Things to Watch out for When Filling Out Your Form 1040 2023

Filling out tax forms can be daunting, especially for self-employed individuals, freelancers, independent contractors or small business owners. That's because these professionals have to also deal with other aspects of running their business. W-2 employees have it easier with their employers withholding taxes directly from their paychecks. But every taxpayer has to file a  Form 1040.

One of the most important forms to understand and accurately complete is Form 1040. This is the holy grail of IRS forms.

Form 1040 is used to report your income and taxes owed to the IRS, and every US taxpayer must fill out and file this as part of their tax return. Failing to fill out the form correctly can lead to missing out on tax refunds, receiving penalties or even getting into legal trouble. Here, we will discuss key issues to watch out for when filling out your Form 1040 in 2023, and we'll look at different considerations for different taxpayers.

What is Form 1040?

This official IRS tax document is the one that every US taxpayer uses to file their annual tax returns. It has several versions and sub-sections for different types of taxpayers and incomes. It also includes documents for accurately calculating tax liabilities, like Schedule C and Schedule SE.

What are the different versions of Form 1040?

You might have to file various 1040 forms depending on your taxpayer status, so that the IRS clearly understands your tax situation when you file your return.

How to correctly fill out Form 1040

If you're a self-employed taxpayer, you are required to file a Form 1040 and fill out certain sub-sections. Here are a few things to keep in mind before you start:

Gather all the information about your income and expenses

For a self-employed person, freelancer, independent contractor or small business owner, having accurate information about all income sources and business expenses is a top priority. You can get this information from your bank accounts or keep their expense receipts from throughout the year for reference. To fast-track this process, you can use FlyFin to automatically track your income and expenses using A.I. from multiple bank accounts.

Claiming a deduction for business and other qualifying expenses

Claiming deductions is one of the best parts of being self-employed, and you can use the different Form 1040 schedules to itemize your business and other qualifying deductible expenses. For example, you can use Schedule A to claim deductions like mortgage interest, charitable contributions and medical expenses.

Calculating your net profit or loss

Use Schedule C to calculate your business activities' net profit or loss. This form helps determine your taxable income and is relevant to freelancers, independent contractors, sole proprietors and single-member LLCs.

Calculating your SECA tax

You need to pay the SECA tax if you are self-employed, an independent contractor or a freelancer. The current rate is 15.3% of your taxable income, and you can calculate it using Schedule SE. You pay this entire sum on your own because you are both your business' employee and employer, whereas W-2 employees only need to pay half of this amount. Their employees pay the other half.  Fortunately, freelancers can deduct SECA tax from their taxable income.

Conclusion

Whatever your tax situation, it can make a tremendous difference in the amount of time you spend on your tax return – and the amount you save when you pay your taxes. FlyFin scans your expenses automatically to find every possible tax deduction, and at tax time, CPAs prepare and file your taxes for you with 100% accuracy and maximum affordability.