In this video, Mahalo tax expert Jon Butler makes filing your taxes easier by explaining income.
Correctly reporting and summarizing your income for the tax year is the foundation of your yearly filing. All income sources, regardless of amount, type or source, must be reported on your income tax filing. Even tax-exempt sources of income, such as tax-exempt mutual fund distributions, must be recorded.http://www.youtube.com/watch?v=ktltpJvcLow
The income section on the 1040 is primarily a place to summarize totals determined on other documents and forms. Most of the line items in this section have a corresponding document that helps you summarize and calculate the amount of income that needs to be reported. Review the documentation for all schedules and forms to ensure you understand how to report your income sources correctly.http://www.youtube.com/watch?v=ktltpJvcLow
Step 1: Obtain Income Documentation
Most of your income sources will provide documentation on your total earnings for the year. Wages from an employer will be documented on W-2 forms, interest income will come on 1099-INTs, dividends will be reported on 1099-DIVs, unemployment benefits will come on a 1099-GOV and other income may come on generic 1099-MISC or other tax forms as appropriate. Some sources of income such as business or farm income may require external documentation such as an income statement from your small business or accounting documents from your farm.http://www.irs.gov/pub/irs-pdf/i1040.pdf
Step 2: Fill Out Supporting Forms
Complete forms for all individual line items on the 1040 that require supporting paperwork.
- For income or dividends, you may need to include a Schedule B.
- If you have a small business, you will need to attach a Schedule C or C-EZ.
- Capital gains may require Schedule D support.
- Other gains or losses not reported on other documents generally require Form 4797.
- For your S corporation earnings, royalty distributions, partnership earnings and rental real estate income, complete Schedule E.
- Any farm income you need to claim is documented on Schedule F.http://www.youtube.com/watch?v=ktltpJvcLow
Step 3: Transfer and Sum
Transfer the total income calculated on supporting forms to your 1040 income section. For items that do not require additional documents, such as wages, calculate the total income and place it on the appropriate line item. After you have recorded all of your income sources on individual lines in the income section, total all of your taxable income for the year and place it on line 22 on your 1040.http://www.youtube.com/watch?v=ktltpJvcLow
References
Meet Our Expert
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Jon Butler
Jon received a bachelor's degree in accounting with a minor in economics from Luther College in Decorah, Iowa. He offers private tax consulting and is also a licensed real estate agent in the state of California. He works with sellers of distressed properties (short sales and foreclosures) and a number of buyers and investors.
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Often requires:
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Summarized on:
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Include:
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Supporting documents:
W-2s, 1099-INT, 1099-DIV, 1099-GOV, 1099-MISC, 1099-R, 1099-S, W-2Ghttp://www.irs.gov/pub/irs-pdf/i1040.pdf -
Rounding:
IRS Forms
Disclaimer
The content in this page is not a substitute for professional financial advice. Please contact a finance professional before using the information presented here.
