1040 (2007)

IRS Resources

1040 - Introductory Material

Table of Contents

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Electronic Filing (e-file)

What's New

What's New for 2007

Tax benefits extended. The following tax benefits were extended through 2007.

Deduction for educator expenses in figuring adjusted gross income.
Tuition and fees deduction.
District of Columbia first-time homebuyer credit.

Alternative minimum tax (AMT) exemption amount decreased. The AMT exemption amount is decreased to $33,750 ($45,000 if married filing jointly or a qualifying widow(er); $22,500 if married filing separately).

At the time these instructions went to print, Congress was expected to consider legislation that would increase the amounts above. To find out if legislation was enacted, and for more details, see the Instructions for Form 6251.

IRA deduction expanded. You may be able to take an IRA deduction if you were covered by a retirement plan and your 2007 modified adjusted gross income (AGI) is less than $62,000 ($103,000 if married filing jointly or qualifying widow(er)).

You may be able to deduct up to an additional $3,000 if you were a participant in a 401(k) plan and your employer was in bankruptcy in an earlier year. See the instructions for line 32 on page 27.

Standard mileage rates. The 2007 rate for business use of your vehicle is 48½ cents a mile. The 2007 rate for use of your vehicle to get medical care or to move is 20 cents a mile.

Earned income credit (EIC). You may be able to take the EIC if:

A child lived with you and you earned less than $37,783 ($39,783 if married filing jointly), or
A child did not live with you and you earned less than $12,590 ($14,590 if married filing jointly).

The maximum AGI you can have and still get the credit also has increased. You may be able to take the credit if your AGI is less than the amount in the above list that applies to you. The maximum investment income you can have and still get the credit has increased to $2,900. See the instructions for lines 66a and 66b that begin on page 44.

Elective salary deferrals. The maximum amount you can defer under all plans is generally limited to $15,500 ($10,500 if you only have SIMPLE plans; $18,500 for section 403(b) plans if you qualify for the 15-year rule). See the instructions for line 7 on page 18.

Mailing your return. You may be mailing your return to a different address this year because the IRS has changed the filing location for several areas. If you received an envelope with your tax package, please use it. Otherwise, see Where Do You File? on the back cover.

Domestic production activities deduction. The deduction rate for 2007 is increased to 6%.

Unreported social security and Medicare tax on wages. If you are an employee and your employer did not withhold social security and Medicare tax, see Form 8919 to figure and report this tax.

Refundable credit for prior-year minimum tax. If you have an unused minimum tax credit carryforward from 2004, see Form 8801 to find if you can take this credit.

Health savings account (HSA) funding distributions. You may be able to elect to exclude from income a distribution made from your IRA to your HSA. See the instructions for lines 15a and 15b on page 21.

Insurance premiums for retired public safety officers. If you are a retired safety officer, you can elect to exclude from income distributions made directly from your eligible retirement plans to pay premiums for certain insurance. See the instructions for lines 16a and 16b on page 22.

Exemption for housing a person displaced by Hurricane Katrina expires. The additional exemption amount for housing a person displaced by Hurricane Katrina does not apply for 2007 or later years.

Telephone excise tax credit. This credit was available only on your 2006 return. If you filed but did not request it on your 2006 return, file Form 1040X using a simplified procedure explained in its instructions to amend your 2006 return. If you were not required to file a 2006 return, see the 2006 Form 1040EZ-T.

What's New for 2008

IRA deduction expanded. You and your spouse, if filing jointly, each may be able to deduct up to $5,000 ($6,000 if age 50 or older at the end of the year). You may be able to take an IRA deduction if you were covered by a retirement plan and your 2008 modified AGI is less than $63,000 ($105,000 if married filing jointly or qualifying widow(er)).

You may be able to deduct up to an additional $3,000 if you were a participant in a 401(k) plan and your employer was in bankruptcy in an earlier year. See the instructions for line 32 on page 27.

Earned income credit (EIC). You may be able to take the EIC if:

A child lived with you and you earned less than $38,646 ($41,646 if married filing jointly), or
A child did not live with you and you earned less than $12,880 ($15,880 if married filing jointly).

Personal exemption and itemized deduction phaseouts reduced. Taxpayers with adjusted gross income above a certain amount may lose part of their deduction for personal exemptions and itemized deductions. The amount by which these deductions are reduced in 2008 will be only ½ of the amount of the reduction that otherwise would have applied in 2007.

Capital gain tax rate reduced. The 5% capital gain tax rate is reduced to zero.

Tax on children's income. Form 8615 will be required to figure the tax for the following children with investment income of more than $1,800.

Children under age 18 at the end of 2008.
The following children if their earned income is not more than half their support.
1. Children age 18 at the end of 2008.
2. Children over age 18 and under age 24 at the end of 2008 who are full-time students.

The election to report a child's investment income on a parent's return and the special rule for when a child must file Form 6251 will also apply to the children listed above.

Expiring tax benefits. The following benefits are scheduled to expire and will not apply for 2008.

Deduction for educator expenses in figuring adjusted gross income.
Tuition and fees deduction.
The exclusion from income of qualified charitable distributions.
Credit for nonbusiness energy property.
District of Columbia first-time homebuyer credit (for homes purchased after 2007).
The election to include nontaxable combat pay in earned income for the EIC.

Filing Requirements

Introduction

These rules apply to all U.S. citizens, regardless of where they live, and resident aliens.

Have you tried IRS e-file? It's the fastest way to get your refund and it's free if you are eligible. Visit www.irs.gov for details.

Do You Have To File?

Use Chart A, B, or C to see if you must file a return. U.S. citizens who lived in or had income from a U.S. possession should see Pub. 570. Residents of Puerto Rico can use TeleTax topic 901 (see page 79) to see if they must file.

Even if you do not otherwise have to file a return, you should file one to get a refund of any federal income tax withheld. You should also file if you are eligible for the earned income credit, additional child tax credit, health coverage tax credit, or refundable credit for prior year minimum tax.

Chart A—For Most People

IF your filing status is . . .	AND at the end of 2007 you were* . . .	THEN file a return if your gross income** was at least . . .
Single	under 65 65 or older	$8,750 10,050
Married filing jointly***	under 65 (both spouses) 65 or older (one spouse) 65 or older (both spouses)	$17,500 18,550 19,600
Married filing separately (see page 13)	any age	$3,400
Head of household (see page 13)	under 65 65 or older	$11,250 12,550
Qualifying widow(er) with dependent child (see page 14)	under 65 65 or older	$14,100 15,150
* If you were born on January 1, 1943, you are considered to be age 65 at the end of 2007.
** Gross incomemeans all income you received in the form of money, goods, property, and services that is not exempt from tax, including any income from sources outside the United States (even if you can exclude part or all of it). Do not include social security benefits unless you are married filing a separate return and you lived with your spouse at any time in 2007.
*** If you did not live with your spouse at the end of 2007 (or on the date your spouse died) and your gross income was at least $3,400, you must file a return regardless of your age.

Exception for children under age 18. If you are planning to file a tax return for your child who was under age 18 at the end of 2007 and certain other conditions apply, you can elect to include your child's income on your return. But you must use Form 8814 to do so. If you make this election, your child does not have to file a return. For details, use TeleTax topic 553 (see page 79) or see Form 8814.

A child born on January 1, 1990, is considered to be age 18 at the end of 2007. Do not use Form 8814 for such a child.

Resident aliens. These rules also apply if you were a resident alien. Also, you may qualify for certain tax treaty benefits. See Pub. 519 for details.

Nonresident aliens and dual-status aliens. These rules also apply if you were a nonresident alien or a dual-status alien and both of the following apply.

You were married to a U.S. citizen or resident alien at the end of 2007.
You elected to be taxed as a resident alien.

See Pub. 519 for details.

Specific rules apply to determine if you are a resident alien, nonresident alien, or dual-status alien. Most nonresident aliens and dual-status aliens have different filing requirements and may have to file Form 1040NR or Form 1040NR-EZ. Pub. 519 discusses these requirements and other information to help aliens comply with U.S. tax law, including tax treaty benefits and special rules for students and scholars.

When and Where Should You File?

File Form 1040 by April 15, 2008. If you file after this date, you may have to pay interest and penalties. See page 78.

If you were serving in, or in support of, the U.S. Armed Forces in a designated combat zone, qualified hazardous duty area, or a contingency operation, see
Pub. 3.

See the back cover for filing instructions and addresses. For details on using a private delivery service, see page 9.

What if You Cannot File on Time?

You can get an automatic 6-month extension if, no later than the date your return is due, you file Form 4868. For details, see Form 4868.

An automatic 6-month extension to file does not extend the time to pay your tax. See Form 4868.

If you are a U.S. citizen or resident alien, you may qualify for an automatic extension of time to file without filing Form 4868. You qualify if, on the due date of your return, you meet one of the following conditions.

You live outside the United States and Puerto Rico and your main place of business or post of duty is outside the United States and Puerto Rico.
You are in military or naval service on duty outside the United States and Puerto Rico.

This extension gives you an extra 2 months to file and pay the tax, but interest will be charged from the original due date of the return on any unpaid tax. You must attach a statement to your return showing that you meet the requirements. If you are still unable to file your return by the end of the 2-month period, you can get an additional 4 months if, no later than June 16, 2008, you file Form 4868. This 4-month extension of time to file does not extend the time to pay your tax. See Form 4868.

Chart B—For Children and Other Dependents (See the instructions for line 6c that begin on page 15 to find out if someone can claim you as a dependent.)

If your parent (or someone else) can claim you as a dependent, use this chart to see if you must file a return.
In this chart, unearned income includes taxable interest, ordinary dividends, and capital gain distributions. Earned income includes wages, tips, and taxable scholarship and fellowship grants. Gross income is the total of your unearned and earned income.
Single dependents. Were you either age 65 or older or blind?
	No. You must file a return if any of the following apply.
		Your unearned income was over $850. Your earned income was over $5,350. Your gross income was more than the larger of—
			$850, or Your earned income (up to $5,050) plus $300.
	Yes. You must file a return if any of the following apply.
		Your unearned income was over $2,150 ($3,450 if 65 or older and blind). Your earned income was over $6,650 ($7,950 if 65 or older and blind). Your gross income was more than—
				The larger of:	Plus	This amount:
			$850, or Your earned income (up to $5,050) plus $300			$1,300 ($2,600 if 65 or older and blind)
Married dependents. Were you either age 65 or older or blind?
	No. You must file a return if any of the following apply.
		Your unearned income was over $850. Your earned income was over $5,350. Your gross income was at least $5 and your spouse files a separate return and itemizes deductions. Your gross income was more than the larger of—
			$850, or Your earned income (up to $5,050) plus $300.
	Yes. You must file a return if any of the following apply.
		Your unearned income was over $1,900 ($2,950 if 65 or older and blind). Your earned income was over $6,400 ($7,450 if 65 or older and blind). Your gross income was at least $5 and your spouse files a separate return and itemizes deductions. Your gross income was more than—
				The larger of:	Plus	This amount:
			$850, or Your earned income (up to $5,050) plus $300			$1,050 ($2,100 if 65 or older and blind)

Chart C—Other Situations When You Must File

You must file a return if any of the four conditions below apply for 2007.
1.		You owe any special taxes, including any of the following.
	a.	Alternative minimum tax.
	b.	Additional tax on a qualified plan, including an individual retirement arrangement (IRA), or other tax-favored account. But if you are filing a return only because you owe this tax, you can file Form 5329 by itself.
	c.	Household employment taxes. But if you are filing a return only because you owe this tax, you can file Schedule H by itself.
	d.	Social security and Medicare tax on tips you did not report to your employer or on wages you received from an employer who did not withhold these taxes.
	e.	Write-in taxes, including uncollected social security and Medicare or RRTA tax on tips you reported to your employer or on group-term life insurance and additional tax on health savings account distributions. See the instructions for line 63 on page 42.
	f.	Recapture taxes. See the instructions for line 44, that begin on page 33, and line 63, on page 42.
	g.	Additional tax on a health savings account from Form 8889, Part III.
2.		You received any advance earned income credit (EIC) payments from your employer. These payments are shown in Form W-2, box 9.
3.		You had net earnings from self-employment of at least $400.
4.		You had wages of $108.28 or more from a church or qualified church-controlled organization that is exempt from employer social security and Medicare taxes.

Where To Report Certain Items From 2007 Forms W-2, 1098, and 1099

IRS e-file takes the guesswork out of preparing your return. You may also be eligible to use Free File to file your federal income tax return. Visit www.irs.gov/efile for details.

If any federal income tax withheld is shown on these forms, include the tax withheld on Form 1040, line 64. If you itemize your deductions and any state or local income tax withheld is shown on these forms, include the tax withheld on Schedule A, line 5, if you do not elect to deduct state and local general sales taxes.

	Form	Item and Box in Which It Should Appear	Where To Report if Filing Form 1040
	W-2	Wages, tips, other compensation (box 1)	Form 1040, line 7
		Allocated tips (box 8)	See Wages, Salaries, Tips, etc. on page 18
		Advance EIC payment (box 9)	Form 1040, line 61
		Dependent care benefits (box 10)	Form 2441, Part III
		Adoption benefits (box 12, code T)	Form 8839, line 22
		Employer contributions to an Archer MSA (box 12, code R)	Form 8853, line 3
		Employer contributions to a health savings account (box 12, code W)	Form 8889, line 9
	W-2G	Gambling winnings (box 1)	Form 1040, line 21 (Schedule C or C-EZ for professional gamblers)
	1098	Mortgage interest (box 1) Points (box 2)	Schedule A, line 10*
		Refund of overpaid interest (box 3)	Form 1040, line 21, but first see the instructions on Form 1098*
		Mortgage insurance premiums (box 4)	See the instructions for Schedule A, line 13*
	1098-C	Contributions of motor vehicles, boats, and airplanes	Schedule A, line 17
	1098-E	Student loan interest (box 1)	See the instructions for Form 1040, line 33, on page 30*
	1098-T	Qualified tuition and related expenses (box 1)	See the instructions for Form 1040, line 34, on page 31, or Form 1040, line 49, on page 37, but first see the instructions on Form 1098-T*
	1099-A	Acquisition or abandonment of secured property	See Pub. 544
	1099-B	Stocks, bonds, etc. (box 2)	See the instructions on Form 1099-B
		Bartering (box 3)	See Pub. 525
		Aggregate profit or (loss) (box 11)	Form 6781, line 1
	1099-C	Canceled debt (box 2)	Form 1040, line 21, but first see the instructions on Form 1099-C*
	1099-DIV	Total ordinary dividends (box 1a)	Form 1040, line 9a
		Qualified dividends (box 1b)	See the instructions for Form 1040, line 9b, on page 19
		Total capital gain distributions (box 2a)	Form 1040, line 13, or, if required, Schedule D, line 13
		Unrecaptured section 1250 gain (box 2b)	See the instructions for Schedule D, line 19, that begin on page D-8
		Section 1202 gain (box 2c)	See Exclusion of Gain on Qualified Small Business (QSB) Stock in the instructions for Schedule D on page D-4
		Collectibles (28%) gain (box 2d)	See the instructions for Schedule D, line 18, on page D-8
		Nondividend distributions (box 3)	See the instructions for Form 1040, line 9a, on page 19
		Investment expenses (box 5)	Schedule A, line 23
		Foreign tax paid (box 6)	Form 1040, line 51, or Schedule A, line 8. But first see the instructions for line 51 that begin on page 37.
	1099-G	Unemployment compensation (box 1)	Form 1040, line 19. But if you repaid any unemployment compensation in 2007, see the instructions for line 19 on page 24.
		State or local income tax refunds, credits, or offsets (box 2)	See the instructions for Form 1040, line 10, that begin on page 20. If box 8 on Form 1099-G is checked, see the box 8 instructions.
		ATAA payments (box 5)	Form 1040, line 21
		Taxable grants (box 6)	Form 1040, line 21*
		Agriculture payments (box 7)	See the Instructions for Schedule F or Pub. 225*
* If the item relates to an activity for which you are required to file Schedule C, C-EZ, E, or F or Form 4835, report the taxable or deductible amount allocable to the activity on that schedule or form instead.
	1099-INT	Interest income (box 1)	See the instructions for Form 1040, line 8a, on page 19
		Early withdrawal penalty (box 2)	Form 1040, line 30
		Interest on U.S. savings bonds and Treasury obligations (box 3)	See the instructions for Form 1040, line 8a, on page 19
		Investment expenses (box 5)	Schedule A, line 23
		Foreign tax paid (box 6)	Form 1040, line 51, or Schedule A, line 8. But first see the instructions for line 51 that begin on page 37.
		Tax-exempt interest (box 8)	Form 1040, line 8b
		Specified private activity bond interest (box 9)	Form 6251, line 11
	1099-LTC	Long-term care and accelerated death benefits	See Pub. 525 and the Instructions for Form 8853
	1099-MISC	Rents (box 1)	See the Instructions for Schedule E*
		Royalties (box 2)	Schedule E, line 4 (for timber, coal, and iron ore royalties, see Pub. 544)*
		Other income (box 3)	Form 1040, line 21*
		Nonemployee compensation (box 7)	Schedule C, C-EZ, or F. But if you were not self-employed, see the instructions on Form 1099-MISC.
		Excess golden parachute payments (box 13)	See the instructions for Form 1040, line 63, on page 42