When tax tie rolls around, there’s three different forms one can use in order to file their tax return: the 1040EZ, the 1040A, and the full Form 1040. There are benefits and restrictions to all three forms, so deciding which to use should be based on which is best for your tax situation. You can always rely on the full Form-1040, which is the most complicated form, as it’ll cover any situation. However, you may be subjecting yourself to more work than is necessary, and you’ll have a more complex set of directions to comply with. On the other hand, even if you can use a simpler form, you may not get all the tax benefits you’re entitled to in doing so. Use the following tips to differentiate the different forms and decide which one is right for your return.
One in six taxpayers opt for this simple tax form, which consists of only a single page and 14 lines to complete. It’s definitely one of the most popular forms, and the easiest and quickest to file, but it’s also very selective. Only a specific group of taxpayers are eligible to file their return using this form. The requirements include:
- Taxable income must be less than $100,000
- All earnings must be reported on a standard W-2 from a traditional form of employment
- Must file as either single or married filing jointly (all other statuses are ineligible).
- Must not have any dependents
- Must be less than 65 years old
- Must not itemize deductions
- Interest income must be less than $1,500
You cannot make adjustments to your income for student loan interest or IRA contributions if you want to use the 1040EZ. Also, you can’t claim dividend or capital gains income. Your ability to claim many tax benefits is strictly limited. In fact, the only credit allowed on the 1040EZ is the Earned Income Tax Credit.
A little less restrictive than the 1040EZ, the 1040A is available to all filing statuses. You are able to claim tax credits and deductions for children and dependents, education expenses, child care costs, and other credits. The 1040A form can also be used if you need to claim IRA contributions or student loan deductions, and you’re able to report interest and dividend income, Social Security benefits, retirement plan distributions and certain capital gains from mutual funds. The 1040A is available to more taxpayers, though it still doesn’t cover everyone. Those who earn more than $100,000 need to use the full form, along with those who want to claim different credits than the selected ones on the form. If you want to itemize your deductions, you won’t be able to use the 1040A. Even with these additional restrictions, more than 40 million taxpayers were eligible to use the Form 1040A when filing their return last year.
Full Form 1040
No matter what, you can always use the full 1040. Every taxpayer is eligible to use this form, and it allows you the opportunity to claim any deduction or credit available to you. One con about using this form is that it’s long and complicated. The form spans multiple pages, front and back, and has many lines to complete on each page. If your income is greater than $100,000, you’ll have to file using the full Form 1040. The same goes for anyone who wants to itemize their deductions. Entrepreneurs with business income or investors with capital gains and losses should opt to use the full Form 1040.