in arriving at your final taxable income amount.

Educator expenses
Line 23 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.

IRA deduction
The next adjustment is for any deductible contributions you made (or will make by the filing deadline) to a traditional individual retirement account. On the 2003 return, this could be up to $6,000 for couples younger than 50 who file jointly, $3,000 per spouse. Older taxpayers can contribute an additional $500 each.

There are income thresholds that could limit your deduction, especially if you or your spouse are covered by a retirement plan or 401(k) at work. Use the worksheet on page 30 of the 1040 instruction booklet to calculate the amount of your IRA deduction and enter it on line 24.

Student loan interest
If you paid interest on a student loan, you may be able to deduct up to $2,500 of it on line 25. The loan money had to be used to pay for higher education expenses, including tuition, room and board and books, for yourself, your spouse or one of your dependents. To figure the exact amount you can enter here, use the worksheet on page 31 of the 1040 instruction book.

Tuition and fees
If you continued your education but didn't have to go into debt to do so, line 26 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 against expenses you 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 tax-break pool.

Moving expenses
The IRS gives taxpayers a break for some moving expenses, as long as the move is connected with work. Form 3903 details allowable moving expenses. Once you complete it, enter the amount on line 27 and attach it to your return.

Self-employment tax
Being your own boss has a lot of appeal. It also means more tax obligations, including self-employment taxes. But on line 28 you get half of these payments back.

Self-employed health insurance costs
If, as a self-employed worker, you paid for health insurance for yourself, your spouse or dependents, you now can deduct 100 percent of those costs on line 29. Use the worksheet on page 33 of the 1040 instruction booklet to figure the amount you can enter here, especially if at any time you also were eligible for an employer-provided health care plan.

Self-employed retirement plans
Retirement accounts are a great way to prepare for your Golden Years as well as reduce taxes. Self-employed workers have several options, including Keoghs, simplified employee pensions (SEPs) and SIMPLE plans. If you contributed to such an account, deduct the amount on line 30.

Early savings withdrawal penalty
Uncle Sam can be a softie. Here he gives you a tax break for doing something that originally got you in trouble. If you took money from a savings account and had to pay a penalty for that, you can deduct that fee on line 31. You should get Form 1099-INT or Form 1099-OID showing just how much you can enter.

Alimony payments
It's probably no fun writing that alimony check every month, but on line 32a you can deduct them from your taxable income. Be sure to enter your ex-spouse's Social Security number on line 32b, or the IRS could take this deduction away from you.

Final adjustments
The next line, number 33, is a sneaky one. It's not actually labeled "final adjustments." Rather, it tells you to "add lines 23 through 32a." However, if you read the 1040 instruction book, you'll find that here is where you can take several specific, although uncommon, tax breaks ranging from performing arts expenses to jury duty pay given to your employer.

One tax break included here is becoming more popular: a deduction for clean-fuel vehicles. Check out the full list on page 33 to see if you qualify for any of these breaks. Once you've totaled them, enter the amount here. Also be sure to write on the dotted line exactly which additional deductions you took.

Contributions to Archer medical savings accounts, named after former Congressman Bill Archer, also are allowed here. These plans are provided to employees of some small businesses, as well as used by some self-employed workers. Use Form 8853 to figure the amount to enter here, and be sure to attach the completed form to your tax return before you send it to the IRS.

And new this year, National Guard and Reservists who travel overnight for training also can deduct travel and lodging costs on line 33.

Adjusted gross income
It's now time for adjustments payoff with line 34. Subtract line 33 from line 22 and enter the amount here. This is your adjusted gross income.

Turn the page
As we turn to page two of the 1040, we get to whittle away at your AGI en route to your taxable income. Re-enter your AGI from the front page on line 35.

Elderly and blind deductions
Taxpayers who are 65 or older or visually impaired of any age need to pay special attention to line 36a. The boxes here could allow you to substantially increase your standard deduction. Just how much can be found on page 35 of the instructions booklet. For couples who file jointly, there are boxes for each spouse. And don't forget to enter the number of the smaller boxes you check in the larger box to the right.

Married but filing apart
If you're one of the small group of taxpayers who is married but you and your spouse file separately, don't overlook line 36b. Since you're filing the long form, it's likely you'll both be itemizing deductions. But if your spouse is doing so on a separate return, check this box. The IRS wants to know so it can check that you both aren't claiming the same write-offs.

Deductions
On line 37 you enter either your standard deduction amount or the deductions you itemized on Schedule A. The standard amounts allowed for each filing status are listed on the left side of the form, or in the instruction book for filers who checked boxes on line 37a.

Be sure the deduction method you choose is the most tax advantageous. Deductions help you get to the lowest possible taxable income amount, so pick the larger amount. If you're 70 and blind but itemizing provides you with more deductions than the increased standard amount, then itemize.

After you've entered your deductions (line 37), subtract them from your AGI (line 35) and put the amount on line 38.

Exemptions
Now we go back to page one and those dependents you can claim as tax exemptions. Take the number you placed on line 6d and multiply it by $3,050. This dollar amount goes on line 40.

High-income taxpayers may not be able to get the full benefit of their exemptions. You'll see a notation that if your AGI is more than $104,625 you'll have to complete the worksheet on page 35 to see how much your exemptions are worth.

Taxable income
Subtract your exemption amount (line 39) from your income total (line 38). This is your taxable income, the amount that the IRS uses to compute precisely what you owe, and it goes on line 40.

If your deductions are more than your income, then you have no taxable income and enter zero on line 40. Lucky you, no tax due!

But don't stop. If you had taxes withheld, you must file a return to get that money back. And if you're eligible for any tax credits, coming up in just a few lines, you could get an even bigger refund.

Tax
Most of us, however, will enter a taxable income amount, so now we go to the heart of this process: determining what is owed the IRS. That amount goes on line 41. But as is generally the case when it comes to taxes, figuring your bill isn't a one-size-fits-all step:

  • If your taxable income is $100,000 or less, you can use the Tax Tables that begin on page 62 of the 1040 instruction booklet to see what you owe.
  • If you made more than that, you'll have to use the Tax Rate Schedules (page 74) instead.
  • If you detailed capital gains on Schedule D, you'll have to complete part IV of that attachment to see what you owe.
  • And if your only capital gains were distributions you put directly on lines 13a or 13b of your 1040, use the worksheet on page 37 of the 1040 instruction booklet to compute your tax bill.

Parents who filled out Form 8814 to report a child's investment income or taxpayers who needed Form 4972 to detail a retirement plan lump-sump distribution must put the amount of tax figured on these forms on line 41, too.

Alternative minimum tax (AMT)
Just when you thought it was safe, here comes the alternative minimum tax on line 42.

The AMT is a separate tax computation with its own rates that could boost your tax bill if you claim a lot of exemptions or deductions on your regular tax form. The worksheet on page 38 of the 1040 instructions will help you determine if you are hit by the alternative tax. If so, you'll also have to fill out Form 6251 and put the amount on line 42. Then add your regular tax due on line 41 and the alternative amount on line 42 and put that total number on line 43.

If you're lucky, you escaped the alternative tax. Either way, alternative or regular tax, the next group of 1040 lines may provide just what the tax doctor ordered -- credits. Tax credits are subtracted directly from any tax you owe, immediately and often dramatically reducing your tax bill.

Foreign tax credit
You can take the foreign tax credit on line 44 if you paid any taxes to another country. This is most common for investors who have international mutual funds. The amount of foreign tax paid on these investments is reported on the 1099-DIV you got from your investment manager.

Foreign taxes of $300 or less ($600 for couples filing jointly) can be entered directly on this line. For larger foreign tax bills, you'll have to fill out and attach Form 1116. A word of warning: The 1116 is a complicated piece of paper.

Child and dependent care credit
You may be able use line 45 if you paid someone to care for your child or other dependent who couldn't care for himself or herself. The key requirement for this tax credit is that the care was necessary so you could work or look for work. If you're eligible for the child and dependent care credit, you'll also need to fill out and attach Form 2441.

Elderly or disabled tax credit
Line 46 provides a tax break for filers who are older than 65 or who retired on permanent and total disability and received taxable disability income. This credit is not allowed if your AGI exceeds certain limits for your filing status. If this credit might affect you, check out the 1040 instructions for allowable income amounts. You'll also have to file Schedule R with your return.

Education tax credits
There are two education credits that could save you tax money. You enter them on line 47.

The Hope Credit helps pay for expenses during a student's first two years of college and could shave $1,500 per student off your tax bill. The Lifetime Learning Credit can be used for undergraduate, graduate and professional degree courses for anyone and offers a maximum annual $2,000 savings. You can claim both in the same year, but not for the same expenses. Form 8863 details both these credits.

And if you claimed the tuition and fees deduction for a dependent student, you aren't allowed to take either credit for the same student.

Retirement saver's credit
The retirement savings contributions credit on line 48 is 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 39 of the instruction book. If you're eligible, you'll need to complete Form 8880 to determine the amount to enter.

Child tax credit
The child tax credit, claimed on line 49, can cut your tax bill by $1,000 per child. There are certain eligibility tests both your and your child must meet and a worksheet to complete before you can claim this credit. Pages 40 and 41 of the 1040 instructions contain details and the worksheet.

The worksheet is especially important this filing season for the nearly 24 million parents who got an advance payment of this credit last year. These filers have a little more work to do on their 2003 returns. The child tax credit amount you can claim on your Form 1040 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.

Be sure you do the proper math here. The IRS knows who got these payments and since a similar early tax refund caused massive filing confusion a few years ago, the agency is keeping a close eye on this tax-return section.

Adoption tax credit
If you became Junior's proud parent thanks to adoption, up to $10,160 of those costs may be credited on line 50. Complete Form 8839 to figure just how much you can claim here.

Other tax credits
Lines 51 and 52 allow you to claim several other, less common, tax credits. They include:

  • Mortgage interest credit associated with a state or local mortgage credit certificate. This is not the same as the mortgage interest deduction you can claim on Schedule A. Form 8396 details this credit. Be sure to check box 51a if it applies to you.
  • First-time home buyer credit for District of Columbia residents. Check box 51b and complete Form 8859.
  • General business credit. Check box 52a and file Form 3800.
  • Prior year minimum tax payment. If you paid this extra tax previously, you may be able to get some of it back here. Complete Form 8801 and check box 52b.
  • Any other forms for a tax credit, such as Form 8834 for a qualified electric vehicle credit or Form 8844 for an empowerment zone employment credit. Check box 52c if these are applicable and note the credit you are claiming.

Total credits
Now add up all the credits you qualified for -- lines 44 through 52 -- and enter the sum on line 53. This number represents your total nonrefundable credits, meaning these credits can get your bill down to nothing. (If they total more than your owe, the excess credit is of no use to you.)

Then subtract line 53 (total credits) from line 43 (regular tax and AMT due) and enter the amount on line 54. If your credits are greater than the tax you owe, enter zero here.

Other taxes
If the amount is zero or small, hold the celebration for a few minutes. What the IRS gives, it also (and more frequently) takes. The next section of Form 1040 is "Other Taxes."

Self-employment tax
Taxpayers who worked for themselves, either as their full-time job or as a side endeavor to make a little extra money, must pay self-employment tax toward Social Security and Medicare. The amount is figured on Schedule SE and entered on line 55 of the 1040.

Tip income taxes
If you received tips of $20 or more in any month last year and didn't report the full amount to your employer, you must pay the Social Security and Medicare or railroad retirement tax on it here on line 56. To figure the tax, use Form 4137.

Retirement plan, IRA and medical savings account taxes
Line 57 is where you enter any tax you owe on the early distribution of an IRA or other tax-deferred retirement account. You also would owe tax here on excess contributions to an IRA or medical savings account (MSA). Some older taxpayers who didn't take minimum distributions from their retirement plans also may owe tax here. To determine just how much, complete Form 5329.

Advance earned income credit payments
The earned income credit provides a tax break for
people who work, but don't earn a lot. The EIC could further reduce your tax bill and even get you a refund if you owe no tax. It's available for all qualifying low-income workers, but pays more to those with children.
In some cases, eligible workers get the credit money as advance payments from their companies. Those payments will be shown in box 9 of the W-2 and must be entered on line 58.

Household employment taxes
If you paid a household employee $1,400 or more last year, you must pay Social Security and Medicare taxes for that employee. Fill out Schedule H and put the amount you owe on your 1040's line 59.

Total tax
Add lines 54 through 59 to find your total tax amount. This number goes on line 60.

Now we get to see how much of that amount you've already paid.

Withholding tax
This is the most common tax payment. Almost everyone who has a job sees a big chunk of cash subtracted from each paycheck to send to Uncle Sam. That federal withholding is reported on your W-2. It also can be found on various 1099 forms that detail other income you earned. Total them all and put the amount on line 61.

Estimated tax payments
If you made estimated tax payments last year, that total goes on line 62. You also enter here any overpayment from your 2002 return that you applied to your 2003 estimated tax bill.

Earned income credit
Low-income workers who didn't get advance payments of the earned income credit through their pay should explore whether they can claim it here. Eligibility guidelines, worksheets and EIC tax credit tables begin on page 44 of the 1040 instructions. When you figure how much you can claim, enter the amount on line 63
.

Excess Social Security taxes
If you (or your spouse if you file a joint return) had more than one employer and your combined income last year was more than $87,000 last year, too much Social Security tax may have been withheld from your paychecks. You can get back the amount over $5,394 that was withheld from you by noting the excess on line 64. Some r
ailroad workers could be in similar straits. Line 64 is for this excess railroad tax, too.

Additional child tax credit
You may be able to get even more of a tax break for your kids through the additional child tax credit on line 65. Like the earlier child tax credit, you have to meet eligibility standards. And you must take the child tax credit first (line 49). Complete Form 8812 to claim the additional credit, which could give you a refund even if you don't owe any tax.

Tax paid with extension request
If you requested an extension to file your return, you had to estimate your tax bill and pay it with that request. Enter that amount on line 66, regardless of whether you paid by credit card, check or money order. If you did use your credit card, do not include the convenience fee you were charged as part of your tax payment. That went to the private company handling the transaction, not Uncle Sam.

Other payments
Line 67 allows some taxpayers to account for two other types of tax payments and a credit. They are related to three very specific circumstances:

  • Undistributed capital gains from a regulated investment company or real estate investment trust. You should have received a Form 2439 that will show any taxes paid by the investments.
  • Federal excise tax paid on fuels sold or used for nontaxable uses, such as for farming equipment or a commercial fishing boat. A full explanation of the eligible nontaxable fuel uses is contained in Form 4136, which must be filed to claim this credit.
  • A health insurance credit for filers who received Trade Assistance Adjustment (TAA) or Pension Benefit Guaranty Corporation (PBGC) payments. Details are found on Form 8885.

All of these are claimed on line 67. Be sure to check which form you used to arrive at the total entered there.

Total payments
Almost done. Add lines 61 through 67. The sum goes on line 68 as the total tax you've already paid.

Overpayment
If line 68 is more than line 60 (total tax due), you are going to get some cash back. Subtract line 60 from 68 and enter your overpayment amount on line 69.

Refund amount
As silly as it seems, line 70a asks the amount of your overpayment you want refunded to you. Most of us want it all. If you don't, decide how much you do want now and enter it here.

If you want your refund to go directly to a bank account, fill in the routing number on line 70b. If you have any questions about the nine digits to enter here, contact your financial institution. Line 70c lets the IRS know if it's a checking or savings account. And don't forget to enter your full account number, which can be up to 17 letters and numbers, on line 70d. If you're copying the number from a check, be careful not to include the check number here.

Refund applied to estimated taxes
If you are among the few who doesn't want a full refund, you have the option to apply part or all of your refund toward 2004 estimated tax payments. That amount goes on line 71. Be sure this is what you want to do. Once you tell the IRS to use the money toward estimated taxes, you can't change your mind and get a full refund.

Amount you owe
If you had to skip the three lines discussed above, it's because line 60 is larger than line 68. Sorry. That means you have a tax bill due. Subtract line 68 from line 60 and enter the amount you owe on line 72.

You also might owe a penalty if you owe at least $1,000 and the amount due is more than 10 percent of your total tax due. A penalty could also be assessed if you didn't make timely estimated tax payments. Complete Form 2210 to find out if you owe the penalty. If so, enter the penalty on line 73, and don't forget to add it to your taxes due amount on the line above.

Because Form 2210 is complicated, you can leave line 73 blank and the IRS will figure any penalty and send you a bill. You won't be charged interest on the penalty if you pay by the date specified on the bill.

When you've figured your final tax bill and want to pay by check or money order, make it out to the United States Treasury, not the IRS.

Third party designee
Hang on. We're heading down the home stretch. This section of the 1040 allows you to name someone else to handle any questions about your return.

By checking the "yes" box here, 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. Details on naming a designated tax representative can be found on page 58 of the form's instructions

Signatures
Finally, whether you're getting a refund or paying Uncle Sam, you've reached the end of the 1040.

Sign your name and write in the date, your occupation and your daytime telephone number. If you're filing a joint return, your spouse must sign and provide the same information as well.

Since you've read this far, we're going to assume you're doing your taxes yourself, so you don't need to worry about the paid preparer's signature block. But folks who did turn their taxes over to a professional should have noticed a new box this year on the 1040. Just under your phone number, you can give the IRS permission to go directly to your tax preparer if the agency has any questions about your return. The goal is to shorten the time it takes to get tax problems solved.

Now, gather all your supporting attachments and forms, assembling them in order of their "Attachment Sequence No." shown in the upper right corner of each and attach them to your 1040.

Also attach the first copy or Copy B of your various W-2 and, if tax was withheld, your 1099 forms.

Enclose your payment with your return, but don't attach the check or money order to the form.

Make sure you have the correct envelope that came with your tax package. One is designated for returns getting a refund, the other for those paying tax. Then double check your 1040 one more time, seal the envelope and head to the post office to get it on its way by April 15.

Tax mission accomplished!

Michele Erbrick assisted with this report.

-- Updated: Feb. 6, 2004

 

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See Also
Form 1040EZ box-by-box instructions
Form 1040A box-by-box instructions
Form 1040
Form 1040 Instructions
More tax form stories
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