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Which Tax Form Should I Use: 1040EZ, 1040A, or 1040?
“If you can add and subtract, you can file your own taxes.” That’s an adage I’ve heard time and again, and there is some truth in it. But, it’s also a little presumptuous. The amended adage should be, “If you can add and subtract, plus you are good at quickly identifying which arcane paperwork with similar sounding names you should be filling out, you can file your own taxes.”
Trying to navigate the IRS’s labyrinth of paperwork can leave even the strongest person wanting to curl up in the fetal position and wish they hadn’t fallen asleep in that high school accounting class they took. But, it doesn’t have to be that way, especially when it comes to the most basic of all income tax forms, the 1040.
The 1040 form – along with its streamlined variants, the 1040EZ and 1040A – is the crux of most people’s tax returns, so it’s important to know how it works and which one to use. There are three basic options: Form 1040EZ, Form 1040A, and the old standby, Form 1040. Here’s what you have to know about each:
Who says the IRS has no sense of humor? Labeling a form as EZ is their way of saying, “Even a caveman could do it.” This very basic form is the simplest to fill out of all the 1040 options, because you’re not allowed to claim any credits, deductions, or dependents.
For folks with a very simple tax situation — regular job, no kids, no house — the 1040EZ form will make the most sense. However, only about 13% of taxpayers file this way. According to the IRS, you should file this form if the following applies to your situation:
- You’re filing as single or married filing jointly.
- You have only wages, tips, salaries, unemployment compensation, Alaska Permanent Fund dividends, or taxable scholarships and fellowship grants.
- You (and your spouse, if filing a joint return) were under age 65 on Jan. 1, 2015, and not blind at the end of 2014.
- You do not claim any dependents.
- Your taxable income was less than $100,000.
- Your interest income was not over $1,500 last year.
- All earned tips are included on your W-2 in boxes 5 and 7.
- You do not owe household employment taxes on wages paid to a household employee.
- You are not a debtor in a Chapter 11 bankruptcy case filed after Oct. 16, 2005.
- You won’t claim any adjustments to income (deduction for IRA contributions, a student loan interest deduction, etc.).
- You won’t claim any credits other than the Earned Income Tax Credit.
If you’re one of the 80% of Americans who earn less than $100,000 per year, you’re eligible to file a 1040A form. This form isn’t as, well, easy as the 1040EZ form, but it’s still pretty streamlined. It’s useful if you still have a relatively straightforward employment situation, but have a few things you’re looking to claim, such as credits for children or education expenses.
Those with dependent children, education expenses, or significant retirement savings, for example, should consider using form 1040A, as the available credits can save you a significant amount of money over the 1040EZ. However, if you earn six figures or want to itemize deductions (including home mortgage interest), you can’t use this form.
Per the IRS, you should file using form 1040A if the following applies to your situation:
- Your taxable income is less than $100,000.
- You don’t itemize deductions.
- You claim credits only for child and dependent care expenses, the earned income credit, the credit for the elderly or the disabled, education credits, the child tax credit, the additional child tax credit and the retirement savings contribution credit.
- Your only adjustments to income are the IRA deduction, the student loan interest deduction, the educator expenses deduction, and the tuition and fees deduction.
- Your income comes entirely from: wages, salaries, tips, taxable scholarships and fellowship grants, interest, ordinary dividends, capital gain distributions, pensions, annuities, IRAs, unemployment compensation, taxable Social Security or railroad retirement benefits, Alaska Permanent Fund dividends.
- Your taxes are only from the Tax Table, the alternative minimum tax, recapture of an education credit, Form 8615 or the Qualified Dividends and Capital Gain Tax Worksheet.
- You did not have an alternative minimum tax adjustment on stock you acquired from the exercise of an incentive stock option.
If you’re a homeowner who wants to deduct the interest on your mortgage, or one of the lucky few earning six figures or more annually, you’ll need to file a regular 1040 tax form.
Basically, the original 1040 is the form for “everyone else” who can’t use the simplified versions. Besides being a high earner, there are three other instances where you’d be required to fill out a traditional 1040 form versus one of the easier versions:
- You itemize deductions (including mortgage interest) or claim certain tax credits or adjustments to income.
- You owe household employment taxes.
- You have certain types of income, such as unreported tips; certain nontaxable distributions; self-employment earnings; or income received as a partner, a shareholder in an S corporation, or are a beneficiary of an estate or trust.
Luckily, this form is also where the real deduction fun lives. Donate to charity? Have business expenses? Tried to quit smoking? Yep, you can deduct for that. Per the IRS, here is a (non-exhaustive) list of things you can deduct on your 1040 form:
- Earned Income Tax Credit (EITC)
- IRA deduction
- Student loan interest deduction
- Educator expenses deduction
- Educator expenses deduction
- Tuition and fees deduction
- Child and dependent care credits
- Elderly and disabled credits
- Education credits
- Child tax credits
- Additional child tax credit
- Retirement savings contribution credit
- Business expenses
- Medical expenses
- Charitable contributions
- Deductible taxes
- Home mortgage points
- Interest expenses
- Work-related educational expenses
- Casualty, disaster and theft losses
Filing your own taxes doesn’t have to be a tremendous burden, even if you have quite a few deductions. Once you realize what form to use, the rest is a matter of following directions. Good luck!