When you reach this point, you have determined your total federal income tax liability for 1987. The next step is to apply against that tax liability all payments of tax already made, plus any further credits you may claim.

Tax withheld for most taxpayers -- the most important of these various payments, and often the only one -- is the amount of federal income tax withheld from your wages by your employer.

Tax withheld is documented in box 9 of each Form W-2 you received from your employer or employers in January. If you worked for more than one employer, be sure you have a W-2 from each, and add the amounts from all forms.

Enter the total tax withheld on line 54 of Form 1040, line 21a of the 1040A or line 8 of the 1040EZ.

Estimated Tax

If you paid estimated tax for 1987, you may not use either of the two short tax forms. On line 55 of Form 1040, enter the total of all estimated tax payments made, including any fourth-quarter payment sent in January 1988.

If you asked to have a 1986 tax refund applied against your 1987 tax, include that amount in this total. But if you're filing a delayed tax return and had sent a preliminary payment with your Form 4868 requesting an extension, that payment goes on line 57 all by itself.

Earned Income Credit

This credit is intended to encourage low-income taxpayers to seek paid employment by providing a reduction of income tax liability to offset Social Security taxes withheld. As the name implies, you must have had some earned income in 1987, such as wages or salary, tips, commissions or net earnings from self-employment. You can't qualify on the basis of pension or retirement pay, Social Security or Veterans Administration benefits, unemployment compensation or income from investments.

The earned income credit is generally limited to "family" taxpayers; that is, your filing status must be married filing a joint return, a qualifying widow(er) with a dependent child or head of a household. (You may qualify if your child lived with you for more than half the year and you had waived the right to the dependent exemption in connection with a divorce or separation agreement.)

The basic credit was increased by the 1986 tax law and has been adjusted for inflation since 1984. It is now equal to 14 percent of the first $6,075 of earned income, so that the maximum credit for 1987 is $850.50. However, the credit phases out at a rate of 10 percent of your adjusted gross income or earned income (whichever is greater) in excess of $6,925, and is gone when either of those figures reaches $15,432.

Sound confusing? There are worksheets and tables included in the instruction booklets for both the 1040 and the 1040A. (You may not use 1040EZ if you are eligible for the earned income credit.) And if you ask the IRS to figure your tax for you, they will also compute the earned income credit if you are eligible.

Are you wondering why the earned income credit is included here with payments, instead of in the earlier section with other tax credits? It's done this way because if you qualify for an earned income credit that exceeds your income tax liability, the IRS will send you a refund check for the difference; the other credits may never be used to bring your tax liability down below zero.

If you received advance earned income credit payments from your employer, remember not to subtract those payments from the credit to come up with a net figure. Report the advance payment under "Other Taxes," as explained above, and claim the full amount of the credit here.

Excess Social Security Tax

If you worked for more than one employer during 1987 and a total of more than $3,131.70 was withheld for Social Security (FICA) or Railroad Retirement (RRTA) tax, claim the excess on line 58 of Form 1040. Any amount claimed here must be supported by the W-2s attached.

In adding up the total withheld, do not include more than $3,131.70 from any one employer. If a single employer withheld more than the ceiling amount, you must claim a refund from that employer rather than from the IRS.

Special Fuel Credit

If you bought a new diesel-powered highway vehicle (car or light truck) in 1987, you may claim a one-time tax credit of $102 for a car, $198 for a truck or van. This credit, intended as partial compensation for an earlier increase in the diesel fuel tax, expired on Dec. 31, 1987, but may still be claimed on line 59 of your 1987 tax return, supported by Form 4136.

Investment Company Credit

In rare cases, a regulated investment company (mutual fund) may allocate capital gains dividends to you that you did not actually receive. If the company paid tax on any of such dividends, it will advise you on Form 2439. You may then claim a refund for those taxes by entering the amount from Form 2439 on line 60 of Form 1040.