How to Calculate Your Tax Return With Form 1040
A few simple calculations will tell you all you need to know
Accurately completing your Form 1040 tax return determines whether you’ll receive a refund or you owe taxes to the IRS. Most of the lines on the form provide simple, straightforward directions, so it doesn’t have to be complicated.
The IRS radically changed the Form 1040 tax return back in 2018. The revised form wasn’t well-received, so the IRS went back to the drawing board and made changes to the tax return again for 2019, then it tweaked it a little more for tax year 2020. The steps, schedules, and line numbers explained here apply to the 2020 Form 1040, the return you’ll file in 2021. They’ll guide you to determining just how much you owe the IRS—or better yet, how much of a refund you’ll be receiving.
How to Calculate Your Tax Return
Your tax return amount is, in general, based on line 24 (total tax owed) and line 33 (total tax paid). Subtract line 24 from line 33. If the amount on line 33 is bigger than the amount on line 24, that’s what you overpaid and, in theory, should get back as a refund. Enter this overpayment on line 34.
If the total tax owed (line 24) is more than the tax you paid (line 33), you’ll owe taxes. Subtract line 33 from line 24 to find out how much. Put this underpayment amount on line 37. This is the amount you owe.
Put "0" on lines 34 and 35a if the result is exactly zero, although this is rare. It means that your payments met your tax liability dollar for dollar, so you have no refund coming and no balance due.
Take the Refund or Make an Estimated Tax Payment?
You have the option of applying your overpayment to next year's tax debt on line 36 of the 2020 1040 tax return. You might want to consider doing this if you expect that your tax obligation will be more significant next year.
It doesn't have to be all or nothing, though. You can divide your refund between lines 35a and line 36. Maybe you're entitled to a $1,000 refund, and you want to dedicate half of that to next year's taxes. You would enter $500 on line 35a ("amount of line 34 you want refunded to you") and $500 on line 36 ("amount of line 19 you want applied to your 2021 estimated tax.")
Put the full amount of your refund on line 35a if you don't want to make any advance payments.
Claim Tax Credits
Tax credits directly reduce how much you owe the IRS. They're either refundable or nonrefundable. The IRS will send you the difference if your refundable credits are more than what you owe. If your claimed credits are nonrefundable, the government doesn’t send you the extra if your credits are more than what you owe.
You can claim most tax credits on Schedule 3 of the 2020 Form 1040. These include:
- The foreign tax credit (line 1)
- The credit for child and dependent care expenses (line 2)
- Education credits (line 3)
- The retirement savings contribution credit (line 4)
- Residential energy credits (line 5)
- The net premium tax credit (line 8)
Claiming some of these credits requires filing additional forms, but each line clearly states which form you should use.
The child tax credit and the credit for other dependents are claimed directly on Form 1040 on line 19. The earned income credit is claimed on line 27, the additional child tax credit on line 28, the American opportunity credit on line 29, and the recovery rebate credit on line 30.
The Recovery Rebate Credit is a credit you can claim in 2021 for tax year 2020 if you were eligible for a stimulus payment or payments but didn’t receive it in 2020.
Direct Deposit Your Refund
You can have the amount that appears on line 35a of your 1040 deposited directly to your checking or savings account. Direct deposit tends to be faster and more secure than having a refund check mailed to you.
You can access your routing number and account either by logging into your bank account online or through an app, or by using a check from your checkbook.
If you use a checkbook, you'll see a lot of numbers in the bottom left corner. The first series of numbers should be a 9-digit bank code. This is your bank's routing number. Copy your routing number to Line 35b of Form 1040.
Now check the appropriate box on Line 35c, depending on whether you want your refund deposited into a checking or savings account. Find your account number on your check and enter this on line 35d.
Double check—even triple check—your bank numbers. Call your bank to confirm them if you're not sure. You might not be able to get your money back if it's deposited to the wrong account.
Pay Your Tax Balance Safely and Accurately
You have several options for paying the amount you owe if you have a balance due on line 37.
You can make a check payable to the United States Treasury and mail it to the IRS. Write your Social Security number followed by the four-digit tax year and 1040. The IRS will know exactly where to apply your payment with this notation. Mail the check for payment with your tax return.
You can also mail the check with the Form 1040-V payment voucher that should be printed out with your tax return if you file electronically.
Your check should be payable to "U. S. Treasury" rather than “IRS,” per the IRS’ recommendation.
You can also make payments online by enrolling in the electronic federal tax payment system (EFTPS). You can schedule payments for your balance due or make estimated tax payments here, as well as monthly installment agreement payments. EFTPS is free.
IRS DirectPay is another free option. You don't have to sign up and enroll on this site, but you'll have to reenter your banking and identifying information each time you want to make a payment. The site won't save the information for you.
You can schedule an electronic funds withdrawal from your checking account for a day that's convenient for you if you use tax preparation software, up to and including that year's tax filing deadline. You can file your return today and schedule a future payment on or before the deadline.
Credit or Debit Card
You can also pay your taxes by credit card or debit card. The IRS provides links to three payment processors on its website. They charge a processing fee for setting up credit card payments to the IRS. If you use a credit card to pay your taxes, be sure to eliminate your balance as quickly as possible to avoid costly interest charges.