What Line on the 1040 Represents a Tax Liability?

The standard federal tax return, Form 1040, has more than six dozen lines, ranging from the well-loved (Line 7: "Wages, salaries, tips, etc.") to the well-loathed (Line 45: "Alternative minimum tax") to the ones that leave many folks scratching their heads (Line 35: "Domestic production activities deduction").

To understand why Line 61 ("Total tax") represents tax liability rather than, say, Line 44 ("Tax") or Line 78 ("Amount you owe"), it helps to look at what the Internal Revenue Service means by tax liability. Your tax liability is the amount of money you are expected to pay in taxes based on your income and your allowable adjustments, exemptions, deductions and credits. When you do your taxes, it's common to find that you've already satisfied your liability with the income taxes withheld from your paycheck. If you've paid more than your liability, you get a refund. If you haven't fully satisfied your liability, you'll owe money.

The first 38 lines of Form 1040 are all about determining your taxable income. That's the portion of your total income that the government is actually going to tax. The more deductions you have, the lower your taxable income. On 1040 Line 44, labeled simply "Tax," you use the IRS tax tables to translate your taxable income into a specific dollar figure for your income tax. But you're not done yet, so Line 44 isn't your tax liability.

On Lines 40 through 56, you make adjustments to the tax figure you came up with on Line 44. Some of these adjustments add to your tax, such as the alternative minimum tax that applies to some higher-income taxpayers and the self-employment tax that applies to, well, self-employed taxpayers. You may have to compute the qualified dividends and capital gain tax worksheet if you had those forms of income. Other adjustments reduce your tax, such as the child tax credit and the credit for child and dependent care expenses. On Line 63, you add it all up. The result, called "total tax," is your tax liability as defined by the federal government. But guess what? You're still not done.

Starting on Line 64, you start subtracting the tax payments you've already made, such as taxes withheld from your paycheck, estimated taxes paid by the self-employed, and any refund from last year that you asked the IRS to apply toward this year's taxes. However, the government also classifies certain tax credits as "payments," including the earned income credit and the additional child credit, both of which help lower-income workers. These credits don't change a taxpayer's official tax liability; the government simply treats them as if they were payments made toward that liability. That means taxpayers can get a refund if these credits exceed their liability.

Once you subtract all your payments from your total tax (Line 63), you know whether you'll be getting a refund or writing a check to your Uncle Sam. As mentioned, if you wind up owing money, the amount you owe isn't your liability. It's just the part of your liability that you haven't satisfied yet.