Source: The White Coat Investor
We are back with another month of Taxtember. A month filled with ideas and education around all things taxes.
The above “flowchart” provides a nice (but detailed) view of how income flows on your tax return. I would recommend putting this with your tax documents for the year and pull it out as when your tax preparers provides you with your draft return. We will have a copy when we meet to do an analysis of your 1040.
There are two main forms that income is reported through with various schedules to get the detail information.
Form 1040 is what everyone is used to seeing. The typical income sources can be found there. Social Security, Wages, Pensions, Interest & dividends (Schedule B), Short & Long Term Capital Gains (Schedule D), IRA Distributions & Conversions (Form 8606). More details can be found on the various Schedules and Forms.
Schedule 1 (which then goes on Line 8 of 1040) does a lot of the non-typical income sources like Farm Income, Rentals, S Corps, Partnerships, Unemployment, Sole Proprietorships and are first recorded in Schedule E, Schedule C, or Schedule F.
Use this chart to have a better understanding of your taxable income.