PART 1
The Income Tax Return
CHAPTER 1 FILING INFORMATION
CHAPTER 2 FILING STATUS
CHAPTER 3 PERSONAL AND DEPENDENCY EXEMPTIONS
CHAPTER 1
Filing Information
Filing an income tax return is a yearly obligation for most U.S. citizens and residents. However, not everyone is required to file a return, and even some who do not have to file may want to do so for various reasons. Tax returns are due by a set date—generally April 15 for most individual taxpayers. It is possible to obtain an automatic six-month extension if action is taken in a timely manner. If not, penalties can apply. There are different versions of Form 1040, U.S. Individual Income Tax Return, for individuals. The version to use depends on the taxpayer’s income, deductions, credits, and other factors. Special rules apply to individuals who are not U.S. citizens or residents.
Personal Information
In order to complete a return, you need to know certain personal information about a taxpayer. You must enter some of the information directly on the tax return; other information is useful to you as a preparer.
Taxpayer’s Name
The name of the taxpayer and that of his or her spouse (if married and filing jointly) must be included on the return. See Chapter 2 for information on filing status. There is no requirement that the husband’s name appear first.
ALERT: If the taxpayer’s name has changed due to marriage or divorce, the taxpayer should report the change to the Social Security Administration before filing the return.
Address
Usually the address is a street address. However, a post office box number can be used if there is no mail delivery to the home. A foreign address may be used if the taxpayer is located outside of the United States.
ALERT: If the taxpayer plans to move after the return is filed, the taxpayer should complete Form 8822, Change of Address, at the time of the move. This will ensure that refunds and other IRS communications reach the taxpayer at the new address.
Daytime Phone Number
The phone number is optional information that can be entered at the end of the return. The IRS may use this phone number to contact the taxpayer to speed up the processing of the return.
Taxpayer Identification Number
Enter the taxpayer’s Social Security Number (SSN) (and the SSN of the taxpayer’s spouse, if the taxpayer is married filing jointly). Nonresident and resident aliens who are ineligible for a SSN must include their Individual Taxpayer Identification Number (ITIN).
ALERT: An ITIN can be obtained by filing Form W-7, Application for IRS Individual Taxpayer Identification Number. The taxpayer generally submits Form W-7 to the IRS together with the first income tax return he or she files. See the form’s instructions for more details.
Date of Birth
The taxpayer’s date of birth is not entered on the return but is used to determine eligibility for certain tax breaks, such as the additional standard deduction amount for those age 65 and over.
Disability
Disability information is not entered on the return but may alert you to possible tax breaks, such as an additional standard deduction amount for blindness or exemption from an early distribution penalty for IRA withdrawals before age 59½.
Occupation
List occupation information at the end of the return near the signature line.
TIP: A taxpayer can elect to contribute to the presidential election fund. It does not change the taxpayer’s tax liability in any way. If the taxpayer wants to contribute, this is indicated in a check box. Taxpayers using the married filing jointly filing status can each make their own decision.
Filing Requirements and Thresholds
Certain taxpayers must file a tax return while others may want to file even though they aren’t required to do so.
A person must file a tax return if gross income is at least a threshold amount (called the “filing threshold”) for the person’s filing status (explained in Chapter 2) and age. This is so even if the person is a U.S. citizen or resident living outside of the United States.
General Filing Thresholds
Table 1.1 lists the filing threshold amounts.
DEFINITION: Gross income is all income received that is not specifically tax free, including income from sources outside the United States. Examples of gross income include gain on the sale of a principal residence (even though the gain may be all or partially excluded) and the taxable portion of Social Security benefits. A portion of Social Security benefits are taxable if the taxpayer lived with his or her spouse at any time during the year but files separately, or is a single or head-of-household filer with gross income, plus one-half of Social Security benefits and tax-exempt interest that exceeds $25,000 ($32,000 if married filing jointly).
Table 1.1 Filing Threshold Amounts
Single | Under 65 65 or older | $9,500 $10,950 |
Married filing jointly | Both spouses under 65 One spouse 65 or older Both spouses 65 or older | $19,000 $20,150 $21,300 |
Married filing separately | Any age | $3,700 |
Head of household | Under 65 65 or older | $12,200 $13,650 |
Qualifying widow(er) with dependent child | Under 65 65 or older | $15,300 $16,450 |
Example
Stan is single, age 45, with interest income of $1,200 and wages of $20,000. He must file a return.
Example
Sarah is single, age 70, with interest income of $1,200 and Social Security benefits of $20,000. She does not have to file a return. Her Social Security benefits are not counted as gross income because they are not taxable.
FYI: Where do these numbers come from? The gross income thresholds reflect the standard deduction amount for each filing status...