As a person with income, you are required by the law to file your tax returns for the year. When it is time to do so, you will have to pick from three forms. These forms are 1040, 1040A, or 1040EZ. Anyone can fill out the Form 1040; the other two have some other specific requirements.
Here is a quick breakdown of the forms and when to use them:
– Form 1040A
You can use this form when you do not want to itemize your deductions, for example for mortgage interest. However, it will be tough for you to claim deductions, but tax credits for expenses such as education can be claimed.
– Form 1040EZ
You will not be able to claim any deductions or credits on this form except for the earned income tax credit. This form is a brief version of form 1040. The best thing about the 1040EZ is that you can easily file your returns with many online tax preparation services free of charge.
– Form 1040
This form allows you to claim all the credits and deductions possible. Also, anyone can use form 1040, regardless of filing status. The only downside about it is that it is much longer than the other two.
Now that we have broken down all the forms, it is time to talk about when to use each one of them.
When to use Form 1040:
1. When your taxable income was $100,000 or more.
2. When you claim certain tax credits, itemize deductions, or are a trust or estate beneficiary.
3. When you have certain types of income such as self-employment earnings, certain nontaxable distributions, unreported tips, or income received as a shareholder or partner in a corporation.
When to use Form 1040A:
1. When your taxable income is less than $100,000.
2. When the only adjustments to your income are the educator expenses deduction, the IRA deduction, or the student loan interest deduction.
3. When you do not itemize deductions.
4. When your income comes entirely from interests, taxable scholarships/grants, wages, IRAs, etc.
5. When you have stock acquired from the exercise of an incentive stock option and you have an alternative minimum tax adjustment.
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