Introduction 1 About This Book 1 Foolish Assumptions 2 Icons Used in This Book 2 Beyond the Book 3 Where to Go from Here 3 Part 1: Getting Ready To File 5 Chapter 1: Understanding the U.S Tax System 7 Figuring Out the U.S Tax System 8 You can reduce your taxes 9 Beyond April 15: What you don''t know can cost you 10 Understanding Your Income Tax Rates 11 Adding up your total taxes 12 Following your marginal income tax rate 12 Noting the Forever Changing Tax Laws 20 The Tax Cuts and Jobs Act of 2017 21 The SECURE ACT of 2019 22 Possible upcoming changes 22 Chapter 2: Tax Return Preparation Options and Tools 25 Going it Alone: Preparing Your Own Return 26 Taking Advantage of IRS Publications 26 Perusing Tax-Preparation and Advice Guides 28 Using Software 28 Accessing Internet Tax Resources 29 Internal Revenue Service 29 Research 30 Tax preparation sites 31 Hiring Help 31 Deciding whether you really need a preparer 31 Unenrolled preparers 32 Enrolled agents (EAs) 32 Certified public accountants (CPAs) 33 Tax attorneys 34 Finding Tax Preparers and Advisors 35 Chapter 3: Getting and Staying Organized 37 Maintaining the Burden of Proof 38 Keeping Good Records 38 Ensuring a complete and accurate tax return 38 Setting up a record-keeping system 40 Tracking tax information on your computer 41 Deciding when to stash and when to trash 41 Reconstructing Missing Tax Records 42 Property received by inheritance or gift 42 Securities received by inheritance or gift 45 Improvements to a residence 45 Casualty losses 46 Business records 47 Using duplicate account statements 47 Understanding the Cohan Rule 47 Chapter 4: What Kind of Taxpayer Are You? 49 What Rendition of 1040 Shall We Play? 49 Form 1040 49 Form 1040-SR 51 Form 1040-NR 51 Choosing a Filing Status 52 Single 52 Married filing jointly 53 Married filing separately 54 Head of household 58 Qualifying widow(er) with dependent child 61 Counting your dependents 61 Deciding who is your dependent 62 Securing Social Security numbers for dependents 65 Filing for Children and Other Dependents 66 Defining Who Is a Qualifying Child 67 Age test 67 Relationship test 67 Residency test 67 Support test 68 Filing a Return for a Deceased Taxpayer 68 Must I File? 69 When to file 71 If you don''t file 71 Where to file 72 How to file 72 A Final Bit of Advice 73 Part 2: Tackling The Main Forms 75 Chapter 5: All The Form 1040s: Income Stuff 77 Starting at the Very Beginning: The Top of 1040 77 Choosing your filing status 78 Adding your name(s), address and Social Security number(s) 78 Electing to give to the next presidential campaign 79 Disclosing virtual currency transactions 79 Calculating your standard deduction 79 Listing your dependents 80 Lines 1-9: Income 80 Line 1: Wages, salaries, tips 81 What those W-2 boxes mean 82 Line 2a: Taxable interest income 85 Line 2b: Tax-exempt interest 85 Line 3a: Ordinary dividends income 86 Line 3b: Qualified dividends 86 Lines 4a and 4b: Total IRA distributions 87 Distributions before 59½ 90 Transfers pursuant to divorce 91 Inherited IRAs 92 Determining who is an eligible designated beneficiary 93 Designated beneficiaries and the ten-year rule under the SECURE Act of 2020 94 Non-designated beneficiaries 95 Withdrawal of nondeductible contributions 95 Loss on an IRA 96 Lines 5a and 5b: Total pensions and annuities 96 Lines 6a and 6b: Social Security benefits 105 Line 7: Capital gain (or loss) 109 Line 8: Other income from Schedule 1, line 26 110 Line 9: Your total income 112 Chapter 6: Form 1040, Schedule 1, Part I: Additional Income 113 Schedule 1, Part I, Line 1: Taxable Refunds, Credits, or Offsets 114 Schedule 1, Part I, Lines 2a and 2b: Alimony Received (by You) 116 Schedule 1, Part I, Line 3: Business Income (or Loss) 117 Schedule 1, Part I, Line 4: Other Gains (or Losses) 118 Schedule 1, Part I, Line 5: Rental Real Estate, Partnerships, and More 118 Schedule 1, Part I, Line 6: Farm Income (or Loss) 118 Schedule 1, Part I, Line 7: Unemployment Compensation 118 Schedule 1, Part I, Line 8: Other Income 119 Line 8a: Net operating losses (NOLs) 120 Line 8b: Gambling income 121 Line 8c: Cancellation of debt 121 Line 8d: Foreign earned income and housing exclusion 122 Line 8e: Taxable Health Savings Account distribution 123 Line 8f: Alaska Permanent Fund dividends 123 Line 8g: Jury duty pay 123 Line 8h: Prizes and awards 124 Line 8i: Activity not engaged in for profit income 124 Line 8j: Stock options 124 Line 8k: Income from the rental of personal property 125 Line 8l: Olympic and Paralympic medals and USOC prize money 125 Lines 8m and 8n: Section 951(a) inclusion and Section 951A(a) inclusion 126 Line 8o: Section 461(l) excess business loss adjustment 126 Line 8p: Taxable distributions from an ABLE account 126 Line 8z: Other income 127 Schedule 1, Part I, Line 9: Total Other Income 128 Schedule 1, Part I, Line 10: Combine Lines 1 through 7 and 9 128 Chapter 7: Form 1040, Schedule 1, Part II: Adjustments to Income Stuff 131 Figuring Out Your Adjusted Gross Income (AGI) 132 Line 11: Educator expenses 132 Line 12: Certain business expenses of certain types of workers 133 Line 13: Health Savings Account deduction (Form 8889) 134 Line 14: Moving expenses for members of the Armed Forces (Form 3903) 135 Line 15: One-half of self-employment tax 135 Line 16: Self-employed SEP, SIMPLE, and qualified plans 136 Line 17: Self-employed health insurance deduction 139 Line 18: Penalty for early withdrawal of savings 139 Lines 19a, b, and c: Alimony paid 139 Line 20: Your and your spouse''s IRA deduction 142 Line 21: Student loan interest deduction 149 Line 22: Reserved for future use 152 Line 23: Archer MSA deduction 152 Lines 24a - z: Other adjustments 152 Other adjustments 156 Form 1040, Line 11: Adjusted Gross Income 156 Chapter 8: Form 1040, Schedule 2: Additional Taxes 157 Schedule 2, Part I: Tax 158 Line 1: Alternative Minimum Tax (Form 6251) 158 Line 2: Excess advance premium tax repayment (Form 8962) 160 Line 3: Add lines 1 and 2 163 Schedule 2, Part II: Other Taxes 163 Line 4: Self-employment tax (Schedule SE) 164 Line 5: Unreported Social Security and Medicare tax on unreported tip income 165 Line 6: Uncollected social security and Medicare tax on wages (Form 8919) 165 Line 7: Total additional Social Security and Medicare tax 165 Line 8: Additional tax on IRAs or other tax-favored accounts (Form 5329) 166 Line 9: Household employment taxes (Schedule H) 166 Line 10: Repayment of first-time homebuyer credit (Form 5405) 166 Line 11: Additional Medicare Tax (Form 8959) 167 Line 12: Net investment income tax (Form 8960) 167 Line 13: Uncollected Social Security and Medicare or RRTA tax on tips 168 Line 14: Interest on tax due on installment income from certain residential sales 168 Line 15: Interest on the deferred tax on gain from certain installment sales 168 Line 16: Recapture of low-income housing credit (Form 8611) 169 Line 17: Other additional taxes 169 Line 19: Excess advance child tax credit repayment (Form 8812) 169 Line 20: Section 965 net tax liability installment from Form 965-A 170 Bringing Us to Line 21 171 Chapter 9: Form 1040, Schedule 3: Adding Up Your Credits and Payments 173 Schedule 3, Part I: Nonrefundable Credits 174 Line 1: Foreign tax credit (Form 1116) 174 Line 2: Credit for child and dependent care expenses (Form 2441) 176 Line 3: Education credits (Form 8863) 176 Line 4: Retirement savings contribution credit (Form 8880) 178 Line 5: Residential energy credits (Form 5695) 179 Line 6: Other nonrefundable credits 180 Lines 7 and 8: It''s time to add! 181 Schedule 3, Part II: Other Payments and Refundable Credits 182 Line 9: Net premium tax credit (Form 8962) 182 Line 10: Amount paid with request for extension to file (Form 4868) 183 Line 11: Excess Social Security and RRTA tax withheld 184 Line 12: Credit for Federal Tax Paid on Fuels (Form 4136) 184 Line 13: Other payments or refundable credits 184 Lines 14 and 15: And even more math 185 Chapter 10: Finishing Up the 1040 187 Arriving at Taxable Income 187 Form 1040, line 10: Adjustments to income 187 Form 1040, line 11: Arriving at adjusted gross income 188 Form 1040, line 12a: Standard deduction or itemized deductions (Schedule A) 188 Form 1040, line 12b: Charitable contributions for non-itemizers 189 Form 1040, line 12c: Add lines 12a and 12b 189 Form 1040, Line 13: Qualified business income deduction (Forms 8995 or 8995-A) 189 Form 1040, line.