How to Fill out Form 1040- Part 2: Lines 7-9

Income Section of the 1040

After filing out the personal information section on the 1040 it is time for the income section of the 1040. For lines 7 through 9 there are multiple documents and forms that help to fill out the line amounts. Some of the different documents that an individual could obtain are W-2, 1099-INT, 1099-OID, and 1099-DIV. A form that might also be needed to help fill out the 1040 lines 8 and 9 is Schedule B.

Line 7: Wages, Salaries, Tips, Etc.

When looking at your W-2 at the end of the year it is important to know what numbers to use on the tax return. Box 1 on the W-2 is your wages. This number goes on line 7 of your 1040. If you have multiple W-2s it is important to add all the numbers found in box 1 on the W-2. More of the W-2 is used later on the 1040, but only box 1 is used on line 7 for the 1040.

It is also important to make sure there is a copy of all the W-2s attached to the 1040 before filing the return.

Schedule B

For lines 8 and 9 on the 1040 it is possible that a Schedule B is needed to also be filed. Schedule B is the Interest and Ordinary Dividends form. The form is easy to fill out and is separated into 3 parts. Part 1-Interest, Part 2-Ordinary Dividends, and Part 3-Foreign Accounts and Trusts. For line 8, only Part 1 will be used, and for line 9 only Part 2 will be used.

These are only if Schedule B is needed. Some of the different reasons a schedule B is required are:

  • Income over $1,500 of taxable interest or ordinary dividends.
  • Received interest from a seller-financed mortgage and the buyer used the property as a personal residence.
  • Had accrued interest from a bond.
  • You are reporting a lesser income than the amount shown on Forms 1099-OID and 1099-INT.
  • Having received interest or ordinary dividends as a nominee.
  • A nominee, in this case, is an individual or company whose name is given as having title to a stock, real estate, etc., but who is not the actual owner.
  • You had a financial interest in an account in a foreign country or you received a distribution from a foreign trust.

Line 8a: Taxable Interest

If you receive a 1099-INT or a 1099-OID at the end of the year, then you probably have some taxable interest.

On Form 1099-INT Box 1: Interest Income is the most common box filled out for individuals. This amount would be put on Line 8a on the 1040. Also Box 3: Interest on U.S. Savings Bonds and Treas. Obligations would go onto line 8a.

On Form 1099-OID boxes 1 and 2 are the interest income used for line 8a on the 1040.

Line 8b: Tax-Exempt Interest

Similar to Taxable Interest, on Form 1099-INT there is a box for tax-exempt interest, this is box 8 on the 1099-INT. This number flows though to line 8b on the 1040. This income can be from tax-free securities such as municipal bonds.

On the 1099-OID form, there is a box for non-taxable interest as well. Box 11- Tax-exempt OID, this box will also go onto line 8b along with the interest income from any 1099-INT that is non-taxable.

This number does not affect the individuals AGI. However, the tax-exempt interest helps to determine the taxable amount of social security benefits.

Any interest that is reported on line 8b also must not be recorded on line 8a. Make sure the two lines do not have crossing-over numbers. There is no interest amount that is both taxable and non-taxable.

Line 9a: Ordinary Dividends

What is a dividend? A dividend is an amount of money paid to shareholders of a company. Dividends are typically paid quarterly and come out of the profits of the business.

Another form you might receive at the end of the year is a 1099-DIV. Box 1 on the 1099 is the number that is put on line 9a for ordinary dividends.

Line 9b: Qualified Dividends

When you receive a 1099-DIV box 2 has the Qualified Dividends amount. This amount goes on line 9b of the 1040.

If you have more than one 1099-Div make sure all of the box 1’s are added to go on line 9a and all of the box 2’s are added for line 9b.

 


Blog Series: How to fill out Form 1040- Personal Information, Filing Status, and Exemptions

When looking at the top of the form 1040 there are three sections before you even get to numbers. These sections can help let the IRS help identify each individual, and figure out how much should be deducted on the tax return for everyone.

Personal Information

In the personal information, it starts with the taxpayer and spouses (if filling a joint return) full names and social security numbers. After that, it goes into the taxpayers address, city, state, and zip code. For 2017, there was also a box that could be checked if you wanted to put three dollars to the presidential election campaign.

Filing Status

Filing status is broken into 5 sections:

1. Single

2. Married filing jointly

3. Married filing separately

4. Head of Household

5. Qualifying Widow(er)

If you are a single individual with no dependants, you check the box next to single. However, if you are un-married and have dependants, the correct box to check is “Head of Household.” If you are married, you can choose between married filing jointly or married filing separately as a filing status. This is up to the taxpayer and spouse, both must file using the same status, one cannot choose joint and the other choose separate. When filing joint, it combines all of your income and expenses onto the 1040, where if you file separate returns it is similar to filing a single tax return.

Exemptions

There is also a section on exemptions. This starts by checking the box for yourself and your spouse, if applicable. Then any dependents that you and your spouse potentially have get added. Similar to the “Personal Information” section dependent’s information includes full name, social security numbers, and relationship to taxpayer.

After filing out the dependents section and checking the boxes for yourself and spouse, (if necessary) there is one last step. On the side of the exemptions box there are five lines. The top one is the number of checks you made. This number could be a one or a two. A one is for single, head of household, and married filing separately. While a two is entered for married filing jointly.

The next three lines are for number of dependents. Line 1 is for dependents who lived with the taxpayer during the year. The second line is for dependents who did not live with you due to divorce or separation. The third is for dependents that were not listed in the above two sections.

The 5th line is for the total number of exemptions. You can find this number by adding all of the above lines together.


How to Report Gambling Income and Losses

Finally, after 18 years, you can to join the army, call yourself an adult, and you can go to a casino and gamble. However, win or lose, did you know you have to report that money to the IRS on your tax return. Do you know where to report gambling winnings? In addition, what if you are a professional gambler is it all the same?

Where to report: Casual Gambler

If you are just going to the casino for some fun, and you have no intent on surviving on the winning you make then you are not a professional gambler. For a casual gambler you will report your winnings on line 21 of Form 1040, as “Other Income”. Now if you have a loss then you report that amount on Schedule A, Itemized Deductions Line 28, Gambling Losses.

This means that all income is reported, however losses from gambling are only helpful if you have enough to itemize your deductions. To understand more on itemized deductions versus the standard deduction look for our blog post, “Standard vs. Itemized deductions”

Where to report: Professional Gambler

Now if you are a gambler and carry out the activity in a businesslike manner and the winnings and losses effect how you are living you are a professional. This is now a trade or business to the IRS. You report your winnings and losses on the Schedule C, Self-Employed Income.

Professional gamblers can also deduct ordinary and necessary business expenses in addition to their wagering losses. However, wagering losses cannot exceed gambling winnings. This shows that once someone is a professional gambler, that person cannot take a loss on their taxes from the losses.

Going to the casino and gambling can be fun. From the slot machines to the poker tables, there are winners all around the room, and the smell of potential winnings is in the air. When filing your tax return for the year, just remember the winnings and losses need to be reported to the IRS. If you are in the casino as a profession and report income as self-employment income, or if you finally made it to the age to have some fun at a casino, filing the return is different.


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