If you’ve said goodbye to those easy simple days when you could prepare your income tax return in about 20 minutes on the user-friendly 1040EZ, well all I can say is welcome to the adult world. Not to say that a 20-something isn’t an adult. It’s just that having one job and no kids, no investments has its own simple grace and usually the complexities and traumas of true adulthood just haven’t hit yet.
Maybe now you’ve become brave enough to start that business you’d always dreamed about. Or you’ve had kids. Or you make a lot of money, or you’ve sold a house. These are all examples of life events that will cause you to have to use the IRS Form 1040 rather than the 1040EZ or even the in-between 1040A.
Only IRS Form 1040 Has Schedule C
IRS form 1040 is the form you have to use if you are self-employed. That’s because the other two forms don’t have Schedule C. Schedule C is what is used when you want to report profit or loss from a business. You enter your income form your business, your expenses, and come out with either a positive amount (which would mean you had a profit) or a negative amount (loss…too bad).
Now, Schedule C is used for reporting business profit or loss if your business is set up as a sole proprietorship. If it’s anything else (Corporation, S-Corp) then it’s a whole different ballgame.
Only IRS Form 1040 Has Schedule A
If you want to itemize your deductions, then you’re using IRS Form 1040, too. That’s because only the 1040 form has Schedule A. It’s called Itemized Deductions, and you’ll want to itemize if the total of your itemized deductions is more than the standard deduction, which the IRS gives you like a freebie.
Only IRS Form 1040 Has Schedule D
If you sold property, again you are locked into using IRS Form 1040. It’s the only form with Schedule D Capital Gains & Losses. Selling a home and selling stocks are the two most common reasons for filling out and attaching a Schedule D to your IRS form 1040.
Only IRS Form 1040 Has Schedule B
Well, there was an A, C, and a Schedule D so we had to include the B as well. And yes, you have to use IRS Form 1040 if you are attaching Schedule B. You would be doing that if you had more than $1500 in taxable interest or ordinary dividends. If you make a lot of passive income, Schedule B is for you, and therefore so is IRS form 1040.