Last Updated : January 14, 2009
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1040A

Form 1040

U.S. Individual Income Tax Return

Taxpayer can use Form 1040, if all of the following apply;

  1. Taxpayer’s Taxable Income is more than $100,000.
  2. Taxable Income is from
    • Income from Self- Employment (Business or farm income).
    • Wages, salaries, tips and wages earned as a household employee and Tips which were not reported on Form W-2.
    • Income received as a partner in a partnership, shareholder in an S corporation, or a Beneficiary of an estate or trust.
    • Dividends in insurance policies if they exceed the total of all net premiums he paid for the contract.

  3. Taxpayer received or paid interest on securities transferred between interest payment dates.
  4. The taxpayer can either exclude any of the following types of income.
    • Foreign Earned income he received as a U.S citizen or Resident alien.
    • Certain income received from sources in American Samoa If he were a bonafide resident of American Samoa for all of 2006.

  5. The taxpayer has an alternative minimum tax (AMT) adjustment on stock he acquired from the exercise of an incentive stock option (Refer Publication 525).
  6. Taxpayer had a financial account in a foreign country, such as a bank account or securities account.

Exception: If the combined value of the accounts was $10000 or less during all of 2006 or if the accounts were with a U.S. Military banking facility operated by a U.S. Financial institution, the taxpayer may file Form 1040A.

  1. The taxpayer received a distribution from a foreign trust.
  2. The taxpayer owes the excise tax on insider stock compensation from an expatriated corporation.
  3. The taxpayer is reporting original issue discount (OID) in an amount more or less than the amount shown on Form 1099-OID.
  4. The taxpayer owes household employment taxes. Refer schedule H (Form 1040) and its instructions to find out if he owes these taxes.
  5. The taxpayer is eligible for the health coverage tax credit. For more information refer Form 8885.
  6. The taxpayer is claiming the adoption credit or received employer-provided adoption benefits. Refer Form 8839 for more information.
  7. The taxpayer is a debtor in a chapter 11 bankruptcy case filed after October 16 , 2005.

For more details regarding filing of forms refer the Charts A, B, and C given in instructions of Form 1040.

Personal Information and Filing Status:
You are not required to fill up this information at here. Fill up the taxpayer’s name, address; SSN and filing status in main information worksheet and program automatically fill up these all information in this form.

Exemptions:
Line 6a: Exemption for Taxpayer
The exemption for taxpayer box is checked by default unless you check the box for “someone can claim taxpayer for dependent” in personal information on main information worksheet.

Line 6b: Exemption for Spouse
The exemption for spouse box (if filing married filing jointly) is checked by default unless you check the box for “someone can claim spouse for dependent” in personal information on main information worksheet. 

Line 6c: Dependents
You are not required to fill up these all information of dependents at here, when you enter the information of dependent in main information worksheet and check the box for CTC, the program will transfer the information of dependent at here.

Income:
Line 7: Wages, Salaries, Tips, etc.
Program transfers the amount of wages, salaries and tips from different forms. Double click on this line to view the links of different forms.

Line 8a: Taxable Interest
Amount on this line comes from Line 4 of Schedule B. Fill up Schedule 1 and program transfers the amount on this line from line 4 of Schedule B.

Line 8b: Tax-exempt Interest
Amount on this line comes from Schedule B if any exempt interest is there.

Line 9a: Ordinary Dividends
Amount on this line comes from line 6 of Schedule B.

Line 9b: Qualified Dividends
Amount on this line comes from Schedule B if any qualified dividend is there.

Line 10: Taxable refunds, credits or offsets of state and local income taxes.
Enter on this line manually amount of refund, Credit or offset of state or local income taxes received in 2006.If the refund is for the tax you paid in 2005 and you deducted state or local income taxes on line 5 of 2005 schedule A, the use the worksheet to know the taxable refund.
If worksheet is added then amount will come from 1040Wkst refund line 7.

Line 11: Alimony Received
Enter the amount received as alimony or separate Maintenance on this line and also mention the social security number to the person who had made payments to you otherwise a penalty of $50 is to be paid by you.
 
Line 12: Business income or (loss).
If the taxpayer operated a business or participated in a profession as a sole proprietor, then report the income and expenses on Schedule C or C-EZ and net profit or loss is transferred on this line by the program itself. 

Line 13: Capital Gain or (loss).
Amount on this line comes from schedule D. If the taxpayer has a capital Gain or loss, including any capital gain distributions or a capital loss carryover from 2005, then the taxpayer should file Schedule D.
Exceptions:
The taxpayer need not file Schedule D if (1)he has only capital gain distributions from Form 1099-DIV to be reported on schedule D. (2)he has no unrecaptured section 1250 gain, or section 1202 gain, or collectibles 28% gain. In such case he need not file Schedule D but enter manually the amounts on this line.

Line 14: Other gains or (losses)
If form 4797 is added then the program transfers the gain or loss from FORM 4797.If form 4684 is added then the program transfers the gain or loss from FORM 4684 and in the adjacent field Literal “FORM4684” is written by the program itself.

Line 15a: IRA Distribution
The program transfers amount on this line from Form 1099-R, line 1, if checkbox on line 7 is checked.

Line 15b: Taxable Amount of IRA distribution
Amount on this line comes form line 2a of Form 1099-R and Line 15 or Line 18 or Line 24 of Form 8606. If line 2a of Form 1099-R is not filled, program enter the amount here from line 1 of Form 1099-R.

Line 16a: Pensions and annuities
The program transfers amount on this line from Form 1099-R, line 1, if checkbox on line 7 is not checked and code on line 7 is selected.

Line 16b: Taxable amount of Pensions and Annuities
The program transfers amount on this line from Form 1099-R, line 2, if checkbox on line 7 is not checked and code on line 7 is selected
Pensions and annuities amount are fully taxable if the taxpayer did not contribute to the cost of his pension or annuity or the taxpayer gets his entire cost back tax free before 2006.
Example of fully taxable amount is the military retirement pay got by the employees of Military. 

Line 17: Rental Real Estate, Royalties, Partnerships, S corporations, Trusts etc.
The amount on this line comes from Schedule E. If the taxpayer has one or more K-1s from Partnerships, S corporations, Estates or trusts then the taxpayer should complete first the
K-1s and then schedule E.
If the taxpayer has rental or royalty income reported on Form 1099-M then include this income on schedule E.

Line 18: Farm Income or (loss)
Enter the farm income or loss on schedule F and the program itself transfers the net income or loss from schedule F.

Line 19: Unemployment compensation received
The amount on this line comes from line 1 of Form 1099-G. Taxpayer should receive a form 1099-G showing the total unemployment compensation received in 2006.

If taxpayer received an overpayment of unemployment compensation in 2006 and repaid any of it in 2006, enter this amount on row 2 of line 19. Program deducts this amount from row 1 and enters the result in outer column.

Include on line 19 any amount received for Alaska permanent fund dividends.

Line 20a and 20b: Social Security Benefits
The program transfers the amount on this line from S.S. and R.R. Benefits worksheet. If filing status is married filing jointly, then enter the amount of spouse also.

Taxable amount on line 20b also comes from S.S. and R.R. Benefits worksheet, line 18 or if Lump sum SS and RR benefit wkst is added then the program transfers lower of the line 18 of SS & RR Wkst or line 20 of Lump sum SS and RR wkst.

Line 21: Other Income
Enter on this line any income not reported elsewhere on the return or other schedules. List the type of the item and amount of income on this line.
Examples of income to report on line 21 are:

  • Taxable distributions from a Coverdell Education savings account (ESA) or a Qualified Tuition Program (QTP).
  • Taxable distributions from a Health Savings Account (HSA) or an Archer MSA.
  • Prizes and Awards.
  • Gambling Winnings, including lotteries, raffles, a lump sum payment sale of a right to receive future lottery payments, etc.
  • Jury Duty Pay.
  • Alaska Permanent Fund Dividends.
  • Alternative trade adjustment assistance payments.
  • Reimbursements or other amounts received for items deducted in an earlier year.
  • Income from the rental of personal property.
  • Income from the activity not engaged in for profit.
  • Loss on certain corrective distributions of excess deferrals.
  • Dividends on Insurance policies if they exceed the total of net premiums paid for the contract.

 Exclusion:
The taxpayer needs to complete Form 2555 or 2555-EZ if the taxpayer has foreign earned income and qualifies for foreign earned income exclusion. The program subtracts this amount from the other income total.

Adjusted Gross Income:
 
Line 23: Archer MSA Deduction
Amount on this line comes from Form 8853.

Line 24: Certain Business Expenses Of reservists, performing Artists and Government Officials.
Amount on this line comes from Form 2106 OR Form 2106-EZ.

Line 25: Health Savings Account Deduction
Amount on this line comes from FORM 8889.

Line 26: Moving Expenses
Amount on this line comes from FORM 3903.

Line 27: One Half of self-employment tax
If the taxpayer is self-employed and owes self-employment tax , amount on this line comes from Schedule SE.

Line 28: Self-employed SEP, SIMPLE, and Qualified Plans
Amount on this line comes from Wkst SEP SIMPLE line 22.

Line 29: Self-employed Health Insurance Deduction
Amount on this line comes from Wkst health Insurance deduction line 14.

Line 30: Penalty on early withdrawal of savings
Amount on this line comes from schedule B interest part total of all lines of column “early penalty”.

Line 31a: Alimony Paid
Enter on this line manually the SSN and amount of payments made to persons.

Line 32: IRA Deduction
Amount on this line come form IRA Worksheet Line 11 (Traditional IRA).

If taxpayer made contribution to a traditional IRA for 2006, he/she may be able to take and IRA deduction.

Line 33: Student Loan Interest Deduction
Amount on this line comes from line 16 of student loan interest deduction worksheet.

However, taxpayer can take this deduction only if all of the following apply;

  • Taxpayer paid interest in 2006 on a qualified student loan,
  • Taxpayer’s filing status is not married filing separately,
  • Modified AGI is less than:
  • $65,000 if single, HOH, or qualifying widow(er);
  • $135,000 if married filing jointly.
  • Taxpayer, or spouse (if filing jointly), are not claimed as a dependent on someone’s 2006 tax return.

Line 34: Jury Duty Pay
If the employer continued to pay the taxpayer salary while the taxpayer served on the Jury , then manually enter the amount of deduction.

Line 35: Domestic production Activities
The taxpayer may be able to deduct up to 3% of his Qualified Production activities income.
Amount on this line comes from FORM 8903 if added. Otherwise the user has to manually enter the amount of deduction.

Line 36: Total Adjustments
The program by itself does the total of amounts entered on lines 23 to line 35.

Other adjustments:
Enter on this line the amount of expenses that cannot be deducted elsewhere but on appropriate lines as per description specified in that part.

Tax Credits, and payments:
Line 39a:
The program checks the applicable checkbox on this line on the base of information entered on main information worksheet.

The spouse box will be checked only if the filing status is married filing jointly, or married filing separately and the box to claim the spouse’s exemption on line 6b of Form 1040A is checked.

Line 39b:
If the filing status is Married filing separately and the spouse itemizes or the taxpayer is Dual –status alien the check the checkbox on this line.

Line 40: Standard Deduction
Standard deduction is based on filing status unless the box for claiming the taxpayer (or spouse if filing joint return) is a dependent of someone else.

If above checkbox is checked, then program calculates the standard deduction on the base of information entered.

Line 47: Foreign Tax credit
If the taxpayer has paid income tax to a foreign country , he or she may be able to take this credit by filing FORM 1116.

Line 48: Credit for Child and dependent expenses
Program transfers amount on this line form line 11 of FORM 2441 if taxpayer fulfills the requirement for child and dependent expenses.

Line 49: Credit for elderly or the disabled
Amount on this line comes form line 24 of Schedule R if taxpayer fulfills the requirement for credit for elderly or the disabled.

Line 50: Education Credit
If taxpayer paid qualified expenses in 2006 for himself or spouse, or for his dependent to enroll in or attend an eligible educational institution, you may be able to take an education credit.

You are required to fill up Form 8863 to claim this credit. Amount on this line comes form line 17 of Form 8863.

Line 51: Retirement savings contributions credit
Amount on this line comes form Line 14 of Form 8880. Fill up form 8880 to claim this credit.

Line 52: Residential Energy Credit
Amount on this line comes form Line 31 of Form 5695. Fill up form 5695 to claim this credit.

Line 53: Child tax Credit
Amount on this line comes from CTC wkst line 13.

Line 54: Credits from FORM 8396, FORM 8839, FORM 8859
The program calculates this credit on forms 8396 (Mortgage interest credit), 8839 (Qualified adoption Expenses) , 8859 (District of Columbia First time homebuyer credit) and transfers on this line if the forms are added.

Line 55: Other Credits
The program calculates the credit if any of the forms have been added as below.

  • Credit for prior year minimum tax. If the taxpayer paid AMT in a prior year then refer form 8801.
  • Qualified Electric vehicle credit. Refer form 8834.
  • General business credit. Refer form 3800.
  • Empowerment Zone and renewal community employment credit. Refer form 8844.
  • Credit for alcohol used as fuel. Refer form 6478.
  • Alternative Motor Vehicle Credit. Refer form 8910.
  • Renewable Electricity, Refined Coal and Indian Coal Production Credit Refer form 8835.

Line 58: Self-Employment Tax
The program calculates self-employment tax on schedule SE when the taxpayer completes schedule C, C-EZ or F. If the taxpayer has income as an exempt notary, the taxpayer should enter it on line 3 of schedule SE and check the checkbox.
If the taxpayer is exempt from SE tax because he or she has an IRS-approved Form 4029 or 4361 then check the applicable box.

Line 59: Social Security and Medicare tax on tip income not reported
If the taxpayer has received tips of $20 or more in any month and did not report the full amount to his or her employer then the taxpayer should figure the social security and Medicare tax on unreported tips by filing FORM 4137.if form 4137 is added then the program transfers the amount of tax calculated on form 4137 on this line.

Line 60: Additional Tax on IRA’S and other qualified plans.
The taxpayer needs to file Form 5329 to figure his additional tax on IRA’s and other plans and if form 5329 is added then the program transfers the amount on this line.

Line 61: Advance earned income credit payments
Amount on this line comes from box 9 of Form W-2 and W-2G.

Line 62: Household Employment taxes
The program transfers the amount of Household employment tax on this line from
Schedule H if added. For details regarding to file Schedule H refer instruction PDF.

Line 64: Federal Income Tax Withheld
The amount on this line comes from number of forms. Double click on this line to view the links for different forms. Program will make the total of the amount of withheld from all the forms and enter it on this line.

Line 65: 2006 estimated tax payments
Enter on this line amount of estimated taxes paid during the year 2006.

Line 66a: Earned Income Credit
The EIC is a credit for certain people who work. The credit may give taxpayer a refund even if he/she does not owe any tax.

You are required to fill up Schedule EIC and EIC Worksheet to claim this credit. Most of the entries in this form are automatically calculated by program. If taxpayer is eligible for EIC, then amount on line 66a will be transferred from Line 9 of the Schedule EIC Worksheet.

Line 66b: Nontaxable Combat Pay Election
If taxpayer is a member of the U.S. Armed Forces who served in a combat zone, certain pay is excluded from taxpayer’s income. The amount of nontaxable combat pay should enter in box 12 of Form(s) W-2 with code Q.

Amount on this line will be transferred from line 3 of Schedule EIC Worksheet if checkbox on line 3 is checked.

Line 67: Excess social security and Tier 1 RRTA tax withheld.
If the taxpayer, or the spouse if filing a joint return, had more than one employer for 2006 and total wages of more than $94200, too much Social Security or tier 1 RRTA tax may be withheld. On this line the taxpayer can take a credit on this line for the amount withheld in excess of $5840. The program calculates this amount by itself from FORM W-2 Or W-2GU added.

Line 68: Additional Child Tax Credit
This credit is for certain people who have at least one qualifying child. The additional child tax credit may give a refund even if taxpayer does not owe any tax.

Amount on this line transferred from line 13 of Form 8812.

Line 69: Amount paid with extension to file
Amount on this line come form estimated tax payment worksheet. Enter in estimated tax worksheet, any amount paid with extension request and program will transfer that amount on this line.

Line 70: Other payments
On this line the program calculates the amount from the below forms if they are added.

  • Form 2439, Undistributed Long term Capital Gains.
  • Form 4136, Fuel tax credit.
  • Form 8885, Health coverage tax credit.
  • Form 8689, Income tax to Virgin Islands.

Line 71: Credit for Federal Telephone Excise Tax Paid:
This is the new credit which is included from tax year 2006. You can decide whether you want to take standard amount of credit or accrual amount of credit. The checkbox is given on row 1 and row 2 of this line.

If you select the checkbox on row 1 i.e. standard amount of credit then program will calculate the standard amount of credit based on number of exemptions claimed on line 6d. E.g. if number of exemptions is claimed on line 6d is 1, then your standard amount will be $30.

If you have checked checkbox on row 2 i.e. accrual amount credit, then you are required to attach and fill up form 8913, and amount on this line will come from form 8913.

Third Party Designee:
You are not required to fill up all these information at here. Once you fill up all these information on main information sheet program will transfer it at here.

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