The IRS will figure your tax liability for you if you wish. All 1040A and 1040EZ filers may request this service; it is available only to 1040 filers who meet specified conditions.
If you are filing 1040EZ, you need only attach the IRS mailing label or print your name, address and Social Security number at the top of the form, then enter the proper amounts for lines 1 through 8. Sign and date the return, attach the required W-2s and mail the package. The IRS will compute your tax and send you either a refund check or a bill for any balance due.
After you have gotten through line 8, however, calculating your own tax liability is no big deal. All that's left to do is to look up your tax in the tax table, enter the amount on line 9, then compare that figure with the amount of tax withheld (line 8) to come up with either a refund or an additional amount of tax due.
If you're using Form 1040A, the help from the IRS turns out to be a little more substantial. In addition to determining your tax liability from the tax table, the agency will also figure the earned income credit for you, if you qualify.
But you still must come up with all the basic data. After completing the identification information at the top of the form, you must then check off your filing status and enter the number of personal and dependent exemptions claimed.
Next, enter the appropriate figures for lines 6 through 19, including such things as unemployment compensation, IRA deductions, the adjustment for a two-earner family and your deduction for charitable contributions.
Skip line 20, the amount of tax from the tax table -- but don't stop there. If you are eligible for either a credit for child or dependent care or a credit for political contributions, you must enter the proper amounts on lines 21a and 21b. And, finally, you must enter on line 24a the total amount of income tax withheld from your pay, normally the total of Box 9 of all W-2s.
Now sign and date the 1040A at the bottom of page 2, attach all your W-2s as well as Schedule 1 (for interest or dividend income above $400, the two-earner credit or the credit for child and dependent care) and mail the whole thing off for the IRS to complete the job for you.
The IRS also will compute your tax for you on Form 1040 if you meet all the conditions specified in the instruction booklet. But if you have more than $50,000 adjusted gross income, itemize deductions, want to income-average on Schedule G or otherwise don't fit the specifications, you'll have to determine your own tax liability.
If you request IRS computation on a joint return on either the 1040 or 1040A (you may not use 1040EZ for a joint return), show the income of each spouse separately, identifying the figures by "H" for husband and "W" for wife. On the 1040A, put this information in the space to the left of line 19; on the 1040 use the left-hand space on page 1 under "Adjustments to Income." Figuring Your Own Tax
You may compute your own tax on any of the three filing forms. Use the tax table if your taxable income is under $50,000, unless you figure your tax by income averaging on Schedule G. If your income exceeds the table ceiling of $49,999 or you use Schedule G, you must calculate your tax liability from the tax rate schedule appropriate to your filing status.
Whether you use the tax table or the rate schedule, on all three forms you must subtract the total dollar value of all personal exemptions and exemptions for dependents. Each exemption is worth $1,040 (up from last year's $1,000 because of indexing). Because the 1040EZ may be used only by a single taxpayer with no dependents, the $1,040 personal exemption is pre-printed on that form.
The zero bracket amount already is taken into account on all the tax tables and rate schedules, so don't subtract the ZBA on any of the basic tax forms. (If you itemize deductions, on line 25 of Schedule A you must subtract the correct ZBA for your filing status from total deductions, to compensate for the fact that the ZBA deduction is built into the tables and schedules.) Income Averaging
If your taxable income for 1985 was substantially higher than it had been in previous years, you may be able to reduce your tax liability somewhat by the use of a special technique for averaging your income. Two requirements must be met to qualify for income averaging:
You must have been a U.S. citizen or resident during the four-year period 1982 through 1985.
You must have furnished at least half your own support during each of the preceding three years (1982-84). There are some exceptions to this test; see the instructions on the back of Schedule G, the income-averaging form.
Schedule G may look rather complex at first glance, but the instructions are quite clear and the line-item descriptions will lead you by the hand through the necessary steps. A copy of IRS Publication 506 will provide additional useful information.
The only situation that could complicate the procedure is a change in marital status during the 1982-85 period. In this case, you will have to do some off-form calculating to separately identify and track your income and your former or present spouse's income through the period. But if there was a sizable jump in income last year, the potential for tax savings might make it all worthwhile.
To complete Schedule G, you must have copies of your federal income tax returns for 1982, 1983 and 1984. If you can't find them, photocopies of your returns for prior years may be obtained from the IRS. Complete Form 4506, "Request for Copy of Tax Form," and mail it to the address shown on the form.
The cost of copies recently came down. Along with the request, send check or money order for $4.25 (down from $5 last year) for each return you want. You can get a transcript of selected tax account information -- enough to complete Schedule G -- for $2.25 a year; but you really should have a copy of the complete return in your personal files.
If you must wait for copies of previous returns to reach you from the IRS, don't ignore the April 15 filing date. Apply for the automatic extension to Aug. 15 on Form 4868. As an alternative on April 15 -- and certainly by Aug. 15 if you still don't have the necessary data -- file a complete return with averaging by completing Schedule G and submitting it attached to Form 1040X requesting a follow-on refund.