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To adapt an old saying, only two things are certain: death and Form 1040.

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You need to file a personal tax return (IRS Form 1040) whether your therapy practice is big or small, old or new, and regardless of its business structure.

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And even if you employ an accountant (or Heard) to file your taxes for you, you still need to understand what kind of information is reported on Form 1040 so you can provide them with it.

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Read on for a line-by-line breakdown of Form 1040 and everything you need to know about filing.

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Who needs to file Form 1040?

Everyone needs to file a Form 1040, but the way your personal tax return relates to your business tax return varies according to your business structure:

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• Sole props and single member LLCs file one tax return both for their business and their individual person. Business losses and gains are reported on Schedule C.
• In partnerships and multi-member LLCs filing as partnerships, the partnership files its own return (Form 1065), and each partner files a Form 1040 reporting their individual earnings from the business.
• In S corporations and C corporations, or LLCs electing either of those filing statuses, the corporation files its own return (Form 1120S or Form 1120, respectively), and each shareholder files a Form 1040 reporting their individual earnings from the business.

Form 1040 schedules for therapy practices

There are a number of schedules (extra tax forms) you may attach to your Form 1040 when filing depending on your particular situation.

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If your therapy practice is a sole proprietorship or single-member LLC, the most important of these are:

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• Schedule C, which reports revenue and losses from your business. (Check out our line-by-line guide to Schedule C.)
• Schedule SE, which you use to calculate and report your self-employment tax
• Schedule 1, which you use to report income not listed elsewhere on Form 1040 (including income from your business)
• Schedule 2, which you use to report tax not included on the basic Form 1040 return, including self-employment tax
• Schedule E, which you use to report income and losses from an S corporation or partnership

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Other schedules you may need to attach when you file Form 1040:

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• Schedule C-EZ, an “easy,” abbreviated version of Schedule C, which you can opt for if your total expenses for the year total less than $5,000
• Schedule 3, for listing tax credits (including business tax credits) reported on Form 3800. (Learn more about tax credits for therapists)
• Schedule D, for reporting capital gains and losses
• Schedule EIC, which you use to claim the Earned Income Credit if you have a dependent child
• Schedule R, to claim a tax credit if you are elderly or disabled
• Schedule 8812, to claim credits for children or qualifying dependents

Form 1040 for therapists, line by line

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The first section of Form 1040 is where you report your personal information, as well as the personal information of your spouse if you are married.

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In the next section, you select your filing status. To learn more about how this affects your tax return and the tax return for your therapy practice, check out our article on filing jointly vs. filing separately as a therapist.

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The next section, on digital assets, is only relevant if you bought or sold cryptocurrency or non-fungible tokens (NFTs) over the course of the year.

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Finally, you must provide information on all your dependents, and indicate whether you are claiming any tax credits because of them.

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The next section, on income, is directly affected by what you earn from your therapy practice and how you earn it.

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Line 1a. If you are running your own therapy practice on a part-time basis while working for someone else as a W2 employee, you report all your income as from Form W-2, Box 1 here. You also report income here if you are an employee of your therapy practice and receive a Form W2. For more information, check out our guide on how to pay yourself as a therapist.

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Lines 1b and 1c. These are only relevant if you work outside your practice as a household employee or service worker receiving tips.

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Line 1d. If you waive Medicaid payments on your W2 income, report the waived amount here.

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Line 1e. If you pay for childcare or dependent care so you can work or look for work, and receive taxable benefits as a result, report them here.

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Line 1f. This line is only relevant if your therapy practice or an employer outside of your practice provides you with adoption benefits.

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Line 1g. This line is only relevant if you worked for an employer other than your own practice and you believe they failed to withhold Medicare and social security taxes from your pay.

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Line 1h. This is not where you report non-W2 income you earned in distributions or owners’ draws from your therapy practice. Line 1h is only relevant for certain withheld or deferred benefits paid out by employers, and is unlikely to be relevant if you run your own practice.

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Line 1i. If you earned a non-taxable stipend for serving with the Armed Forces in a designated combat zone during the course of the year, and you plan to include it in your earned income while calculating the EIC, enter the total here.

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Line 1z. Even if the only line you filled out above was 1a, you must total lines 1a through 1i here.

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Lines 2a and 2b. If you earned non-taxable and/or taxable interest (respectively) from original issue discount (OID) bonds during the course of the year, report the amounts here. You will receive a Form 1099-OID and/or Form 1099-INT if this is the case.

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Lines 3a and 3b. If you earned qualified or ordinary dividends (respectively) over the course of the year, report them here. You will have received a Form 1099-DIV reporting these dividends. If you pay yourself distributions from your S corp, this is not where you report them.

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Lines 4a and 4b. Any IRA distributions (non-taxable and taxable, respectively) you receive over the course of the year are reported here.

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Lines 5a and 5b. Any pensions or annuities (non-taxable and taxable, respectively) you receive over the course of the year are reported here.

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Lines 6a and 6b. Any social security benefits (non-taxable and taxable, respectively) you receive over the course of the year are reported here. Check off 6c if you choose to use the lump-sum election method for this line.

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Line 7. Report capital gains or losses here. These include capital gains or losses related to owning an S corp or being a partner in a business.

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Line 8. Additional income you earn and report on Schedule 1 of Form 1040 is listed here. Since you report business income and losses on Schedule 1, they’ll be included in the total for this line.

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Line 9. Add up your total income here.

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Line 10. Adjustments to income listed on Form 1 are totalled up and listed here. (See Line 26 of Form 1 for more info.)

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Line 11. Subtract adjustments to your income from your total income to get your adjusted gross income (AGI).

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Line 12. If you’re claiming the standard deduction, enter it here. If you’re itemizing your deductions using Schedule A, attach Schedule A to your return and list the total amount here. If your business is a sole prop, whether you choose the standard deduction or itemized deductions has no impact on deductible business expenses you list on Schedule C.

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Line 13. If you’re claiming deductions from a qualified trade or business—calculated on Form 8995—list the total amount of the deductions here. For more info, check out our article on the QBI deduction for therapists.

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Line 14. Enter the sum of your standard or itemized deductions plus your Form 8995 deductions here.

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Line 15. Now for the good stuff. Subtract your total personal deductions as listed on Line 14 from your AGI as listed on Line 11 to get your total taxable income. This amount will be used to calculate the federal income tax you owe.

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Line 16. Enter the total amount of income tax you owe here, based on your tax bracket. If you are including tax from other forms, indicate so here. Check the IRS instructions for Form 1040 for more information on these forms.

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Line 17. If you have uncollected social security, Medicare, or tax on tips, report it here. 

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Line 18. Enter the sum of the two lines above.

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Line 19. If you’re filing Schedule 8812, enter the total tax credits from that form here.

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Line 20. If you’re claiming business tax credits, you list them on Form 3800. The total amount carries over to Schedule 3. Line 8 of Schedule 3 is the total number of nonrefundable tax credits you’re claiming; enter that amount here.

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Line 21. Enter the sum of the tax credits reported on lines 19 and 20.

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Line 22. Subtract your total nonrefundable tax credits from the taxes you owe. If the result is a negative number, enter “0”.

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Line 23. This line is important. Here you’ll enter your total self-employment tax for the year, as reported on Schedule 2. Any additional taxes listed on Schedule 2 are listed here as well.

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Line 24. Enter the sum of your total tax after non-refundable credits and the taxes (including self-employment tax) listed on Schedule 2. This is the total amount you need to pay. 

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Line 25a, b, c, & d. If any of your Form W2 or Form 1099 (employee and contractor, respectively) earnings had income tax withheld from them by employers or clients, list it here and enter the total on line 25d.

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Line 26. If you made estimated tax payments over the course of the year, enter their total amount here. If you carried over any excess tax payments from the prior year to this one (you would have reported them on Form 1040-X), include them in the total.

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Line 27. If you’re claiming the earned income credit, enter it here.

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Line 28. Enter any additional tax credit from Form 8812 here.

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Line 29. If you’re claiming the American opportunity credit on Form 8863, enter it here.

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Line 30. Tax law is always changing. Watch this space for an exciting new line to come.

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Line 31. Enter the total amount of refundable credits you’re claiming (as reported on Schedule 3)

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Line 32. Enter the sum of your additional credits and payments as listed in the four lines above.

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Line 33. Enter your total withheld income tax, estimated tax payments, and refundable payments and credits here. This is the total amount you’ve paid in taxes for the tax year for which you’re filing. 

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Line 34. If the amount you paid for this year’s taxes (line 33) is greater than the amount you owe (line 24), subtract the amount you owe from the amount you paid. This is the total amount you overpaid in taxes. 

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Line 35a, b, and c. If you’re owed a tax refund, this is where you indicate how much of it you’d like to receive as cash and where you’d like it deposited. If you’d like to receive the refund in multiple bank accounts, or accept some of it in the form of US savings bonds, fill out and attach Form 8888.

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Line 36. If you’re owed a refund and you’d like some or all of it applied to next year’s taxes, indicate the amount here.

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Line 37. Subtract the total amount you paid for the year (line 33) from the total amount you owe (line 24) to find the total amount you must pay.

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Line 38. If you owe penalty payments because of a failure to file quarterly estimated taxes, enter the total amount here.

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Line 39. If you’d like to designate a third party (typically a financial professional) as legally entitled to discuss this tax return with the IRS, indicate so here and provide their information.

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Near the end of Form 1040, you (and your spouse, if you’re filing jointly) must sign here.

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The last section of Form 1040 is for your tax preparer (eg. your accountant) to fill out.

Instructions and worksheets for Form 1040 

If you’re completing and filing your personal or sole prop tax return without the help of an accountant, the IRS instructions for Form 1040 include worksheets and schedules to help you calculate the amounts you need to enter on certain lines of Form 1040.

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You’ll also find more detailed, technical instructions for completing the return than what is covered in this article.

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Are you a sole prop or single member LLC? You’ll need to file Schedule C along with your Form 1040. Check out our line-by-line walkthrough of Schedule C for therapists.

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This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult their own attorney, business advisor, or tax advisor with respect to matters referenced in this post.

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Bryce Warnes is a West Coast writer specializing in small business finances.

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