IRS Tax Forms Explained

As the April tax deadline draws near, most taxpayers start gathering up all of the IRS forms they need to complete their income taxes.  Even if you're quite confident that you don't need help finding any of the many IRS forms out there, we'd thought it useful to provide a bit of a guide to the most common tax forms used.

Finding Tax Forms

But just in case you're not up to the challenge of finding a tax form on the IRS website, we've got some good news.  Our publication on Federal Income Tax Forms contains nearly 100 different forms and they're grouped into categories to make it easier for you to find the exact form you're looking for.  The links to those forms are updated each year, so if you're looking for a quick reference, then be sure to bookmark that page.

Form 1040

The IRS Form 1040 is perhaps the single most important of all the IRS forms published.  That's because most of the other tax forms we'll talk about later on provide back up calculations or documentation that feeds the 1040.

The 1040 form is somewhat unique in that the IRS allows different taxpayers to complete different versions.  One of the three 1040s is known as the "long form" because it's the most involved of the three forms.  The good news is that the IRS tries to make things simple by allowing you to complete the shortest form possible.

Form 1040 Guidelines

The simplest versions of this tax form are the 1040EZ and 1040A.  If you make less than $100,000 and don't have a lot of tax deductions, then one of these two forms is probably all you need to file your income taxes.  The following paragraphs provide a more detailed guide to choosing the right form 1040.

Form 1040EZ

• Taxable income below $100,000
• Your interest income must be $1,500 or less
• You must be under the age of 65
• Tax filing status of Single or Married Filing Jointly
• You cannot have any dependents

Form 1040A

• Taxable income below $100,000
• You can have a capital gain distribution, but no other capital losses or gains
• The only deductions you can take are for IRA contributions, student loan interest, education expenses, or higher education tuition and fees
• The only tax credits you can have are for children, education, earned income, child and dependent care expenses, adoption expenses, elderly and retirement savings account contributions
• You cannot have any itemized deductions

If your want to file a more complex tax form, then you need to file Form 1040 - the long form.

IRS Forms Schedule A & B

If you're filing a 1040 long form, then the two most important backup forms are IRS Schedules A&B.  The tax form Schedule A is used to figure out a taxpayer's itemized deductions.  As a taxpayer, there is nothing we like better than tax deductions because they lower our tax liability or tax bill.

Each taxpayer is allowed standard deductions as determine via the IRS tax code.  If a taxpayer can "beat" these standard deductions using Schedule A, then they are allowed to take the higher deduction.

The following table contains the standard deductions for the tax years 2005, 2006 and 2007:

Standard Deductions 2005 / 2006 / 2007

So if you can beat these standard deductions, then you are better off filing Schedule A along with your 1040.  The following are the most common types of deductions appearing on Schedule A.

Medical and Dental Expense

These are all of you medical and dental related expenses, subject to a 7.5% threshold.  That means you can only deduct these expenses that are in excess of 7.5% of your Adjusted Gross Income.

Taxes Paid

These include taxes paid to other jurisdictions or authorities such as state and local income taxes, property taxes and real estate taxes.  Most of us pay state income taxes so we can take that deduction on Schedule A.  If you own a home, then you've probably paid property taxes too.  If you have a mortgage, then the property taxes paid or disbursed on your behalf will be reported on Form 1098.

Interest Paid or Interest Expense

If you're a homeowner and have a mortgage on your house, this is where you deduct the interest expense associated with those payments.  Your mortgage company will send you a statement of interest paid sometime in January - Form 1098, Mortgage Interest Statement.  Interest paid, along with taxes paid are usually the two largest tax deductions found in Schedule A.

Gifts to Charity

If you've made any gifts to charity, including donations to a church, they would go into this category.  Keep in mind that for donations in excess of $500 and / or non-cash donations the IRS may require additional record keeping.   For example, if you're thinking about donating a car, the IRS rules are very specific to that kind of donation.

IRS Schedule B

IRS Schedule B is the form is used to report interest income and ordinary dividends.  If you have money in an interest bearing savings account, then the banking and / or financial institutions will have sent to you a form 1090-INT in the mail. If you have received a distribution of dividends, then the banking and / or a financial institution will report this information a form 1090-DIV.

The information found on the 1090-INT and 1090-DIV is used to fill out the IRS form Schedule B.

Special IRS Forms

The above three forms above - the Form 1040, Schedule A and Schedule B - are the most common tax forms that individuals will file with the IRS.  There are a couple of specialized forms that are worth a quick mention too:

• Schedule C or C-EZ - which is used to report to the IRS any business income or losses
• Schedule D - which is used to report long or short term capital gains
• Form 2441 - which is used to report your child and dependent care expenses
• Form 8863 - which is used to report to education credits
• Form 8812 - which is used to report additional child tax credits

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